Economic Reality

What can we learn from the oil boom in North Dakota, the protest movement to raise the minimum wage and robots in California? – Maybe something about jobs, pay and the economy.

Start with the protesters.  The Huffington Post reports that the fight for a $15 minimum wage is heating up.  The protesters and organizers represent it as a fight for social justice.  With demonstrations in over 230 cities and on college campuses, they hope to pressure fast food companies into giving their employees raises.  McDonald’s has promised an increase, but the corporation controls wages only at owned stores, while the majority of their outlets are run by franchisees.

Perhaps the protesters will get their way, not the whole $15 but some concession.  As they wait, they should ask themselves a few questions.  When I get on an elevator, why is there just a row of buttons on the wall and not someone standing there all day whose job it is to drive the elevator?  When I make a phone call, how can I contact anyone in the world by just dialing a number without having to ask one or more switchboard operators to plug the wires together to make the connection?  When I call customer service, why must I negotiate past the mechanical voice to speak to a live human?  When I buy gasoline and groceries, why am I expected to do work once assigned to an employee?

These questions are relevant, because as MacDonald’s promises a small pay increase, they are testing order kiosks at restaurants to take the place of workers at the counter.  Of course, they will still need people to make the burgers, won’t they?  Not according to this Reason article about that robot company in California.  The company, Momentum Machines, claims that their equipment can replace “all of the hamburger line cooks in a restaurant,” doing “everything employees can do except better.”  That should not come as a surprise; it was just a matter of time.

That brings us to an important economic point.  Over the long run you can’t secure higher pay by protest.  Higher wages come to those who have developed or were born with superior skills and who are willing to work hard applying those skills.  Just as rare gems are more valuable than costume jewelry, rare skills are more valuable than common ones.  As a dramatic example, near the oil fields in North Dakota where the unemployment rate is about 1%, one Wal-Mart store offering $17.40 per hour to attract entry-level workers.  A similar situation exists near the oil sand in Western Canada.  But in New York City where employment choices are few and low skills are common, workers are forced to resort to coercion. 

The dispute is not about justice; it’s about economics.  This is an important lesson.  It’s too late for those workers who chose to have a family of four before developing the skills and ability to support a family of four -- but it’s not too late for our children.