New York & California Just Killed Entrepreneurship

In just 16 years, the minimum wage in the State of California will see a rise of 222% from $6.75 in 2006 to $15 in 2022.  That is an average annual increase of nearly 14%.  In New York, the increase to $15 from, again, $6.75 in 2006 is more complicated as follows:

• For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage would rise to $11 at the end of 2016, then another $2 each year, reaching $15 on 12/31/2018.
• For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage would rise to $10.50 by the end of 2016, then another $1.50 each year, reaching $15 on 12/31/2019.
• For workers in Nassau, Suffolk and Westchester Counties, the minimum wage would increase to $10 at the end of 2016, then $1 each year, reaching $15 on 12/31/2021.
• For workers in the rest of the state, the minimum wage would increase to $9.70 at the end of 2016, then another .70 each year, until reaching $12.50 on 12/31/2020 – then  continue to increase to $15 on an indexed schedule to be set by the Director of the Division of Budget in consultation with the Department of Labor.

The reality is that no other class of workers has seen that kind of increase.  In fact, assuming a 2% raise a year, it would take the middle class worker an average of 111 years to have a 222% rise in their salaries.

The point is that many people will find themselves less able to afford products and services that are heavily dependent on low wage workers; such as fast food businesses, retail, hospitality, and leisure.  The same goes for this nation's 55 million seniors, who, at best have seen increases of just 1% a year in their Social Security checks.  Additionally, millions more, such as waiters and waitresses, won't be eligible for minimum wage because they earn tips.  And, so too, for the three quarters of 47 million Americans in poverty who aren't even working.

More importantly, the $15 wage will accelerate the death of entrepreneurship and its ability to create jobs.  It will be much more expensive to start new businesses that generally depend heavily on entry level employees.  Entrepreneurship has already been in decline for decades, but now it will become a much higher risk proposition.  Even before instituting this excessive wage, 1-in-4 startup businesses failed in the first year.  50% will be kicked to the curb in just 4 years, and operational costs are one of the 4 main reasons for failure.

I hope I'm wrong, but I think the $15 minimum wage will be a real job creation killer.  And, in fact, a job killer for businesses who must raise prices, and in turn, lose customers who can't afford those price hikes. Also, the $15 minimum wage will bring in automation to replace the humans making that wage.  Already, you can rent a robo-security guard that can hear, smell, and has 360 degree night vision for just $6.25 an hour.  So, if you can already automate a security guard, it only seems logical that other lesser tasks, such as flipping burgers, will follow suit.

References:

Governor Cuomo Signs $15 Minimum Wage Plan and 12 Week Paid Family Leave Policy into Law: https://www.governor.ny.gov/news/governor-cuomo-signs-15-minimum-wage-plan-and-12-week-paid-family-leave-policy-law

California, New York enact $15 minimum wages: http://www.foxnews.com/politics/2016/04/05/california-new-york-enact-15-minimum-wages.html

California Minimum Wage 2006: https://www.google.com/search?q=california+minimum+wage+in+2007&ie=utf-8&oe=utf-8

New York Minimum Wage 2006: https://www.google.com/search?q=minimum+wage+in+new+york+in+2006&ie=utf-8&oe=utf-8

Minimum Wage - United States Department of Labor: Questions and Answers About the Minimum Wage: http://www.dol.gov/whd/minwage/q-a.htm

The Mysterious Death of Entrepreneurship in America: http://www.theatlantic.com/business/archive/2014/05/entrepreneurship-in-america-is-dying-wait-what-does-that-actually-mean/362097/

The Slow Death of American Entrepreneurship: http://fivethirtyeight.com/features/the-slow-death-of-american-entrepreneurship/

Startup Business Failure Rate By Industry: http://www.statisticbrain.com/startup-failure-by-industry/

The Four Major Reasons for New Business Failure: http://smallbusiness.chron.com/four-major-reasons-new-business-failure-51924.html

Rent A Robot Security Guard for $6.25 an Hour: http://www.psfk.com/2014/12/rent-a-silicon-valley-security-bot-for-6-25-per-hour.html

Will Socialism Be The Only Answer In A World Run By Robots?

We already have cars being tested that drive themselves.  So, when they are finally perfected and approved, why would we need cab drivers?  What about bus drivers and truck drivers?  In Nevada, German truck manufacturer Daimler is already testing a self-driving truck. Microsoft has replaced its human security guards patrolling it's Silicon Valley campus with 5 foot tall robots that use artificial intelligence to navigate and detect security problems.  There's even a robot capable of sorting items at recycling centers.

The reality is, that an increasing number of jobs are being replaced by intelligent machines.  So rapidly, in fact, that some experts believe that 30% of all jobs will be replaced by 2025.

The 30% of workers that do lose their jobs will no longer be paying into Social Security and Medicare to support the millions already living off of those two programs. They'll pay no taxes that typically support welfare and wards of the state. So, how is society going to take care of the millions of workers forced into unemployment by these machines?  I think initially, the politicians will try to stop robot takeover through a tax on every one being deployed; arguing the taxes will be needed to pay for all those people who lost their jobs.   Eventually, though, the only answer will be to allow robot takeover and dump capitalism in favor of socialism with everyone being paid by the state and allotted certain necessities for free.  And, in the irony of all ironies, capitalism, the chief driver of innovation in the world, will die by its own hands.

References:

Self-driving Cars Are No Longer a Thing of the Future | TIME: http://time.com/3661446/self-driving-driverless-cars-ces/

The World’s First Self-Driving Semi-Truck Hits the Road: The World’s First Self-Driving Semi-Truck Hits the Road

Microsoft's Silicon Valley campus is protected by robots:http://www.dailydot.com/technology/microsoft-robot-security-guards/

Green machine: Intelligent robot system recycles waste: http://www.cnn.com/2013/06/07/tech/zenrobotics-recycling-robot/

The Minimum Wage Protestors Are Too Naive To See What Is Already Happening To Their Jobs

Just last Saturday, CNBC posted a story entitled: "Hiring R2D2 to protect your mall or campus—all for $6.25 per hour".   In that article, it showed a robot that was capable of making security rounds at an hourly depreciated and operational cost that is a full dollar below the minimum wage.

Additionally, these robots won't need vacation time or a matching pay in to Social Security and Medicare; and, for sure, won't cost the company a single cent in providing mandated healthcare under ObamaCare or the fine that would be imposed for not providing it.

Then, just before Thanksgiving, Amazon announced the deployment of 15,000 robots of its own to streamline its picking, packing and shipping in their warehouse operations.

Saving approximately 20% in labor costs, the little orange robot is designed to bring a storage rack of goods to a human so they can pick the product off the rack and then package it for shipping.  No longer would real people have to roam a large warehouse in search of product that needed to be shipped; and, then, return to a shipping point to pack it and complete the process.

Earlier this year, in a joint effort between Adept Technologies and SwissLog, a labor saving hospital robot was announced that could shuttle specimens and, I would think, medications throughout a hospital autonomously.

Of course, one has to ask, why couldn't a robot like this also deliver food to a restaurant table in the not too distant future.

The simple fact is, that already, robotic workers are cheaper than paying the current minimum wage at $7.25 an hour plus benefits for a human worker doing the same job.  And, don't think that ObamaCare and the employer mandates won't also be at the heart of this trend of replacing humans. So, what do you think will happen if Obama and the Democrats get their way and the minimum wage is set 40% higher at $10.10, or if the short-sighted $15 minimum wage protesters got their wish?

The high cost of union labor has driven much of American manufacturing jobs overseas in the last 5 decades. Now, labor's wish for a higher minimum wage is sure to banish the existence of most of those  jobs through robotics.  It's a matter of simple economics, and right now, there are at least 50 companies (link below) chomping at the bit to have their robot technologies added to our everyday lives.

References:

Hiring R2D2 to protect your mall or campus—all for $6.25 per hour: http://www.cnbc.com/id/102240810

Amazon's new robot army is ready to ship: http://www.sacbee.com/news/business/article4216163.html

Florida Hospital Orlando to automate laboratory transport with Swisslog autonomous mobile robot: http://www.prweb.com/releases/2011/4/prweb8336301.htm

Robotic Business News: 50 Robot Producing Companies: http://www.roboticsbusinessreview.com/companies/category/top_50/list

ObamaCare, The Minimum Wage, and Automation

In 2011, Obama blamed people-replacing machines like ATMs and airport check-in kiosks for causing the slow economic recovery.  What he fails to realize is that increased automation is a direct result of  his own policies.  Higher costs for labor -- such as increasing the minimum wage by 41% from 2007 to 2009 or mandated employee benefits such as health insurance coverage under ObamaCare -- only forces businesses to find alternatives to increasingly costly humans.  That is one of the primary reasons why, today, many companies have off-shore call and customer service centers or, why so many retailers have incorporated self-checkout lanes in their stores.

According to the Bureau of Labor Statistics, three-fifths of all minimum wage earners are in the fast food industry; an industry that employs 4 million.  But, another round of raising the minimum wage by a proposed 25% just might be the tipping point at which fast food companies like McDonald's start automating their stores.  After all, they are already facing hefty penalties or insurance costs under ObamaCare in 2015, and its not much of a stretch to think these people could easily be replaced with the current technology.

That drive-up order taker/cashier could simply be replaced by a touch-screen and an integrated credit card reader.  This would be especially true if customers are given a discount for paying by credit card and, thus, avoiding costly human interaction in accepting cash payments.  The same is true for cashiers inside the store. In fact, that is exactly what McDonald's did in France by installing 7000 touch-screen order and credit card acceptance machines.  Those machines also had the additional benefit of instantly displaying calorie information; another requirement of ObamaCare in this country.

Further,  there is no reason why any of the rest of the jobs at a fast food restaurant couldn't be replaced.  In fact, a company by the name of Momentum Machines has already built a hands-free unit that can crank out and dispense 360 gourmet burgers per hour.  The company already claims that, by replacing humans, their machine will pay for itself in a year.   Of course, the payback would be slashed to 9 months if the minimum wage is raised by another 25%.

Lastly and more importantly, if one fast food company, like McDonald's, starts rolling out automation, eventually, they will all follow suit.  When that happens, a source of 60% of all minimum wage jobs will disappear, and, the damage may well be higher than 60% if businesses outside the fast food industry also find ways to replace the costly humans.


References:

Obama, ATMs And Rage Against The Rise Of Machines: http://www.forbes.com/sites/mattkibbe/2011/06/21/obama-atms-and-rage-against-the-rise-of-machines/

Characteristics of Minimum Wage Workers: 2012: http://www.bls.gov/cps/minwage2012.htm

C/Net:  McDonald's hires 7,000 touch-screen cashiers: http://news.cnet.com/mcdonalds-hires-7000-touch-screen-cashiers/8301-17938_105-20063732-1.html

Robot Serves Up 360 Hamburgers Per Hour: http://singularityhub.com/2013/01/22/robot-serves-up-340-hamburgers-per-hour/