Government Makes It Worse

After writing the piece on the social upheaval about to be wreaked by the self-driving car, I read that now both New York and California are raising the minimum wage to $15/hour. With benefit costs, also mandated, this means that a minimum wage employee will now cost about $25/hour, or $200 for an 8-hour day.

Now let’s turn that on its head. If we are going to replace that worker with automation (and we are), how much can we spend? Just to pick a number, let’s say $5/hr for power, maintenance and so forth. Obsolescence is fast these days, so let’s say a 10-year useful life to 20% of original cost. We’ll also add 10% to the cost for installation and de-installation. The machine will work from 6am to midnight, typical fast-food hours, so 18 hours a day, 7 days a week – 126 hours. Interest is 5%. Firing up the HP-12C, breakeven is at about $1 million. So the business operator can spend up to $1 million for automation that replaces 126 person-hours per week and be ahead of the game. You can get a lot for a million, software has essentially no manufacturing cost and computers are cheap.

Or to put it another way, that counter person facing you at your favorite burger joint needs to outperform a million dollar’s worth of automation. Even if I am off by an order of magnitude, the result won’t be any different. Not going to end well for the counter person.

It seems that government is working to accelerate the loss of jobs to automation.

Both comments and trackbacks are currently closed.
%d bloggers like this: