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Why Raising the Minimum Wage is a Bad Idea

Wouldn’t it be great if you could just tell every business owner to raise the wages of their employees? Then everyone would be happier and better off. Right?

The mantra I’ve heard is that “increasing the minimum wage lifts people out of poverty.”

This statement is partially true. If you have 100 workers making $8 per hour and you raise the minimum wage to $16, some of these workers are lifted out of poverty. Maybe 50 of the workers are now making twice as much money, but what about the other 50 workers that were fired because the company couldn’t afford the wages?

Here is real life. Business owners are trying to keep their businesses alive in an extremely competitive environment. Every year their costs increase. Things like property taxes, electricity, health care and other costs to satisfy heavy government regulation.

What happens when wages increase substantially? The business owner has two choices: fire a bunch of workers or replace them with machines.

It’s no wonder that young people are having a hard time finding jobs. Back in the day, you could work at the grocery store as a cashier or sacker. Oops, there are machines doing a lot of that work now. Or a young person could have a paper route to earn money. But nobody is reading newspapers anymore. Many young people served as tellers at banks, but the ATM is replacing lots of them. In fact, Internet banking is replacing the entire bank.

Several months ago I mentioned that if you raise the minimum wage too high, business owners will just replace the workers with machines. Here are some more recent headlines.

Applebee’s plans to install a tablet at every table in its 1,860 restaurants in America. Chili’s is doing something similar.

Lowe’s has just announced it is going to experiment with a robot greeter at its stores.

Where will everyone work when the machines have been fully deployed?

Keep your eyes open for this growing trend. As the minimum wage increases, retailers that already pay high property taxes and utility costs will continue to find ways to replace people with machines.

Soon, the stores and cafes will be empty of people. Just walk in and push the buttons to order. Go up to the counter, say “hi” to the cook and get your food. The cook may want to chat a moment because he will be lonely working by himself. Eat your food while you play video games on the tablet. Then swipe your card and leave. Maybe you tip the cook a dollar just for old times because he was the only human voice you heard.

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