Should the Democratic Party’s desire to federally mandate a national $15-per-hour minimum wage ever come to fruition, Americans can rest assured that it would cause costly unintended consequences for millions of lower-income workers and their would-be employers. This pain would come on top of the struggles due to the tough times of the COVID-19 economic disruption.
President Biden, who favors the idea, established a precedent by more than doubling the present $7.25 minimum in signing an executive order that now requires federal contractors to pay their workers at the new higher rate (with taxpayer money).
Meanwhile, the Democratic-dominated House Education and Labor Committee’s $1.9 trillion coronavirus relief proposal attempted to incorporate a provision into the bill that will eventually raise the hourly minimum wage to $15 by 2025.
This idea was removed by the Senate parliamentarian from the COVID-19 relief bill late Thursday night, yet Speaker of the House Nancy Pelosi has already promised that the provision will be kept in the bill anyways. Regardless, progressives will undoubtedly continue pushing for the $15 minimum wage over the next four years if it fails this time around.
Congressional Republicans have opposed the increase, and will likely continue to do so, arguing that it will be an undue burden on businesses that would reduce employment. The Congressional Budget Office (CBO) estimates that it would result in 1.4 million job losses and contribute an additional $54 billion federal deficit through 2031.
If it is ever passed, the pay hike will be particularly problematic for many small enterprises.
According to the latest quarterly CNBC|SurveyMonkey Small Business Survey, one-third of the small business owners said they’ll likely lay off workers if the federal $15 an hour minimum wage becomes mandated.
Twenty percent of those small business owners said they would be forced to lay off workers if the minimum wage increases to $15/hour, while another 13 percent said they’d likely be raising wages for some workers, while laying off others.
So which sorts of workers are most likely to be laid off?
Many will fall into lowest-skill, lowest pay occupation, lowest profit margin categories that can be most readily automated.
A pre-Covid 2019 Brookings Institution study projected that of the one-quarter of American jobs that are at high risk of automation, those which are “boring and repetitive” are most vulnerable. Included in the highest-risk category were about 36 million jobs in office administration, production, transportation, and food preparation.
The Brookings study estimated that more than 70 percent of the tasks performed in these sectors – typically involving physical labor, information collection and routine processing activities – are subject to automation.
We can readily observe that it’s already happening.
Catering orders have routinely moved online even within neighborhood restaurants, whereby ordering is as easy as a few touches on a screen.
Fast food restaurants already use automation to dispense beverages in drive-throughs and fry- up batches of fries.
Drones have begun to replace human-driven deliveries to drop packages at front doors. And we can soon likely expect to see driverless vehicles – passenger taxis and trucks - rapidly displacing many jobs provided by human-piloted varieties.
Brookings warns that low-wage earners will be among the first to see their jobs disappear, since many of their tasks are routine-based. Those aged between 16 to 24, Hispanic/Native American Indian/Black workers and less-educated employees are at greatest risk of losing out to machines.
These, of course, are the very same population segments that a minimum wage increase burden on business will drive to adopt labor cost-saving automated alternatives.
And given that younger people of all backgrounds are actually more at risk of automation displacement than older workers–particularly where they’re already over-represented in food and retail industries–this also puts them at added disadvantage in getting their first job as entry-level positions thin out.
As with particular types of jobs, the Brookings report noted that various places in the country are likely to see their employment markets impacted by automation in different ways.
The Midwest is especially vulnerable to technological disruption because jobs there revolve heavily around manufacturing and agriculture. The report noted, for example, that In Kokomo, Indiana, 55 percent of the work could be automated; in Washington, D.C., just 39 percent.
Regarding minimum wage factors, it’s also fundamental to consider that some areas and municipalities of the country have highly differential employee pay scales where a federal one-size-fits-all standard makes no sense at all.
A dramatic pay hike requirement in small town rural America can be expected to drive many mom and pop enterprises out of business altogether in competition with higher volume-profit margin big box stores and online shopping options, whereas the much higher living costs in large metropolitan centers already tend to compensate at higher competitive wage rates.
Nor will payroll impacts of a new minimum limit be confined in practical terms within lowest job compensation categories. Many employees who already earn that minimum hourly rate will expect to see raises as well…with each pay grade above them concomitantly following suit.
As elaborated in my 2018 book, "Reinventing Ourselves: How Technology is Rapidly and Radically Transforming Humanity," the artificial intelligence and automation revolution is already having substantial impacts on how and where we work. Covid pandemic business adaptations and life accommodations have since accelerated these trending developments in ways that were then unimaginable.
Companies of all types and sizes are logically most inclined to adopt automated task alternatives to slash labor costs during economic downturns.
The Covid-19 pandemic is an equal opportunity economic destroyer that has ravaged big and small businesses, rural and metropolitan areas, and our nation’s economic and social health as a whole.
Let’s not kill more businesses, cut more jobs, and simultaneously grow inevitable wage/price inflation and debt on the pretext of helping those who will be put out work by counterproductive and irreversible charities.
Larry Bell is an endowed professor of space architecture at the University of Houston where he founded Sasakawa International Center for Space Architecture and the graduate space architecture program. His latest of 10 books, "What Makes Humans Truly Exceptional," (2021) is available on Amazon along with all others. Read Larry Bell's Reports — More Here.
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