Zackery Wallach

Professor Creaney

English 11000

November 20, 2019

The Unintended Consequences of an Increase to the Federal Minimum Wage

In recent times many have advocated in favor of increasing the federal minimum wage in the United States. Supporters of the increase believe that doing so will help to reduce poverty and improve the lives of millions of Americans both financially and mentally. Although an increase looks good on paper, there are consequences that many fail to consider. Automation is a lot closer than many seem to realize. Self-checkout machines at stores, kiosks at restaurants, robot arms in factories, as well as the rate in which artificial technology is increasing, are examples of this. An increase to the federal minimum wage would serve as an incentive for companies to accelerate efforts to automate away jobs because it would be cheaper to invest in technology instead of paying workers more. 

Studies have shown that an increase to the minimum wage directly impacts the rate that companies will try to automate away jobs. In areas where the minimum wage was increased companies were incentivized to turn to technology in order to find a cheaper alternative. Economists Grace Lordan of the London School of Economics and David Neumark of the University of California, Irvine studied the impact that an increase to the minimum wage has on automatable jobs. They analyzed government census data from 1980 to 2015 and published their findings in an economic journal from the National Bureau of Economic Research. The data 

shows that many low-skilled workers are at risk of having their jobs automated. Low-skilled workers as defined in the study, are workers who have a high school diploma or less. When the minimum wage is increased, these workers could potentially be out of a job. “We find that a significant number of individuals who were previously in automatable employment are 

nonemployed in the period following a minimum wage increase.” (Lordan and Neumark 6). These jobs include positions such as cashiers and factory workers who can be easily replaced by kiosk/self-checkout machines and robot arms. When the minimum wage is increased, the company finds it cheaper  to replace these jobs with machines instead of paying the worker more. “It is important to acknowledge that increases in minimum wage will give incentives for firm to adopt new technologies that replace workers earlier.” (Lordan and Neumark 25). When there is an increase to the minimum wage, many low-skilled workers are displaced from their jobs. 

  Although they found that an increase would lead to low-skilled workers being replaced by technology, higher skilled people would not be affected in the same way. “we find that some of the adverse employment effects among low-skilled workers in automatable jobs are offset by increased employment opportunities for higher skilled workers, likely because automation of low-skilled work creates other kinds of jobs.” (Lordan and Neumark 25). When new technology is implemented workers will be needed to help maintain it. However, even though there are some job openings created as a result, very few people are needed for this. In addition, low-skilled workers will still be out of a job when originally the increase was intended to benefit them the most. At the same time, older workers are also at risk of losing their jobs. “one striking result is 

that the share in automatable employment declines rather sharply for older workers” (Lordan and Neumark 24). Automatable jobs require skills that are often times more difficult for older workers to obtain. Lordan and Neumark found that these two groups are at the biggest risk of losing their jobs to automation, and would have the toughest time transitioning as well. 

Many supporters of an increase to the federal minimum wage hope that it would help workers become more financially stable. However many fail to see the negative aspects of the increase. When such a proposal is implemented, companies will always look to find ways to cut costs. This means that they will invest in new technology and accelerate their efforts to automate away those jobs. As a result the threat that automation has on the country is much worse for low-skilled workers. It would be cheaper for these companies to replace jobs with machines, as they would only need a few workers to look after and maintain this new technology. Low-skilled workers will have a difficult time transitioning and finding a new job. While it is true that there are some benefits in increasing the minimum wage, that is only short term. Eventually the rate that automation occurs would be faster when the minimum wage is increased. 

An increase to the minimum wage is supposed to help lift a financial burden that many of these low-skilled workers face. However, by implementing an increase to the minimum wage they are instead affected negatively. There is a direct correlation between an increase to the minimum wage and job loss. The research shows that there are negative aspects of implementing a federal minimum wage. When companies are forced to pay their workers more, they will search for alternatives. These companies will invest in and implement new technology that would replace the very same workers that the proposed increase was meant to benefit. While increasing the minimum wage does sound good in principle, it will end up hurting workers more than it would help.

 

Work Cited

 

Lordan, Grace, and David Neumark. “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs.” NBER WORKING PAPER SERIES, 2018, pp. 1–44., doi:10.3386/w23667.

 

 

Zackery Wallach

Professor Creaney

English 11000

November 20, 2019

Target Increases Their Minimum Wage, But Workers Are Now Worse Off 

In 2017 Target announced that they would gradually increase their minimum wage to $15 an hour by 2020. At the time this was met with a lot of praise for them taking a pro-worker stance. This sounded great for the workers. They would get paid more, and in theory they would greatly benefit from such an increase. Those advocating for an increase to the federal minimum wage used this to pressure other companies to also increase their wages. However, not everything was as good as it seemed. Many of the workers were actually negatively affected by this increase. Their hours have been cut, and many are struggling to pay their bills. Instead Target changed the way that they operated their stores, as well as a reliance on self-checkout machines instead of cashiers. This is an example of an unintended consequence of an increase to the minimum wage. This increase was supposed to help workers, however, the very people it was supposed to benefit were now worse off than they were before.             

Heather, an employee of Target at their Florida branch explains how much this has affected her. She says “I got that dollar raise but I’m getting $200 less in my paycheck,” and she now struggles to pay rent and buy food. Heather used to work up to 40 hours a week, and as a full time employee she received health benefits. She is now offered less than 20 hours a week, and is no longer considered a full-time worker. Target offers health benefits for workers who average 30 hours a week. If your hours are cut, then you no longer qualify for those benefits. She now makes less than what she did before, and has lost her benefits. 

Many other workers at Target are in a similar situation as Heather. Workers who reported that their hours were slashed, explain that a higher wage is pointless if they work less hours overall. This a clear example of the downside of an increase to the minimum wage. Since the increase, Target has relied more on self-checkout machines, a way in which workers’ jobs are being automated.

Target is not the only company cutting worker’s hours. According to Bureau of Labor Statistics, retail employees currently work on average 28.5 hours, down from 30 hours last year. In retail 851,000 workers are forced to work part-time when they would prefer to work full-time. This is mainly due to automation. Automation is a serious threat to workers in the retail industry. Self-checkout machines, robots in warehouses, self-driving trucks, and artificial intelligence are all examples of various technology that can replace many of the 16 million retail workers nationwide. 

Such a reality may not be as far away as you might think. As the minimum wage increases companies will naturally look for ways that they can reduce spending and increase profits. By increasing the minimum wage, they will be incentivised to accelerate efforts to automate these jobs. While an increase to the minimum wage might seem nice at first, there are several unexpected consequences that people fail to consider. What is currently going on at Target and other stores nationwide is an example of this. It is clear that an increase may not be the best way to help workers. We must carefully consider the way an increased minimum wage would affect the people, and find new ways to make sure employees needs are met before enacting such a plan.