It’s not surprising that low-margin businesses facing higher mandated labor costs often opt for cost-saving (and labor-reducing) changes to stay in the black. What is surprising is how some proponents of a minimum wage hike have unwittingly pointed to these changes as proof that mandates are a good thing.
Liberal website ThinkProgress — whose parent organization, the Center for American Progress, is funded by labor unions — recently praised France for its high minimum wage of $12 an hour, and pointed out that McDonald’s still operated in the country with prices roughly comparable to those in the US. The organization also hailed WinCo — a small grocery store in the western United States — for its higher employee wages and cost-saving business model.
Ironically, all of Think Progress’ examples involve automation and other trade-offs that result in fewer jobs for entry-level employees.
The first example is McDonald’s’ “tidy profit” in France, which ostensibly results from happy humans making a higher minimum wage. The downside is European fast food workers are beginning to look more like R2D2 than entry-level employees. This process has been underway for several years: In 2011, when Micky D’s in the United States employed 64,000 humans, its European counterpart “hired” 7,000 touch screen computers.
ThinkProgress also unwittingly praises WinCo for using similar practices. The store’s spartan atmosphere lacks the typical frills and fanfare of a normal grocery store—but it also lacks many of the employees. Shoppers bag their own groceries, while checkout lines have multiple lanes to reduce the number of cashiers. In other words, the store can pay a higher wage because there aren’t as many people earning it.
Raising the minimum wage only hastens the turn to automation, as more-costly employees can be replaced by cheaper alternatives that never make wage demands or go on strike. It’s a pity that activists won’t admit the consequences of their demands, even as they praise those consequences where they already exist.