Tuesday, February 19, 2013

One Good Thing About Obama

Is that you never run out of stupid ideas to make fun of.

Raising the minimum wage to $9?  Actually, the mere fact that Obama wants to do it and that Paul Krugman is endorsing it ought to tell you that it's not a smart thing to do. 

I'm tired of arguing over this issue because, to be honest, I'm always right and I always lose.  I'm right because I say it will cost the jobs of the people it's trying to protect and it will lead to inflation.  Those things then happen.  And I always lose because not enough politicians have the guts to stand against a minimum wage increase. 

Earth to liberal economists: your ideas never work.  Where I come from, people whose ideas never really work out get fired. 

Didn't work?  You guys did so well with Cash for Clunkers, taking used cars off the market that low-wage people need to buy, and raising the price of used cars by 10% in a matter of a few weeks.  Not to mention costing taxpayers $24,000 per car and paying 12 times the going carbon trading price for the tiny mileage improvements.  You need to be an Ivy League academic to screw up that bad.  You did so well for low pay employees, by imposing the mandatory health care act so that employers cut back their hours to keep them well under 30 hours, so that now they need two part time jobs - and desperately need that good used car to get between jobs.  If I were on minimum wage, I think I'd be screaming at you to STOP TRYING TO HELP ME!!! 

So what unintended consequences will come from a $9 minimum wage?  Zendo Deb at 357 Magnum points out a robotic hamburger maker to replace those expensive workers.  The machine just got cheaper with every nickel of minimum wage increase.  Heck, in China, where workers are much cheaper than over here, restaurants are going to robotic staffs to wait tables and do most of the cooking.  The robotics industry forecasts that service robots - medical, cleaning, milking - will be the fastest growing segment of robotics.  Right now, demand is so high that manufacturers can't keep up.

Want to bet robotic waiters and burger makers are going to come here?  There are jobs that just aren't going to be worth $9/hr - if the shop or restaurant owner can't make enough profit from the employee.  You can be sure some people will have their hours and pay cut, or will lose their job completely.  
Hooters will never be the same...


12 comments:

  1. "Hooters will never be the same..."

    Obviously you are not familiar with Number 6 cylons.

    ;)

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    1. I should only live long enough to see that!

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  2. The issue isn't "$9/hr minimum wage" - that's the tip of the iceberg. Even though it really comes out of the employee's paycheck, employers pay 6.2% above the wage rate for "their" portion of social security; with a wage rate increase there's a corresponding worker's comp increase; and so on. The employee burden rate - the $$ it actually costs to have Joe, Jane or Jose on the job - is the crucial value, and it includes the hourly rate, SS, worker's comp, benefits, sick leave, vacation, medical coverage, EEO meetings, parking, the employee's share of IT, HR, etc., security, training, ad infinitum. The employer must receive a certain margin of profit in order to stay in business, and I'd be surprised if 50% gross was adequate. So, if an employee's burden rate is $25/hour, which is not out of line at a $9 hourly rate, that employee has to generate at least $37.50/hour gross revenue (25 X 1.5) each and every hour they workto justify having them on the job.

    Invest in robotics and companies that make business automation systems.

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    1. At Major Electronics Manufacturer, where I work, they no longer hire entry level workers. Too risky for the cost.

      Instead they hire people on six month contracts with no benefits. Once the employee has shown evidence of being able to work out, they might be offered a permanent position.

      I can see a lot of employment turning into that. As government of all sizes keeps regulating businesses, companies morph into a small number of regular employees and lots of contractors. "Insurance for all employees? We don't have any".


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    2. Congratulations, you're all temps now.

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    3. Erin, nearly 30 years ago, during the big early-80s recession, a friend gave me a perspective I've never forgotten: "some of us are permanently temporary and some of us are temporarily permanent".

      There's a lot of wisdom in there.

