Would You Like Fries With Your Unemployment Check?

From Zero Hedge, the “unintended” (?) but inevitable consequence of the $15/hour minimum wage:

With a seemingly endless line of talking-heads willing to ignore essentially every study that has been undertaken with regard the effects of raising the minimum-wage; and propose what is merely populist vote-getting ‘benefits’ for the ever-increasing not-1% who benefitted from Ben Bernanke’s bubbles – we thought the following burger-flipping robot was a perfect example of unintended consequences for the fast food industry’s workers.

Oh, my.

And it’s produced by a what, you say?

With humans needing to take breaks, have at least 4 weekend days off per month, and demanding ever-increasing minimum-wage for a job that was never meant to provide a ‘living-wage’, Momentum Machines – a San Francisco-based robotics company has unveiled the ‘Smart Restaurants’ machine which is capable of making ~360 ‘customized’ gourmet burgers per hour without the aid of a humanFirst Jamba Juice,then Applebees, next McDonalds…

The end result – says the company?

There are those on the left who say that it’s inevitable, that robots were/are going to replace humans in fast-food kitchens anyway.  The statement itself betrays ignorance about how economics work; the artificial acceleration of wages for what was never intended to be anything but entry level jobs where people trade low-skill labor for low-skill wages and – for the smart ones – work experience.  As the jobs got priced beyond what the labor was naturally worth to the market, the imperative for the “robots” grew.

The opportunity is there, of course, for those who are smart enough to see it and develop the skills for it; for people to build, sell, install, program, maintain and repair the “robots”, this is going to be the good ol’ days.

But those aren’t the people who are marching up and down in front of WalMart, McDonalds and Burger King demanding minimum wage hikes.

33 thoughts on “Would You Like Fries With Your Unemployment Check?

  1. This is why centrally planning an economy never works out. Think the House of Saud ever considered what $100 per barrel oil would bring beyond the ability to export more Wahabi fundamentalism? Some smart ass in say, North Dakota, will find it economically viable to get oil out of the ground in a new way. Of course when you are a Democrat, your good intentions trump the real life disaster you impose on others’ lives.

  2. They’ll still need $15/hr. grunts – equipped with pictogram instruction guides – to load the meat, buns and other ingredients into the machines. This person will be called “Manager.”

  3. “artificial acceleration” Obama, the Fed, and the Democrat party did everything perfectly to accelerate the substitution of capital for labor.

    It’s cruel, and will cost society and government massively.

    I hate these bastards.

  4. I’m surprised that the robot was actually made in the USA. If so, I wonder how well they’ll fare in the equal opportunity arena? I wonder if a proliferation of these things will suppress illegal migration to some extent?

  5. That bun is over-toasted.

    My son and I were having a discussion last night. He said “my generation is screwed.” He and the girlfriend have been looking at rings, and he finds the cost too much. So he asked what our rings cost in 1987. The three rings (mine, and wedding/engagement rings for her) were less then half of what he is seeing. That lead to discussion of pay. I related that, as a fresh graduate of college, having passed the CPA exam, and taking a position with a Big Eight accounting firm, I was making the princely sum of 14,000 per year. Less than the current minimum wage.

  6. fresh graduate of college, having passed the CPA exam, and taking a position with a Big Eight accounting firm, I was making the princely sum of 14,000 per year.

    Straight out of college, I lusted after a tech writing job that paid 18-20K. I actually got a radio call screener job that paid me about $8K. I felt like the king of the world when I was making $12K (and probably 2-3K from freelancing, talent fees and voice-over work on the side).

  7. Straight out of college, I lusted after a tech writing job that paid 18-20K.

    Straight out of college, I got a job that paid more than my fully-tenured professor and adviser. But then again, I was smart enough not to go into academe.

    Obama, the Fed, and the Democrat party did everything perfectly to accelerate the substitution of capital for labor.

    You ain’t seen nothing yet. Software trails hardware by a decade at the very least. The next two decades will have massive substitutions of capital for labor as many more things automate. The key to prospering will be to be the ones doing the automating, or to have a ton of capital to prosper.

  8. Geez! I’m glad that it’s almost lunch time! That burger looks damned tasty!

  9. Loren, tell him to check out pawn shops. No, I’m serious. Sparkles just as much and he’ll save a bundle. Pitch it to her as “This way we can afford to spend more on your dress.” Something old, something new . . . .

  10. or the simple cost of his soul, I got some nice rings down here.

  11. It’s worth noting that the early burger-flipping machines will be made in the USA, as we do have the engineers and machinists to do that. However, what will happen as the technology becomes more “required” (e.g. when a minimum wage hike becomes dominant) is that the procurement executives at McDonald’s and Burger King will seek ways to drive cost out of the bill of materials.

    At that point, the makers either automate the manufacturing process, or it goes offshore, most likely. The one thing in favor of keeping it stateside is that it appears to be a lot of stainless steel, and it’s light–the cost of importing it will be a little bit more than a lot of things.

    But more to the economic point, it always baffles me why so many people cannot figure out “OK, you’ve just increased your cost side of the ledge by x% in terms of labor. What will businessmen do to compensate?”.

    It’s not like we don’t deal with this every day. Beef goes up, you look at pork or chicken. Coke goes up, you look at Pepsi or the off brands. Pop in general goes up, you drink water or coffee. Why can’t people figure out that their employment follows this law, too?

  12. On a recent Fox News financially-oriented panel show, Ben Stein disclosed his passion for the Big Mac …

  13. QUOTE: You ain’t seen nothing yet. Software trails hardware by a decade at the very least. The next two decades will have massive substitutions of capital for labor as many more things automate. The key to prospering will be to be the ones doing the automating, or to have a ton of capital to prosper.

    I can’t prove this, but I think the big problem is we have pumped up the price of housing artificially for 100 years. Thus, we are getting killed by globalization. We could operate on lower wages if the price of rent wasn’t so damn high, in other words. The problem is the banking system and the political system can’t tolerate it.

    Then throw in the price of health insurance and education. Excess taxation due to useless government that is trying to equalized for bad government and bad Fed policy.

    #InflationismIsInsanity

  14. Housing is a forced savings / speculation vehicle in other words.

    Until it all collapses.

  15. TFS; the Dems will never acknowledge that they were over 90% responsible for the housing/mortgage crisis in 2008. I remember GW sounding an alarm in either late 2005 or 2006 that he was concerned that they were both leveraged too heavily. Of course, Fat Boy Bowney Fwank and his buddy Chris Dodd screamed bloody murder that there was nothing wrong and therefore nothing to see. Then, as usual, the Dems played duck and cover until they could blame a Republican. If we take this back a little further, we can see that Slick Willy Clinton actually started the ball rolling downhill. The bottom line is that the Dems own that mess and they are doing their best to allow history to repeat itself.

  16. Is it just me, or did anyone else notice the irony that Momentum Machines is a San-Francisco based company?

  17. So when I click on a link about what “every study that has been undertaken” on minimum wage show, I understand some hyperbole might be going on. But I was rather shocked to find the link contained not one single study empirical study. Instead of any references to the rather large body of economic studies of actual real world increases in the minimum wage, we get the author’s bland a priori assurances that a minimum wage increase must increase unemployment.

    I guess for the SITD crowd, pretending to cite real research, is good enough.

  18. Ya know, Rick, if you’re trying to promote a completely counter-intuitive conclusion–that businessmen do not respond to a rising price of labor by compensating with capital, firings, and the like–you might do well to, say, actually cite a study or two?

    I’ll start with a simple statistic. Youth unemployment rates in Minnesota are twice the state average. http://minnesota.cbslocal.com/2013/05/01/unemployment-rates-released-for-mns-young-adults/

    Explain how this has nothing whatsoever to do with a mandated wage of over $7/hour for kids whose work may not be worth that much. Really, Rick, that minimum wage laws put unskilled workers out of work is almost self-evident. And why do you hate kids?

  19. BB:
    Before we debate the minimum wage, can we first agree that Zero Hedge a. pretended to link to actual empirical studies of minimum wage and b. did not actually cite any such studies?

  20. Oh I guess I will skip waiting for a reply because this is just too damm funny.
    “Explain how this has nothing whatsoever to do with a mandated wage”

    Because youth unemployment is pretty much always and everywhere double the adult rate. In fact double is the low end of the range. Per those socialists at the IMF.
    “Young people have always had a tough time finding work. Historically, the unemployment rate for those ages 15 to 24 in advanced economies has been two to three times higher than for older age groups.”
    http://www.imf.org/external/pubs/ft/fandd/2012/03/morsy.htm

  21. Rick:

    Oh I guess I will skip waiting for a reply

    Big talk from a guy that has never not had an assertion on this blog factually shredded, and is usually slow-to-nonexistent answering questions.

