The democratic regime under President Barack Obama has been pushing for an increase in the minimum wage from $7.25 to around $10.10, claiming that the increase is likely to increase the living standards among the low-income earners in the United States. Nevertheless, the idea has received criticism from several individuals, especially economic analysts and political opponents. The economic aspect of the arguments against the idea is quite impressive. In this article, Michael Saltsman (2014) has developed a comprehensive argument based on economic evidence. He cautions the government that the idea is likely to affect the economic system, especially by interfering with the natural relationships between supply and demand as well as the existing relationship between labor, automation, and prices.
In the article, the author attempts to describe a situation that will result if the government succeeds in pushing and implementing the rise in the minimum wage. According to the author, a compulsory rise in the minimum wage will involve several other issues. The author argues that automation of service delivery, which is made possible by the existence of a dynamic state of technology, has already started taking over the roles that are conventionally performed by humans. The author points at several organizations that have started automation of their operations. For instance, restaurant chains such as Chili’s and Evan Bobs, departmental stores such as Target and Macy’s as well as several other organizations have started automating their services.
Moreover, the author cites a recent report from a study carried out by the National Restaurant Association, which indicates that most restaurants have developed comprehensive strategies and programs to start automating their services. What is the cause of the situation? What does this imply and what impacts will the raising of the minimum wage on the situation?
The situation that the author is describing in the article can be analyzed from an economic perspective. In this context, four aspects of the economy must be considered- supply, demand, labor, prices, and automation. In this context, a forced increase in the minimum wage is likely to decrease the profit levels for employers. Since the employers are ready to face loses or reduction in their profit margins, they will have to take the only options available for them- increasing the product price or reducing the cost of production (Thomas, 2008).
On the other hand, it is worth noting that employers are more likely to attempt reducing the cost of production than increasing the product price or compromising product quality. Therefore, the only option remaining for them is to reduce the cost of production by reducing the number of employees. However, this is also a threat to business because reducing the number of employees is likely to reduce product quality, service delivery, and competitiveness (Thomas, 2008).
Fortunately, technology has come to their aid, especially in a situation such as the one described above. In this context, technological dynamism has made it possible for computerized programs to perform human functions, including providing service in hotel chains, retail chains, food chains, airports, schools, and other fields. Also, the accuracy and efficiency of service deliver though computerized programs are higher than human labor (Thomas, 2008). The implication is that the demand for labor will decrease significantly. On the other hand, unemployment is likely to increase, which means that workers will be accepting low wages and salaries. In the end, the Democrats will have made no impact on the lives of the people, contrary to their claims.
References
Saltsman, M. (2014). The employee of the month has a battery: Minimum wage hikes accelerating trend toward automation. The Wall Street Journal. Web.
Thomas, R. J. (2008). What Machines Can’t Do. Berkeley: University of California Press. Web.