Well-meant minimum wage increases will accelerate automation

Summary: The class war heats up as cities and states raise their minimum wages and long-ignored labor laws are revived (e.g., over-time). While effective in the short-term, is this an effective response to the new industrial revolution — or a counter-productive response that will accelerate job losses from automation?

Ending the Class War

The campaign to increase the cost of workers continues to sweep the nation. Big cities such as like New York, Los Angeles, San Francisco, and Seattle. Now “New York Just Created a Revolutionary New Family-Leave Policy” by Rebecca Traister, New York Magazine, 1 April 2016 — And scheduled increases taking the State’s minimum wage to $15.

This makes no sense except as a short-term palliative. Economics 101: raising the cost of labor through minimum wage and family leave regulations will only accelerate the pace and scale of automation. Hundreds of articles make this obvious point.

How should we respond to the new industrial revolution?

There are roughly four often discussed responses to the rise of new tech.

Automation robot

Until the past year, faith has been the usual response of economists to concerns about automation. The West survived the previous industrial revolutions (albeit with periods of widespread suffering and social turmoil). This is often phased as trust in the “invisible hand” (a mad exaggeration of Adam Smith’s limited concept in Book IV, Chapter II of The Wealth of Nations (1776). The 1% want you to trust in this Force.

Education is worthwhile for many reasons, but ineffective as a response to this problem. This wave of automation will affect both low and high skill jobs. There is no evidence it will create large numbers of jobs that people with upgraded skills can fill. For more about this see Education, the glittering but fake solution.

Guaranteed minimum income programs (rebranded welfare) have their proponents, but provide at best an gloomy future for the likely ever-growing number of unemployed and underemployed Americans (the US population has increased 7.7% since the great recession began in 2007, while the number of full time jobs is up only 1.2%). They create an underclass of relatively low-income Americans, while the rich grow richer from the productivity of new technology. Nor should we ignore the spiritual drag of subsisting on charity of the rich.

My guess is that the only effective response will require structural change in Western society. Exactly as did the previous industrial revolutions, to which the West successfully adapted by development of more representative governments and organized labor (compare post-WWII Britain with its 18th century laissez-faire economics and social order maintained by the “Bloody Code“).

We can only guess at what form this will take in the 21st century. Government-regulated employee unions with seats on corporate Boards of Directors (as they have in Germany)? Legally required profit-sharing or partial public ownership of businesses? Or distribution of profits by taxation? These are 20th century solutions. Perhaps these will evolve into new forms or be replaced by measures not yet in the public consciousness.

Foresight

Conclusions

My prediction is that no matter how clear the forecasts of coming turmoil, we will do little or nothing until the pain forces action. Unfortunately minds get clouded in the heat of near-revolutionary stress, and people too-often choose unwise leaders — demagogues rather than Solon the Lawgiver.

America’s success resulted largely from our choice of leaders in such moments: Washington, Lincoln, and FDR. Let’s hope we do it again.

For More Information

If you liked this post, like us on Facebook and follow us on Twitter. See all posts describing how the 3rd industrial revolution has begun, especially see these…

See these books to learn about the new industrial revolution now in progress…

Rise of the Robots
Available at Amazon.
The Future of the Professions
Available at Amazon.
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14 thoughts on “Well-meant minimum wage increases will accelerate automation

  1. Human evolutionary divergence occurs at a very rapid pace: https://lesacreduprintemps19.files.wordpress.com/2012/12/the-10000-year-explosion-how-civilization-accelerated-human-evolution-2009-by-gregory-cochran-henry-harpending.pdf

    This applies to genes that affect every aspect of human functioning, including cognitive aptitude, skills learning, impulse control, and future planning capacity.

    Inequality penetrates to the molecular level of each human being. Because the molecules in different humans behave differently, the nerve cells connect differently and function at different speeds with different efficiencies. Human equality is an impossible myth, which the universe could tell human intellectuals if they would only shut up and listen. But they are too busy grasping for political power in government, academia, media, NGOs, thinktanks, and the entire intellectual milieu.

