There is all kinds of public talk about "minimum wage", yet I still have some special facts to share in this blog.
It is a long time ago now, but I think it sets the stage for this blog. Back on April 24, 1968, I was the chairman of the Western Electrical Manufactures Association (WEMA} Management Roundtable for Industrial Engineering in Palo Alto, California. The subject discussed was Capital Budgeting and Investment. At that time most of the companies used, "payback" in terms of years to justify capital investment projects. I was trying to show that this simple rule was not optimum for selecting or authorizing the best capital projects. At the time, there were a lot of ideas on how to reduce labor cost or to make products at lower cost. It was clear to all that often the cost of the capital equipment was too expensive for the amount of labor it saved. It was also clear to all that the higher the labor wages, the easier it was to justify a capital investment. The above is the back ground for what is to follow.
Our President Biden is full speed ahead to increase the minimum wage and few understand the impact that this will have. First off, raising the minimum wage not only effects those who are now paid less, it effects those above. If you were now earning a few dollars more than those whose skills put them well below you in terms of pay and someone well below you had their wages increased to near yours, you would immediately demand more pay too. That means the impact of this kind of decision will have far reaching impact on wages. This will cost almost all products more and for products make in the USA less competitive in the world. I think that you can see from the paragraph above that it will be easier to justify capital equipment or project that eliminate workers?
The other thing that we discussed in that WEMA Industrial Engineering Round Table was that the interest cost also have a big impact on projects to eliminate jobs. If you have not noticed, interest rates are now at an all time low. If you combine this fact with the minimum wage, you have the elements of a perfect storm for the elimination of jobs.
One of the other items that we could not predict at that Round Table was the rapid development of computers and printed circuit boards. This has had the impact of making the machines that we were talking about much cheaper and thus better and better investments to replace workers and jobs. This factor has had an exponential impact on the elimination of jobs because computerized and even AI programed machines could replace more than just physical work jobs, but could now replace many jobs that, up to that time, required a human. Think of the telephone switch board operator? When was the last time a human answered your business call? Or was it a computerized robot? What has happened is that jobs that required special skills can now be replaced by computers and robots.
What do you think happens when all of the factors above are combined for the very first time in human history? Well, you ain't seen nothing yet and this minimum wage move only accelerates the trend to more job elimination at the bottom of the food chain. You have to admit that it is mostly people at the bottom who are now going to be effected by the minimum wage law who voted Biden into the Presidency plus those at the top who are going to get even richer. I feel that it was those in the middle who actually could see the future and how it would effect them, their families and the country.
I am very sorry to have to post this blog. I am an old guy who will be dead and buried when this experiment goes up in dust..
