After sharing an article with this title on Twitter and Facebook, I got into a conversation with someone who didn’t agree. The concern is genuine. The thinking goes that if we make companies pay the workers more, they’ll have a better living. It’s based on the notion that the companies are just greedy and really could pay more if they only would. There may be instances where that is true, but generally the market will sort that kind of thing out.
I pointed to what is happening where cities have taken it upon themselves to raise the minimum wage. Companies are closing or they are automating. Automation was rejected as a consequence of higher wages, under the assumption that companies are going to do that anyway. A machine is always easier to manage than a human being. There’s truth in that, but to illustrate why it’s not the whole truth, I’ll bring the example a little closer to home.
I hire a lawn crew to take care of my yard. I deal with a small business owner who sends the crews out. It’s a very economical service. I don’t know, but I would not be surprised to learn that his crews are not making more than minimum wage. Now let’s say all the Californians moving to Texas reach critical mass and we start seeing these laws in Texas. I apologize to my fellow Texans if I’m giving you nightmares.
My lawn guy then has to raise his prices. I might accept that for a while, but eventually the price is going to become too high. When it does, I have several choices available to me. I can stop caring for the yard, but eventually when the city comes down on me that will cost me more than the now prohibitively expensive lawn crew. I can hire the kid down the street. That might work for getting the grass cut, but only until some nosey do-gooder decides that’s child labor and takes away another job that young people can do for money. . I could do it myself, but being almost blind that would be almost as bad as the first option. So I’m left with one more. I’ll pay whatever I have to one time to have someone pull up all my shrubbery and either make my yard into a rock garden or get one of those robotic lawn mowers. There’s your automation. However I go about it, My lawn guy has lost business. If too many of my neighbors make the same choices, he’s out of business. Instead of having a job that might not meet all their needs but gives them something, his workers have no job at all. Everyone is worse off than before the minimum wage was raised.
Now I like the automation idea. Gadgets are cool. There are robot mowers available that can cut grass, but as far as I know they don’t do shrubbery. That’s a great deal more complicated. If I had a few million sitting around, I might try getting a robot built that could mow the lawn and trim the shrubs. The technology is out there, but there’s little call for anyone to spend the money on it. Lawn crews are much cheaper, and there’s no incentive for anyone to invest in such a thing. Some day it will happen, but it will be a few years. What happens when you make the lawn crews more expensive? Now there’s incentive for a technology company to develop and sell that robot sooner than later. Maybe we like the idea of government incentivizing the development of technology, but if the goal is to make life better for the poor, raising the minimum wage has the opposite effect.