Senate Republican Leader Tom Kean said that the approval of legislation increasing New Jersey’s minimum wage to $15/hour would almost surely lead to job losses for those who are unskilled or lack prior experience, especially when those positions can be replaced by technological alternatives.
The legislation, A-15/S-15, would increase the minimum wage from the current rate of $8.38/hour to $10.10/hour on January 1, 2017, followed by annual increases reaching $15/hour on January 1, 2021.
“It’s undeniable that increasing the minimum wage by nearly 80% will result in substantial job losses for people already struggling,” said Kean. “Taking away opportunities to get a foothold in the workforce will harm the same young and inexperienced people that the sponsors of this legislation are trying to help.”
The Federal Reserve Bank of San Francisco recently examined the effect of the minimum wage on jobs, noting that, “Many studies over the years find that higher minimum wages reduce employment of teens and low-skilled workers more generally.”
They followed with: “The overall body of recent evidence suggests that the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers—with possibly larger adverse effects than earlier research suggested.”
Kean highlighted how increased labor substitution will occur as the cost of an employee increases relative to the cost of technological alternatives.
“With minimum wage increases under debate across the country, many restaurants including McDonald’s, Wendy’s and Panera Bread have announced plans to quicken the pace of rolling out self-service technology that replaces unskilled workers,” said Kean. “If you walk into a Wawa today to buy a sandwich, for example, you already place your order through a kiosk. Taking that order used to be somebody’s job.”
Regarding that trend, the CEO of Carl’s Jr. and Hardee’s restaurants said: “If you’re making labor more expensive, and automation less expensive — this is not rocket science.”
On increasing the use of automation and technology to replace workers, the CEO of Wendy’s said: “We continue to use all of those tools to mitigate any of the inflation that we see on the wage front.”
A former CEO of McDonald’s said: “It’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who’s inefficient making $15 an hour bagging French fries. It’s going to cause a job loss across this country like you’re not going to believe.”
Kean highlighted how the trend to automate and replace jobs as wages increase extends far beyond fast food.
“Grocery stores are replacing cashiers with self-checkout aisles, and many banks now require basic transactions to be completed through ATMS, reducing the need for bank tellers,” said Kean. “Automation and self-service technology is coming, and it will replace tens of thousands of jobs in many industries. Increasing the minimum wage so drastically and so quickly will only guarantee that job losses for our lowest income workers to technology happens sooner rather than later.”