    Minimum wage laws, affirmative action mandates, diversity enforcement, and all the rest of the literally unconstitutional apparatus of a politically correct intellectual tyranny can not help but have unintentional consequences that more likely than not will be catastrophic to the good intentions that are claimed by their authors. Personally, I am not so convinced that the intentions are honest or good.

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    1. Alvin,

      Always nice to hear from the right-wing tin foil brigade, and its pseudoscience.

      I think most people would be happy to return to the levels of inequality and social mobility we had in the 1960s (plus the racial progress made since 1960) — before the Right’s long campaign to roll back the New Deal, restore the Gilded Age plutocracy, and crush the Middle Class.

      We did it once and can do so again.

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    2. Inequality is a phenomenon of nature that is unavoidable. The grand charade of attempting to correct for inequality is one of the most excellent ways in which the great herd of followers can be guided in ways that benefit the elite. The exhilarating self-righteousness of it all!

      An added benefit of the warm fuzzy groupthink identity is the thrill of using ad hominem name calling to avoid facing the complex universe as it is.

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    3. Alfin,

      A simple way to identify ideologues (other than by their cracked rants) is how when they’d shown obvious evidence that they’re wrong, they don’t even notice. Such as pointing out that almost nobody wants to abolish inequality — but rather to return to the levels of inequality & social mobility we had in the 1960s (but with better racial integration). When we had a strong middle class, before right wing loons wrecked it.

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  2. I appreciate the fact you returned to this topic again so soon, just two days after your previous post about it. As you know, I posted two far too long comments:) in response to your March 31st post “The coming Great Extinction – of jobs”. I shared a link to, and excerpts from, that post–along with my extensive comments in response to it–with a group of futurists I am affiliated with. I received the following response from one of my colleagues about my comments: “This is a tremendous amount of excellent material on how to address a problem/opportunity that has finally emerged, demanding attention of decision makers–about 40 years too late–and shows that you are still the top surfer on this huge tsunami.”

    After reading your April 2 post above, I agree with you that we may not be able to “educate” our way out of this dilemma in the hope there will always be ever more “good” jobs which require ever more higher edu. I also agree increasing the minimum wage could actually accelerate the rate at which it becomes cost-effective to automate more jobs out of existence. So I also shared your April 2 post, along with the following comment, with my colleagues:

    “My first impression is that my comments (in response to your March 31 post) may have stretched his (your) thinking somewhat, but I still think he does not attempt anything like what I would regard as an in-depth comparison of the pros and cons of various alternatives to traditional responses, e.g. 1) minimum wage increases, 2) reorganizing labor, and 3) more progressive taxation and income redistribution–even though I think it is fairly obvious that at least 1 and 2 may be increasingly ineffective if the labor supply increasingly exceeds the job supply.

    “However, I have also said we may see a prolonged period of experiments with job-sharing/rationing and make-work programs before jettisoning the notions that “full” employment and “earning” one’s living are still feasible and desirable.”

    I then received the following question from the same colleague: “What in this (your April 2 FM post) do you see as a possible response to your prodding?” I replied as follows: “He (you) said a little bit more about basic income guarantee (BIG) ideas than previously, before dismissing the concept again just as he did a couple of days ago when he dissed the Data Mining Royalty Fund (DMRF) idea.

    “He apparently thinks they–i.e. all BIG proposals–are the same, and all would have limited impact, without even attempting a more in-depth comparison of not only all BIG ideas, but also alternatives to them. Similarly, he seems to think they all would equally keep recipients dependent upon charity from the rich (I disagree), as if this would be different or worse from making more people dependent on income redistribution from more progressive taxation.

    “But he has never attempted (at least in his blog) a comparison of even the limited ideas in the end-of-work literature he is most familiar with, much less the other sources I cited. So, at the moment, he seems content with repeatedly ringing the alarm–which is needed, of course–but otherwise seems to hope that electing someone such as another Washington, Lincoln, or FDR would be our best hope –someone who could somehow intuitively know how to best address technological unemployment, in contrast to trying to think through the pros and cons of various alternatives in advance rather than simply hoping the next Great President will save us.”

