Minimum Wage Machines

What is a “living” wage?

It seems reasonable that anyone working full-time should be above the poverty-line. For a family of four, that would be $23,550. Which, if supported by a single wage-earner, would require a minimum wage of $11.78 per hour. While that would be a significant increase from the current Federal minimum of $7.25, it’s not that far from some proposals.

But when Amazon is proposing to deliver packages by drone, raising the minimum wage seems misguided. While many service-sector jobs can’t be outsourced to lower-wage countries, they can be replaced by robots. Tablets can replace waiters and waitresses at restaurants; self-driving trucks can replace driver-operated vehicles, especially at work-sites; autopilots already do most of the flying on airlines. Most businesses struggle to remain profitable; the more expensive labor is, the more attractive automation becomes.

And a more productive society is a wealthier society. Doing more with less means that the work that remains will be less mindless and more meaningful. That’s not to say that the transition won’t be painful. Getting the young and poor into the job market is a vital policy challenge. I don’t know what the solution is, but I’m pretty sure that raising the cost of labor isn’t it.

Maybe the answer will come when robots can replace politicians.

Douglas R. Tengdin, CFA

Chief Investment Officer

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