Rising wages force employers to look at tech instead of people

Original Article: http://www.desmoinesregister.com/story/opinion/columnists/2014/08/29/rising-wages-force-employers-look-tech-instead-people/14773569/

  • Author: Michael Saltsman

  • Publication Date: August 2014

  • Newspaper: The Des Moines Register

Thousands of young adults this summer flocked to the season’s must-see blockbuster movie, “Dawn of the Planet of the Apes.” In reality, though, it’s not rampaging primates that teens need to be worried about — it’s the rise of the robots.

Increases in the minimum wage at the state and federal level are hastening the transition away from entry-level work and toward automated, computerized alternatives. Unfortunately, new research suggests that young adults will pay a long-term price if they miss out on early work opportunities.

Evidence of the robot revolution is all around us. For instance, CNBC carried a story recently about Starwood Hotels’ decision to test a robotic butler — cleverly named the “Botlr” — that handles common room service tasks in place of human staff. The same week the bionic butler made news, a photo went viral of a McDonald’s location in Romeoville, Ill., that introduced touch-screen kiosks as a replacement for human cashiers.

The companies emphasize the improvements to the customer experience, and it’s true, self-service can be fun and convenient. But these conveniences — which used to be part of someone’s job description — are also a cost-cutting means to moderate price hikes when adapting to higher labor costs.

The math is straightforward. Service-industry employers typically have narrow profit margins, which means they keep just a few cents in profit from each dollar in sales after paying expenses. When labor costs increase, these businesses either have to raise prices or reduce costs. Self-service technology allows them to do the latter and avoid price hikes that could discourage customers and depress sales.

It works for the customer, and it works for the business. But what about the young adult who used to fill that job?

Increasingly, they’re out of luck. The Bureau of Labor Statistics, which tracks employment for the nation’s teenagers, reported that the summer unemployment rate for 16- to 19-year-olds averaged 20.5 percent. Nearly two-thirds of the nation’s teenagers (about 11 million people) aren’t even in the labor force.

Missing out on a job isn’t just hard on teens’ wallets — it’s hard on their career prospects, too. In a new study, economists from the University of Virginia and Middle Tennessee State University found that young adults who worked part time in high school were earning 20 percent more six to nine years after graduation compared to their counterparts who didn’t find part time work while in school.

This paycheck boost isn’t short term: Studying high school graduates in the late 1970s and early 1980s, high school job-holders were still earning higher wages years later compared to their classmates who didn’t have a job.

The economists tied this career benefit to the career experience that’s gained in an entry-level job — the “invisible curriculum” that teens pick up from reporting to a manger, interacting with customers and showing up to work on time. They’re skills that teens don’t pick up in high school and often don’t have role models to mimic.

The robots aren’t the problem. The problem is increases in the minimum wage that are forcing employers to opt for a less-costly alternative to hiring teens. As we close the book on another tough summer for young job-seekers, policymakers considering a federal minimum wage hike should take care that this story doesn’t have an unhappy ending.