On Aug. 29, labor-backed walkouts targeted fast food outlets in over a dozen major American cities from coast to coast. They demanded a more-than-100 percent increase in the minimum wage to $15 an hour.
The protesters were targeting their rhetoric at restaurant management. But this isn't accurate. In reality, the employees in the picket lines are fighting a war with price-conscious customers. If they get their way with a $15 minimum wage, they will only hasten the service industry's move toward automation and self service, where the customer (or even a computer) performs a task that used to be part of an employee's job description.
The labor-aligned protesters are butting up against some basic economic realities of the service industry. Fast food restaurants, along with other labor-intensive businesses such as grocery stores, gas stations and retail outlets, keep just a few cents in profit from each sales dollar after paying for food, labor and other expenses. In other words, a $15 wage mandate — which would add over $15,000 a year to the cost of each full-time minimum-wage employee — can't just be absorbed.
This leaves employers with one of two unpleasant options: Raise prices or reduce costs. But higher prices to offset a wage hike of this magnitude aren't realistic — imagine how you'd respond if the 99-cent menu became the $2.99 menu. Instead, restaurant operators have to provide the same service with fewer employees.
This means that customers end up serving themselves instead of being served by an employee. For example: Today, we might bag our own groceries at a supermarket checkout or pump our own gas at the station (except in New Jersey and Oregon, where it's against the law). Even self-service soda refills at fast food restaurants were developed as a labor-saving device.
In other cases, a robot can be "hired" to do the job instead of an employee. The technology is already here: San Francisco-based Momentum Machines recently announced a new robotic burger flipper that does the work equivalent of three full-time kitchen employees. That's 360 burgers per hour, with no strikes, benefits or wage demands.
At current labor costs, Momentum's burger flipper pays for itself within the first year. But at $15 an hour for an employee, the investment would pay off in a matter of months.
This trend toward automation doesn't just affect the kitchen. In 2011, McDonald's announced it was installing touchscreen ordering terminals at 7,000 European locations, where the minimum wage is higher — making the cashier position effectively obsolete. California Pizza Kitchen, Chevys Fresh Mex and other table-service chains are experimenting with computer terminals that let customers order and pay at the table, with minimal service from a server required.26 comments on this story
These changes don't become inevitable until the cost of service gets trumped by customers' desire for low prices. But once the jobs are automated, that's one less entry-level position for a less-skilled employee to work his or her way up the career ladder — no small concern given that teen unemployment has been above 20 percent for the past five years.
Those teens, along with other entry-level employees, will be the first to feel the unintended consequences of a $15 minimum wage. However well-meaning the striking employees are, the fact is that they're only fighting the laws of economics — and that's a fight they can't win.
Michael Saltsman is the research director at the Employment Policies Institute.