Enter the Robots

Some say it’s a matter of justice. Workers should receive enough pay to sustain themselves. If businesses refuse to comply, the government will have to dictate the minimum wage.

This argument overlooks the relationship between wages and the value a worker can add to an enterprise. Certainly, companies have been known to overpay, but there are limits to how much they can overpay without either raising prices or laying off workers.

Tyler Durden (via Maggie’s Farm) explains the issue:

Proponents of raising the pay floor argue that it’s simply not possible to live on minimum wage and indeed, there’splenty of evidence to suggest that they’re right. Opponents say forcing employers to pay more will simply mean that companies will fire people or stop hiring and indeed, as we highlighted on Friday, it looks as though WalMart’s move to implement an across-the-board pay raise for its low-paid workers may have contributed to a decision to layoff around 1,000 people at its home office in Bentonville.

"The reality is that most business are not going to pay $15 dollars an hour and keep their doors open," one Burger King franchisee told CBS. "It just won't happen. The economics don't work in this industry. There is a limit to what you're going to pay for a hamburger." 

And then there is the problem of competition. Not the competition presented by low-wage workers in certain foreign countries, but the problem posed by non-unionized, non-voting, non-human employees, like robots. What happens when these robots are more efficient, more productive, more effective and don't get a pension or health insurance?

What good does it do you to gain a higher minimum wage if you lose your job? The same question arose when people were asking what good it does you to have a union job, with generous salary and benefits, if it forces your company to close the factory and move the job overseas.

Durden quotes the following article from TechRepublic:

In Dongguan City, located in the central Guangdong province of China, a technology company has set up a factory run almost exclusively by robots, and the results are fascinating.

The Changying Precision Technology Company factory in Dongguan has automated production lines that use robotic arms to produce parts for cell phones. 

The factory also has automated machining equipment, autonomous transport trucks, and other automated equipment in the warehouse.

There are still people working at the factory, though. Three workers check and monitor each production line and there are other employees who monitor a computer control system.Previously, there were 650 employees at the factory. With the new robots, there's now only 60. Luo Weiqiang, general manager of the company, told the People's Daily that the number of employees could drop to 20 in the future.

The robots have produced almost three times as many pieces as were produced before. According to the People's Daily, production per person has increased from 8,000 pieces to 21,000 pieces. That's a 162.5% increase.

The increased production rate hasn't come at the cost of quality either. In fact, quality has improved. Before the robots, the product defect rate was 25%, now it is below 5%.

Is the movement to raise the minimum wage a scheme to buy votes? Perhaps it is. Does it suggest a failure to understand even the most elementary principles of economics? It seems to.

Obviously, robots have been around for a while now. It appears that they are becoming better at their jobs and probably can do more jobs. Who knows how far they can go?

If robots are so much better and so much cheaper at certain jobs, what will that do to the job market? What will it do to the cost of goods and services? The questions should be addressed, perhaps before we decide that the government, in its wisdom, should dictate wage levels, regardless of the cost of doing business and regardless of the alternatives.