Minimum Wages Don't Cause Unemployment, a Lack of Robots Does
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In a Dunkin Donuts last week, the line was long. And moving slowly.

The internal desire was to express frustration with the employees and their slow pace, but to what end? Was complaining or a threat of a bad Yelp review going to make them work faster, or happier? The not unreasonable speculation is that based on their sulky, lethargic, and unresponsive ways, the employees behind the counter didn’t like their jobs. And that’s no insight.

At the same time, it maybe sheds light on the economics of entry-level work. Conservatives claim that minimum wages foster unemployment and poverty, while nail-biting members of the left wring their hands that no worker can support a family on the minimum wage. Neither side distinguishes itself.

Without defending forced wage floors for even a second, the right's analysis is hard to take seriously. To see why, just visit any fast food restaurant in search of a job. The starting pay invariably exceeds wage floors. Which is another way of saying that with or without minimum wages, entry-level pay in the world’s richest country is much greater than the minimum wages that conservatives claim cause unemployment and poverty. In other words, not everything is a policy failure.

Just the same, the whining on the left about exploitative businesses requiring force to raise their wages for individuals trying to support families similarly makes little sense. For one, total household pay where minimum wage workers reside tends to be pretty high as is. What’s the riddle here? It should be obvious, but just in case, minimum wage workers tend to not be the primary household bread winner. Not enough? Those earning the minimum wage tend to be living under the roof of the primary bread winner. Get it?  

From there, those earning the minimum wage are increasingly few and far between as is. See above. Businesses are already paying well above what the law requires, yet the jobs remain unfilled. And if they are filled? While it’s admittedly a local anecdote happened upon by yours truly, the Dunkin example hopefully vivifies a broader reality that low-wage workers are costly.

Allowing for the truth that anecdote isn’t statistic, there’s arguably a relationship between help wanted signs in seemingly every service-business entered and frequently limp service offered in those same businesses. It seems individuals increasingly don’t want to work in those businesses, regardless of pay.

Even at pay well above the minimum wage, the takers are few. It’s arguably evidence that as opposed to individuals shunning “minimum wages,” what they’re really shunning is entry-level work.

Which calls for automation of the work that individuals seemingly don’t want. Notable here is that businesses are already pursuing automation, thus generating predictable reactions from right and left. Conservatives claim with straight faces that automation is a response to minimum wage laws, and members of the left claim it’s a way for businesses to avoid paying fair wages.

In reality, automation is just a market response from businesses to the reality that entry-level work more and more goes unclaimed. Robots would do what humans more and more don’t want to do, only for the automation of past work to instigate all-new definitions of entry level. Yes, what erases work exists as a lure for the very investment that leads to better, more productive (think, higher pay) work forms. 

The bet here is that tomorrow’s entry level work born of automation will both pay much more and meet the needs of entry-level workers much more. Better, higher-paid entry-level work will exist as a lure for more and happier human exertion.  In other words, we have an unemployment problem, and it's rooted in a lack of robots.

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors ( His latest book is The Money Confusion: How Illiteracy About Currencies and Inflation Sets the Stage For the Crypto Revolution.

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