Minimum wage harms those it supposedly helps

Not so long ago, I flew into a small airport in Ohio. Don’t ask why, sometimes Ohio just happens and you have to deal with it. Arriving late (driving Delta: “Always delayed every last time”), I didn’t get on the plane until 11pm. And I was worried about picking up my rental car because all the tables of the car companies were dark.

Then my phone vibrated; I had a notification in the Hertz app: “Slot B17 code 2946” and some instructions. I went to the box, entered the code and removed the key from door B17. My car was in parking lot B17, I got in the car and drove away.

In 2011, Mark Andreesen’s famous quote, “Software is eating the world.”“. He argued that “the problem is even worse than it looks, because many workers in existing industries will find themselves on the wrong side of the software-based breakthrough and may never be able to work in their fields again.” Well, my experience in Ohio made me wonder: have the people who once worked behind the Hertz counter found a new job? They had experience in retail, but those jobs are disappearing fast.

You have seen this in other industries. One day you walked up to a fast food counter and read a few words from the menu aloud. Giant burger, huge fries, vat of drinks, set menu. The man behind the counter then looked up the corresponding printed words on his cash register. No wonder software has entered this world. All you have to do is turn over the cash register. You You can press these buttons on the touch screen of the kiosk yourself. You You can enter the payment yourself and get your own receipt because the software records, charges and transfers your order to other software at the back of the restaurant.

In the grocery store, the self-service checkout now replaces the checkout. When I was growing up, the only place I could “test myself” was in a mirror, and now in some stores there are no cashiers at all except for customers with disabilities who make a special request.

The coronavirus pandemic has also contributed to the loss of jobs in the service sector, so we cannot write off all the losses on software. But Overall, the number of people working in the service sector and the number of hours worked by those with jobs have been steadily declining since 2019.

The general problem can be represented as an analogy that you worked on when preparing for the SAT:

[software] This [_________]

How

[robotics/automation] This [manufacturing].

The correct answer to the question “fill in the gap” workplace maintenance. In other words, where we all talked about automation causing “technological unemployment” in the 1960s and 1970s, the new easy fruit to replace jobs is service jobs. Ironically, the solution of many current political scientists is that the solution is to raise the minimum wage, which disproportionately affects service jobs.

Let’s think about this logic for a second.

Minimal salary

Jobs in the service industry are shrinking because software is displacing people at an incredible rate. We all see it in some areas – grocery stores, car rentals, fast food, movie tickets, etc. – but it also happens in other areas that we don’t see – accounting, information requests, scheduling, booking. , almost any service. which can be routinized. What happens if we try to solve this problem of job loss by raising the minimum wage?

You don’t need a PhD in economics to predict the consequences. But I have a PhD in economics, so let me try:

• Even if it “works” and does not reduce employment at all, there are still many ways in which the minimum wage makes work inconvenient for the poorest segments of the population.due to competition in other fields.
• The best interpretation that could be given to the effect of the minimum wage in the period before software devoured the world was as follows. unemployment growth was less than expected. But it still caused part-time job or shortened work daymost of the time and for any large increase.
• The reduction in the amount of work, especially hours, for those who still work has been much more noticeable in recent years. This especially true in neighborhoods (such as Seattle) where the increase in hourly wages was large enough to create a “living wage”.“. Not surprisingly, the consequences are 1) higher wages for those who still have a job (the law requires it), and 2) a reduction in the number of jobs and hours worked (this is required by the laws of economics).
• Even if there were a large positive effect on wages and no effect on unemployment, higher prices for products and services produced by workers with minimum wages will cause significant damage to the poorest segments of the population.disproportionate to the intended benefit, which is questionable in the first place.

I recently wrote about the conflict between directionalists and destinationists. Some destinations – for example, my good friend Richard Sulsman — would argue that the problem with the minimum wage is that it interferes with freedom of contract.

But you don’t have to believe this argument to see that raising the minimum wage right now is a terrible idea. If you care about people who are struggling to keep their jobs in a difficult economic climate, you should speak out against raising the minimum wage: it hurts the very people you want to help. Being able to work and feel productive is an important part of the social aspect of our economy. Service jobs are disappearing fast enough that the process is not being accelerated by misguided support for higher minimum wages.