There is much talk about raising minimum wage, even to the absurd rate of $22 per hour. President Obama has promised an increase to $9 per hour. Some small business owners, feeling the pinch of these raising wages, are turning to technology to solve their economic issues.
Carla Hesseltine, who runs a small bakery, is considering eliminating employees and replacing them with tablets that will take orders:
In order for her Just Cupcakes LLC to remain profitable in the face of higher expected labor costs, Ms. Hesseltine believes the customer-ordering process “would have to be more automated” at the Virginia Beach, Va., chain, which has two strip-mall locations as well as a food van. Thus, she could eliminate the 10 workers who currently ask customers what they would like to eat.
Small business owners can only raise prices so much without damaging sales, in order to cope with increased labor costs. Of course, there are costs involved with the set-up, upkeep and repair of technology, and the intangible cost of the loss of human contact.
Many studies about the effects of higher wages on overall employment tend to be politicized, clashing over whether the benefits of higher paid workers outweigh the costs of having fewer low-wage jobs. To support President Obama’s case for an increase in the minimum wage, the White House cites a 2009 academic study that says any adverse employment effect from such would be of a small and possibly irrelevant magnitude.
The raise in minimum wage to $9 does in fact seem to be minor. However, it is clear from Ms. Hesseltine’s story alone that tinkering with the minimum wage system will have ramifications. One could argue that the loss of minimum wage jobs will be balanced out by sales of technology and the jobs created there. It remains to be seen.