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Economy

Seattle’s Dick’s Drive-In Mocks Offers a Roadmap on Minimum Wage

Reprinted from RealClearMarkets

Up front, the minimum wage should be less than zero. Some say it should be zero, but as Oklahoma State professor Per Bylund once explained it to me, individuals should have the right to pay someone to work for them. Think about it. If the only way to work for Jeff Bezos was to pay him, wouldn’t you?

Speaking of Bezos, or the city where Amazon is headquartered, one of the best known fast-food institutions there is Dick’s Drive-In. It’s excellent.

Notable about my recent visit to Dick’s was a sign in the window. It announced starting wages of $20/hour, with a boost to $25/hour once a worker is fully trained. Other benefits include $28,000 for schooling and/or childcare. What do these numbers tell us? Many things really, but most notably that on the matter of the minimum wage, Left and Right pander to their flocks mindlessly. Let’s beat up on the Left first.

They claim businesses “exploit,” that they exert “pricing power” that results in insufficient pay. A visit to Dick’s explodes the notion. These very clean hamburger stands are a marvel of operational genius, but ultimately they’re hamburger stands. Yet at these stands workers putting in 40 hour weeks can earn over $50,000/annually in addition to benefits mentioned. Exploitation? Let’s be serious.

From there politicians pandering to the Left promise to institute ever more generous “minimum wage” laws. $15/hour has been the number thrown out a lot in modern times, yet as Dick’s reminds us, businesses don’t require a law. Eager to win the services of good and willing workers, the wages they’ll offer well exceed the promises of politicians who have nothing to offer other than force.

Pivoting to the Right, members claim that the minimum wage’s imposition causes “poverty” by pricing workers out of the market. Which similarly isn’t serious. As the wages offered by Dick’s yet again remind us, there aren’t even enough workers available at $25/hour in prosperous U.S. locales. So while the imposition of a minimum wage is a horrid property taking that vandalizes reason, to pretend as members of the Right do that what’s foolish causes poverty in the world’s most opportunity-laden country is a bit much. Don’t worry, the argument gets worse.

Every time a business automates, and in particular a fast-food restaurant automates, a Right that learned all the wrong lessons from the Left about pandering starts generating faux tears about how wages floors are bringing on the replacement of man by machine. Which is gag-inducing, and economically illiterate.

To see why, ask yourself what businesses and fast-food restaurants would be doing if the minimum wage were zero. Logic says they would be doing the same. See Dick’s Drive-In yet again. Figure that Dick’s still needs workers, which means that compensation of $25/hour would be the norm even without government intervention.

What’s important is that the above would likely be true even if Dick’s could secure the services of workers for less than $25. Why? The answer is that cheap labor is very expensive. Incredibly so. Low-paid workers frequently live down to their pay, they quit without care, and worker turnover is incredibly expensive. Henry Ford taught us this truth over 100 years ago. He didn’t overpay his workers so that they would buy Fords; rather he overpaid them so that they would stop quitting.

Which brings us back to automation. As any sapient being would deduce, businesses of all stripes would be automating today regardless of illiterate fiddling with wages by politicians. They would simply because the more that work can be automated inside a business, the better off that business is. Robots don’t show up late, they don’t need breaks, and they don’t quit. Robots are expensive now, but as with all things produced by the profit-motivated, what’s useful starts out expensive only to get cheaper and cheaper.

Looking ahead, automation will more and more become the norm. And it will to the endless betterment of – you guessed it – workers. Anytime extra “hands” can be added to the workplace, human hands are rendered exponentially more productive.

In short, a Right that should know better gets it backwards. Automation won’t replace human workers as much as it will rapidly increase the value of those workers. Which also explains why a Left promising what it cannot will also be rendered superfluous.

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