  22. Rick, your source does not have any historic data . Are we to assume something completely counter-intuitive by fiat? The only time scale we’re looking at is 1980 to 2005, when we always had a minimum wage about the same as today’s.

    Did you ever learn about experiments without a control, and why they generally don’t mean anything? If not, it’s about time you did.

    Another source; didn’t the CBO estimate that a $3 hike in the minimum wage would cost about half a million jobs? Sorry, Rick, but smart businessmen do indeed look at balance sheets and make these decisions. Another point of reference is Dr. Marvin Olasky’s “The Tragedy of American Compassion”, which notes that except for periodic panics, non-farm unemployment was negligible among those willing to work, including those who did not know English and had no marketable skills. And the U.S. was, along with England, the advanced economy.

  23. Rick: the answer is that (a) no, Zerohedge did indeed link to a document which illustrates the idiocy of the minimum wage brilliantly and (b) it ought not be necessary to cite econometrics to justify a conclusion that is obvious to anyone who can read a balance sheet and infer the results of a price floor on a chart off supply and demand.

  24. youth unemployment is pretty much always and everywhere double the adult rate

    RickDFL: Wrong again. Wrong always.

    US Youth unemployment has always been 2-3x the general rate. Now it’s right around 4x, and is likely only that good because of the number that have dropped out.

    Quick, Rick – have you seen the U6 rate for workers below 25? The one counting the underemployed and discouraged?

    Obama’s economy is a crime.

  25. From the Solutions section of the IMF report cited by RickDFL:

    ” . . . A pervasive dual labor market system, with a flexible temporary workforce and a highly protected permanent workforce, can increase unemployment (Blanchard and Landier, 2002; Dao and Loungani, 2010). Easing regulations only for fixed-term contracts strengthens the power of permanent workers in wage bargaining, which pushes up wages and makes it harder for others to get hired. This is why both steps must be taken together. . . .”

    In other words, get rid of unions.

    And don’t artificially push up wages because that makes it harder for others to get hired. In other words, get rid of minimum wage laws.

    Good cite, Rick. I’m in complete agreement with the IMF’s proposals. Now, can we get Alida aboard with it so Minnesota Democrats will know how high to jump?

  26. Mitch: The only way you get a 4x “youth” unemployment from your graph is if you just look only at the 16-17 or 17-18 year old lines. BB and I were talking about 15-24 or 16-24 year olds. Your graph does nicely illustrate that the unemployment ratio by age remains fairly constant over time.

    BB: If you and Zero Hedge want to do economics free from empirical facts, go ahead. But neither of you should pretend that your conclusions are backed by real world evidence.

    Joe: Not exactly. The IMF recommends relaxing labor law protections for some workers (full time) but improving them for others (temporary). So the overall level of labor law protection remains constant but is spread equally over all workers. Also note that while in the US, for the most part only union workers have a contract, in the rest of the world almost all workers have a contract. So when the IMF talks about contracts they are not necessarily talking about unions or collective bargaining.

  27. Rick, if you’re going to argue that businessmen don’t pay attention to their own balance sheets, there is no amount of experimentation that can rescue you. The question is not whether they respond, but how and to what degree.

    But if you must indulge econometrics to answer the self-evident, the CBO estimates that the minimum wage hikes desired by Dear Leader would cost half a million people their jobs.

  28. I never said a business would not respond. There are very many ways to respond other than simply cutting hours or positions for low wage workers. The CEPR study below lists 11 possible responses. While I am sure some employers do respond as you suggest, others respond in different ways. There is an enormous literature of empirical research on how employers in aggregate have responded to previous minimum wage increases. It shows that past increases have had little effect on overall employment.
    http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

    It is telling that even when pretending to look at real world results, ZH retreats into simple a priori assertions about what must be the case. You, at least, seem to dispense with reality all together.

  29. What I’m doing is citing the CBO instead of your gang of Keynesians, Rick.

    http://www.cbo.gov/publication/44995

    This is reality. When your wages get too high, employers go elsewhere. Just ask people who used to work in the domestic textile industry, in the domestic garment industry, in the domestic electronics industry, or any number of other industries that have gone offshore in part as a response to wages being too high here. I have personally been in the room when such decisions were made at companies where I’ve worked. It may escape CEPR, but it’s a very real effect.

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