Minimum Wage Mechanization

Part One
When the minimum wage is increased, there comes an assumption that there will be a negative impact on employment. Despite this expectation of unemployment, historical trends have shown that no such rise in unemployment exists overall, but can be found with specific groups. Workers are now easily replaced by technology in low skill fields and businesses have the option of switching over to machines for the same tasks. While an increase in minimum wage has little impact overall, youth employment suffers due to mechanization.
Part Two There is little observed impact in an increase in minimum wage on the overall employment. Minimum wage workers make up a very small portion of the American workforce, with only 2.6% of all American salary workers earning minimum wage (DeSilver, 2014). With only a small subset of workers actually affected by changes to the minimum wage, the broad overview of employment is not going to change. The majority of workers are already paid more than the minimum hourly so many businesses do not experience a change in costs. Even
when minimum wage workers become more expensive, businesses are able to keep employment constant by adjusting other factors (Schmitt, J., 2013). Existing options such as small price increases and improving organizational efficiency give business options to maintain costs at previous levels. The ability of businesses to respond effectively minimizes the impact on overall employment, preventing changes prompted by an increased minimum wage. While there is no impact on overall employment, youth employment suffers when a minimum wage increase is imposed. Youth make up the majority of the workforce in minimum wage industries, with 50.4% of those making minimum wage in America younger than 24 (DeSilver, 2014). When wages make up the majority of a business’ expenditures, employing fewer workers is a simple way to reduce costs. Additionally, youth workers often lack higher education. (U.S. Bureau of Labour Statistics, 2014). In 2014 7% of minimum wage workers had not completed high school and 4% only had a high school diploma, reducing their available avenues of employment significantly. An increase in minimum wage reduces the amount of employment opportunities available to young workers, causing youth employment to decline. The increased costs of labour when the minimum wage increases become an incentive for businesses to mechanize their minimum wage labour.
Faced with two tasks of equal complexity, a business is motivated to mechanize the more costly process (Feng & Graetz, 2015). Once the costs of human labour outweigh the costs of mechanization businesses have the incentive to switch. Many of the jobs paying workers a minimum wage are low skill and involve a high turnover, such as in fast food or the restaurant industries (Desilver 2014). In these situations, replacing workers with machines is a cost effective solution. With a single fixed expense, several variable expenses (worker salaries) can be eliminated entirely, removing a cost of production. Given that a business’ primary goal is to turn a profit, if mechanization has lower costs than actual employees businesses will switch at the expense of youth
employment.
Part 3 When businesses are prompted to mechanize by minimum wage increases, youth employment suffers even when overall employment does not. Youth unemployment leads to workers losing skills and actually reduces future employability but this takes a secondary position to businesses turning a profit. As the group most affected by a minimum wage increase, the consequences on youth employment should be carefully considered before an increase is put in place.