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  3. Erin, I don't think there's much market for temps, either. I designed a document management system for a certain organization that, for one function, reduced the manpower requirements from 16 experienced people working 8 hour days to 4 people working 4-6 hours/day, and only 2 of those needed training/experience comparable to any of the 16. Had they given me a freer hand (and a little more money), I could have driven that down to 2 people for 6 hours, and reduced their phone staff by half as well. They did not understand arithmetic: the burden rate for an "average" permanent employee was, by their own analysis, $22.45/hr; that means each employee cost them just under $47K/yr. Going from 16 employees X 8 hours to 4 X 6 hours cut the employee cost for that one function by $600K/yr. Every year. That can pay for a lot of automation.

    When I was in the semiconductor biz, the engineering staff was under constant pressure to implement more automation, improve quality and reduce costs. Semiconductor manufacturing now is a lot different than when I was in it 20 years ago. We staffed much of 3rd shift, and a lot of 2nd, with closely supervised 6-month temps, many of whom got extended to 12 months, but almost none were converted to permanent employees. The people were too expensive, automation was much cheaper in the long run and made a lot fewer errors.

    Look what's happening to retail: order online, either pick up at store or have delivered. That means fewer experienced - and more expensive - salespeople are needed and more low wage stock handlers. I'm waiting for someone to connect the dots and build a "Wal-Best-Target-Mart" complex that's mostly a very large warehouse with on-site pickup and low-cost local delivery. Actually, outfits like Costco, BJ's and Sam's Club have some of those features, but brand alignments prevent them from offering a great deal more then they do now. In years past there were showroom/warehouse stores (BEST Products is probably the widest known), but big box stores and the internet killed them. Shopping has become a social experience, but you can bet everyone from Walmart to Fred and Larry's Excellent Merchandise Emporium is looking for ways to increase market share and reduce costs.

    Costs are interesting - Costco apparently doesn't make profit on merchandise and depends on membership fees for profit; I'd wager Sam's and BJ's are in a similar situation. Amazon loses money on shipping, but makes it up on merchandise. (My guess is the average Costco/Sam's/BJ's could increase SKUs by 25-35% if human customers were banned from the buildings. Forklifts have pretty tight turning radii, can easily be automated, and automated stock pickers have been around for a while. A former employer of mine has multiple warehouses that literally run in the dark; the only time the lights are on is when a human needs to do something in the warehouse, and that's not often. The robots don't need visible light to operate.)

    Software quality is a constant issue (see Borepatch), but apps become more stable over time as they're used and debugged. Over the next decade 3D printing will grow in both acceptance and features and I can foresee 3D Printing Shops springing up. That won't work for corn flakes, though....

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    1. The nationwide push for companies like Amazon to collect sales taxes means that Amazon no longer has an excuse to not open a warehouse in large cities in every state. My prediction is that is exactly what Amazon will morph into: an automated warehouse, where the customer places the order, and it is available the same day. At the warehouse, or delivered to a local pickup box (like RedBox movies) for a small fee, this will make shopping cheaper and more convenient.

      After all, an automated warehouse is cheap to run, and located on low cost real estate when compared to expensive retail space.

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    2. The "Warehouse with a front end outlet" has been operating in the UK for a long while. ARGOS (www.Argos.co.uk) has a front end with catalogues only. Select what you want from the catalogue,complete a slip with the stock number of the item, pay for it at a manned till and take your receipt to a counter to pick up the item you want (though it has been a long while since I shopped there and I daresay that the payment process has been automated too).
      Minimal staffing and human interaction, maximum price discount.

      Phil B

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  4. This is an excellent opportunity to get behind an idea and push it downhill, hard.

    Why stop at $9/hr? THINK BIG - embarass these divots into something stupendously, crushing stupid - like oh $125/hr - or nobody makes less than obama.

    What would happen? If they refused - their useful idiots would be incensed. If they passed - everyone would be fully cognizant of the obamaites hubris - and pissed.

    itor

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    1. That is the classic answer: if you can define any wage you want, with no effects on society except everything good, why stop at $9? What? Are you some stingy bastard? Go for $100/hour or $1000/hour.

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  5. Dat's it! Dat's the spirit! uh i mean zeitgeist.

    push it. watch the backpedal.

    itor

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