What is the cost of $15 per hour times zero? The answer to this is the amount many fast food and minimum wage workers are about to see as businesses transfer human labor costs to electronic kiosks and machines. And while companies like McDonalds are already well under way in replacing their lower skilled workers with error free digital displays, the next restaurant chain to jump on this futuristic bandwagon is now Wendy’s.
Wendy’s (WEN) said that self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.
It will be up to franchisees whether to deploy the labor-saving technology, but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.
McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.
Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”
It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15. – Investors
As we have discussed many times before, wages are not to be based on someone’s ‘living needs’, but rather on the amount of value a worker provides to a business based on their skills and productivity. This is why an individual on Wall Street or Silicon Valley averages six figure salaries while those with high school educations and no experience in other areas are relegated to function as burger flippers or gas station attendants.
But sadly, it is the most menial of jobs that will always be replaced first when the cost of human labor reaches or surpasses the cost of technological replacements. And this even includes arenas like tax form assistance where much cheaper software has replaced the need to go to temporary tax advisers either quarterly or annually.
It is perhaps ironic that those who protest and demand higher wages for low skilled work never question the fact that if they took their own initiative to learn better skills, they would no longer have to reside at the poverty level and in lower wage menial jobs that even a robot can now perform. But that is sadly the way of the human condition, and why economic Darwinism will always win out over those that are unable to evolve.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.