When People Become Too Expensive


Blogger The Phantom spots a Reuters article that, in Phantom’s words, shows “what inevitably happens when you raise minimum wage to idiotic heights.”  A grocery company is developing automated stores that are essentially like giant vending machines.  The advantages as the blogger sees them:

Lets list the advantages for the vendors here:
No shoplifting (Which is huge)
No employee stealing (Which is huge)
Much reduced breakage (robots don’t drop stuff as much)
Much reduced spoilage (Just In Time delivery and stock rotation goes a lot faster.)
Tiny square footage compared to regular market
NO EMPLOYEES means the store can be open 24/7/365, including Sundays and holidays. It’s a vending machine.

What’s the downside for the customers or the companies making the decisions?  Well, human interaction is nice and important (at least for most of us) and has some value.  I’ve never seen a statistic, but it has always seemed to me that people will typically go into a store to buy a soda even when there’s a vending machine outside.

The value of human interaction applies to the business owners, too.  Folks start or run businesses in order to earn a living, of course, but they mostly like the idea that they’re helping people support their families and that sort of thing.  Even looking at Phantom’s list of advantages to automation can remind us that a store manager, while annoyed about breakage and such, derives value from interactions — helping an employee to improve, for example, by teaching them life lessons and work strategies.

This is why minimum wages, regulations requiring the provision of certain benefits, and other government interventions are so detrimental.  They increase the direct cost of people to the point that the business begins to not be able to provide the financial benefit to the owners and managers.  That is, they place the ancillary benefits of employing people in opposition to the primary benefit of operating a business in the first place.

  • Joe Smith

    There is a difference between “idiotic” binding minimum wages and minimum wages that are simply necessary to prevent management exploitation. I don’t think $8 an hour is going to kill any legitimate business. $15 an hour is a different story.

    The stores will still need labor at least for the foreseeable future; robots/technology do malfunction and somebody has to fix/monitor; robots can’t deal with the customer who probably screwed up the order but nonetheless wants to complain their order isn’t right, etc. What you might get is what you saw in Seattle where companies like Starbucks simply raised wages higher and cut back on lower productive workers.

    Ah, but we should remember disturbances in one market have second and third order effects. Reduced spoilage/breakage and just in time delivery – demand for food at the wholesale ;eve; should go down. Lower food prices – whether they get passed onto the consumer is one thing, but that might for certain food (farm produce for example) markets necessitate even more government price subsidies or market interventions – unless we are politically willing to accept destruction in those markets (doubtful – even while Trump bangs the fair/free trade, US sugar policy for example probably won’t change given the importance of Iowa and Florida and now a Democratic House).

  • true to my Constitution

    If the minimum wage is $100 per hour, a loaf of bread would cost $25. The only way to get ahead is do a higher level function in the economy.