    So I would like to know if you think my comments above about your thinking are inaccurate or too harsh in any way. Thanks:)

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  3. Mr Maximus, thank you for this thought-provoking and relevant post, helping to keep us at the forefront of the known condition of our society.
    Your point is well taken, that although tried-and-true economic palliatives of the 20th Century, like minimum wage and minimum income, might offer help for some people, some of the time, that we will indeed need new, as-yet un-conceived 21st Century solutions to weather the storm.

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    1. Todd,

      “will indeed need new, as-yet un-conceived 21st Century solutions to weather the storm.”

      Yes, that’s possible. But I suggest we consider known methods first, perhaps implemented using modern methods. Redistribution of profits or a share of public ownership, for example.

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    2. True, of course. Better to do what’s pragmatic now, rather than strive for ideological absolutes, or hold out hope for some hypothetical cure-all.
      Thanks again!

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  4. A Basic Income Is Smarter Than a Minimum Wage” by Leonid Bershidsky at Bloomberg.

    “The idea is radical and it sounds like money for nothing to many people, but it has more of a libertarian flavor than a Communist one. By guaranteeing basic survival, a government provides a service as necessary as, say, policing the streets or fighting off foreign enemies. At the same time, once this service is provided, the government can get out of trying to regulate the labor market: Its goal of keeping people fed and clothed is already achieved. The Finnish government believes the basic income scheme will encourage the currently unemployed to take part-time jobs, which they avoided for fear of losing their benefits.”

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    1. I see what you describe as one possibility, which understandably might appear most likely at present. But there are conservatives and libertarians (e.g. Charles Murray) who have been arguing for years/decades that paying a guaranteed income based on citizenship directly to citizens would be cheaper than trying to maintain the current welfare bureaucracy, and presumably the entitlement (Soc Sec and Medicare) bureaucracy as well. And one example of this already exists in the US in the form of the Earned Income Tax Credit, aka a version of Milton Friedman’s “negative income tax” (but which is currently only available to those with low but “earned” income).

      In fact, if and as tech unemployment increases, I think this idea could gain traction as pressure mounts to keep the social safety net financially viable as fewer workers make smaller contributions into it, and perhaps after we first try to force the owners of the robots and AI that are making human workers ever more expendable to increase their contributions–also assuming we don’t first try to democratize ownership of the machines, computers, and AI that replace us in some way/s (many options for doing so I also already posted to your site).

      I think there could be prolonged and intense debates about not only trying to maintain something close to “full” employment via job sharing/rationing and make work (so everyone still has to do something to “earn” their living), but also about if, how much, and when a basic income guarantee/s (BIG) should supplement or completely replace existing (and likely shrinking) traditional social safety net programs funded primarily by tax revenue.

      This, in turn, could stimulate debate about all the various ways such BIG programs could be funded via taxes or by other means. But for that to happen, I think more people need to be more aware of the many and varied alternative funding sources I have posted to your website. And if you read the article I posted about Richard Branson’s blockchain summit, you may already know there also may be huge potential to reduce the cost of government bureaucracy by automating much of it.

      BTW, I also submitted another comment yesterday which–by its absence above–appears to never have been posted, intentionally deleted by you, or is perhaps stuck in your spam filter:)

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    2. Thomas,

      “But there are conservatives and libertarians (e.g. Charles Murray) who have been arguing…”

      I guess you are not joking. Still, that’s funny, imagining that such people wield any influence. As they say, “the dogs bark but the caravan moves on.”

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  5. Do robots vote? if they don’t then I don’t see a problem. Peg the tax rate to the % of robots employed in the business. 99% robots employed? 99% tax rate for the business. 1% robots employed? 1% tax rate for the business. Businesses will work out the appropriate % of robots employed where the benefit of having the robot outweigh the increased cost of the tax rate.

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    1. Jacob,

      What’s a robot? They’re not going to be the human like creatures in “I, Robot”. Is the screen that takes your order at McDonald’s a robot? The mechanical arm that spray-paints new cars? The software that uses algorithms to approve your new mortgage?

      Like

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