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California’s $15-an-hour minimum wage may accelerate automation.

Stashed in: Economics!, Unintended Consequences

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When people are expensive to employ, automation becomes more necessary.

Amazon is growing and continuing to build warehouses. But "each new warehouse adds fewer employees because each new warehouse is more automated." 

If economic growth were to slow, or the pace of automation quicken, that could lead to a worsening job situation, said Graham. "And if the cost of labor were to increase (due to minimum wage hike) that will quicken the pace away from labor towards machines," he said. 

The just released Duke CFO Global Business Outlook, which surveys some 630 firms, backs up that assertion. About 70% of the respondents that pay less than less than $15 an hour said a higher minimum wage would push them toward automation. 

A shift to automation affects higher paying jobs, too. The White House, in a recent economic report, found that people earning between $41,000 and $83,000 ($20 to $40 an hour) face a 31% median probability of being replaced by automation. 

Michael Jones, an assistant professor of economics at University of Cincinnati, said that if it costs $10 an hour to serve 100 customers with labor, and $12 an hour to serve 100 customers with technology, firms will hire workers. As soon as labor becomes $15 and hour, they will switch to technology, he said.

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