This article was posted on Monday, Feb 01, 2016

When you have minute, go to your browser and Google OSHBOT and check out the video.  OSHBOT is a robot about four feet tall which was developed by Orchard Supply Hardware (now a subsidiary of Lowes).  It is already deployed at its Silicon Valley store.  You can ask verbally where in the store a specific item is located and it will physically lead you there.   If you only have a sample, it can visually scan it and tell you what and where it is.  

It can do this in multiple languages.  If you are still not served, you can call up a live person on the robot’s screen.  How many jobs will be lost to this cousin of R2-D2?  

You may be aware that the City of Seattle recently instituted a $15 minimum wage to be phased in over time.  There is a proposal for exactly that circulating in California as a proposed ballot initiative.  If enough signatures are collected and the initiative certified, it would likely pass.  Our own Berkeley City Council last week began deliberations on a suggested $19/hour minimum wage. 

Of course it would be wonderful if everyone were employed in meaningful work and making enough money to support a family.  Nevertheless, you cannot create this situation by government fiat any more than you can provide healthy, sound housing at an affordable rent for all who demand housing.  If both cases, the state is simply requiring that some level of economic activity take place regardless of the specific circumstances involved. 

What happens when a minimum wage is imposed?  First of all, it only affects a small portion of the work force.  You have to start by acknowledging that work has a monetary value to the employer which is only so flexible.  With a minimum wage, you get three classes of workers. At the top, and unaffected, are those whose labor is clearly worth more than the imposed minimum.  At the bottom are those whose level of skill to the labor market is inadequate to be worth anything close to the minimum wage.  These people are unemployable.  Employing them at a wage which reflects their value to you is illegal.  The higher the minimum wage, the more of them there are. If a labor-intensive car wash cannot be provided for less than $40 with a minimum wage of $15, there will be only automated car washes.  The consumer in this case is served but the jobs are gone. 

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Then there are the jobs which are valued just below the minimum wage.  The value of a job to an employer is not exact.  If the minimum wage is $15, maybe there is flexibility down to, say,  $13.  In other words, an employer who was willing and able to pay $13/hour might try to make a go of it at $15.  He/she might cut back elsewhere, try to raise prices a bit and/or make a little less money him/herself.   But an increase of $2/hour for 25 employees, with the higher ancillary costs like workmen’s comp, could cost the owner over $100,000 a year.  He/she may not be making much more than that.  In this case, the business folds and 25 people are out of work because the business is simply not viable at the higher minimum wage.  Another option in many cases is exporting the work to lower-wage countries.  Either way, the result in lost jobs attributable to the higher minimum wage. 

Proponents of the minimum wage claim that studies show that there is no or minimal effect on unemployment.  If this is so, why not have a $50 minimum?  Oh, they acknowledge, that could indeed lead to unemployment   How can small increases have little or no effect, but large ones lead to unemployment?  Is the curve flat and then, at some critical point, it jumps up leaving — then and only then – masses of newly unemployed workers on the streets? 

The case that is made for a minimum wage is usually made showing the utter impossibility of a family of four being able to survive with one wage earner at the minimum.   This is true.  The minimum wage is established at a level – politically determined – that will not support a family or four and then deemed inadequate because it will not support a family of four.   That is just the nature of a low wage job; it is not sufficient for families.   But why then should four mal-educated 19-year olds be denied jobs all the way up to $30,000/year because that amount is insufficient for someone else?  Four such teenagers would have an aggregate $120,000/year income and be able to comfortably handle shared housing in all but the highest-price housing markets in the country.  A $10/hour wage for an entry level job would be a godsend for these kids.  Paying them only that, however, becomes a crime.  Denying them that opportunity is a bigger crime!

The minimum wage is not do-good politics; it is feel-good politics.  It inevitably means more unemployment, wipes entry level job opportunities from the market entirely, moves more jobs to low-wage labor markets and makes marginal businesses even more precarious.  Like rent control, it does more harm than good.  More people are hurt than benefit.     

This article was written by Albert Sukoff, Editor of the Berkeley Property Owners Association’s BPOA Monthly.  BPOA is a trade association dedicated to assisting rental housing providers with upkeep and management of residential rental property and coping with Berkeley’s rent law.  Reprinted with permission.