Over the last few year, there has been a movement to dramatically increase the minimum wage in the USA. In particular, the SEIU, the Service Employees International Union, has been a driving force behind this campaign. The goal has been a $15 an hour minimum wage and there have been several communities where the campaign has succeeded on a municipal level in driving the cost of entry-level labor. The most well-known success has been in the Seattle area where the restaurant industry has already seen businesses shut down, some anticipating that they would not be able to compete in that environment. The SEIU has seen a shrinkage in it’s membership in some of those areas as the natural economic consequence of such business contraction has been to reduce the employment of minimum wage workers. Some labor unions have responded by seeking an exemption from the mandatory increase for their unions. HUH?
In the end, businesses, like people, will act in their own self-interest in order to survive. The fast food industry is the most likely battlefield for this conflict, and a big salvo was fired Thursday when McDonald’s decided to take a 200 store technology experiment into all 14, 000 of it’s US stores. Click on this link to view a short video on how the concept will operate.
Customers will venture into their local land of the Golden Arches and seek out several large touch-screen kiosks to order their food, pay electronically, and sit down to wait for their food to be brought to them. For families with small children, a key demographic, this frees them up to supervise their munchkins in the play area or get them seated and prepared for food without having to wait at the counter for the meal. You may say, “well, I wouldn’t be caught dead in a McDonald’s anyway.” The point is that the fast-advancing technological revolution is going to lead to a huge revolution in labor intensive industries like restaurants. You won’t see wait staff eliminated, just greatly reduced. The demands for $15 a hour just sped up the process and eliminated a lot of the jobs for entry-level employees; a kick in the head to those who were supposed to “benefit” from the forced increase.
McDonalds has pleased the investment community by being able to demonstrate that this system has produced an increase in both foot traffic and a significant increase in the dollar amount per order. The fast food giant has also found that they can cut their most important cost – labor. Today, labor cost increases are critical for competitive industries like restaurants because of the increased requirements for benefits like health care.
The laws of economics have not been repealed: make something artificially more expensive and it will lead to the natural consequence of seeing less of the commodity, in this case, labor.