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The Law Of Unintended Consequences Meets The Push For A $15 Minimum Wage

March 31, 2016

By Michael G. McClory

15 is the current minimum wage magic number.  It is a high number that makes for catchy phrases (such as Fight for $15 and Oregonians for 15) Look at these headlines.
  • California Assembly passes historic minimum-wage hike to $15 an hour (California);
  • As New York Debates $15 Minimum Wage, a Bronx Company Makes It a Reality (New York); and
  • Oregon now has highest minimum wage in the country (Oregon).
Oregon’s minimum wage increase fell just short of $15/hour, much to the chagrin of the coalition of advocates pushing for that number.  Nevertheless, advocacy groups across the country are continuing to press this issue, as this petition demonstrates.
On the flip side, though, the economics of 15 are in serious doubt.  Numerous other headlines reflect the concerns that wage raise advocates ignore.
  • Economists Weigh the Pros and Cons of a $15 Minimum Wage (ABC News);
  • Analyst: Wage hike would cost California taxpayers $3.6 billion (Associated Press); and
  • California's $15 Minimum Wage Deal Will Cause Unemployment--And We Have Proof Of This (Forbes).
The Bullard Edge is not going to analyze each of the concerns expressed.  Instead, we are going to turn to a real world example of the reaction to the 15 movement.
Carl’s Jr. restaurants are outstanding.  Before it became the national powerhouse that it is today, it was a small California hot dog and burger restaurant.  I have fond memories of many family meals there and even spent a summer working in the Redondo Beach location.  (The California Roast Beef sandwich made a great lunch.)
While Carl’s Jr. remains awesome, the restaurant experience may be changing.  Rising minimum wages have pushed the company to explore 100% automated restaurants.  Said another way, Carl’s Jr. is interested in developing employee-free locations.  In an interview, CEO Andy Puzder explained: “With government driving up the cost of labor, it’s driving down the number of jobs.”  Mr. Puzder predicted that the near future will “see automation not just in airports and grocery stores, but in restaurants.”
Minimum wage advocates may want to dismiss this as unrealistic talk designed to scare folks away from supporting efforts to increase the wage rate.  However, given that the cost of labor is high (and getting higher), it should not be a surprise that business is looking for ways to contain those costs. 

The bottom line: The movement to increase the minimum wage may serve as the catalyst for innovations that have the net effect of eliminating some jobs.  This surely would be the law of unintended consequences at work.
Best regards,
The Bullard Edge