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Object Lessons in the Minimum Wage
Today is the sort of day that demands a quick and easy lunch. You see, I’m preparing for my company’s annual financial audit and I really just don’t have the time to wait around. (I usually try to get this audit done in February, but the birth of my anchor baby got in the way of that.) So, come 12:30 pm I hauled myself away from my desk and off to the nearest fast food establishment to grab a quick bite.
The restaurant is called CaliBurger, a not very subtle rip off of the great In-N-Out Burger, located near my office in Pasadena, CA. I’ve eaten there before but its usually not my first choice, the quality isn’t great and it’s a tad expensive compared to the real deal. What I like about it is that it’s close and they serve you quickly. The staff was always attentive and the service pretty good for a fast food joint. Lo and behold, when I arrived there today my experience was entirely different.
First, there was the person who greeted me and took my order:
Well, that’s new. Not that I’d never experienced an ordering kiosk at a fast food place before, it’s just that this place always had four employees at their various cash registers to take orders and keep up with the lunch rush. I looked around and saw one person milling about behind the cash registers, but he seemed to be doing other work. Ordering took about 30 seconds, a beep as my apple pay was charged and the machine spits out a receipt. There were no lines.
Ten seconds later the gentleman from behind the cash registers rushed over to me with a cup for my soda, which I filled at a self-serve station. He asked me if I wanted to watch my burger being made by “Flippy”. Well, I thought, that’s an odd and very specific nickname for the chef at a fast food burger joint, only to turn around and see:
Meet Flippy: the burger flipping robot. Equipped with a vast array of cameras and sensors Flippy can cook up to 300 burgers an hour to the exact same specifications every time. No more underdone or burnt burgers. He will even switch utensils for different jobs automatically and clean the grill in between each batch. Not only does he cook a pretty decent burger (it was the best one I’ve had at this restaurant) but he also is equipped with a sophisticated cloud-based AI that can learn from his surroundings and experiences and acquire new skills over time.
Well, damn.
Oh, that guy in the background? He’s Flippy’s assistant and puts cheese on the burgers when needed. I guess Flippy hasn’t acquired that skill yet. Other than the gentleman who brought me my cup and Flippy’s Sous Chef there was one other employee I could see, a nice lady who assembled the finished burger once Chef Flippy was done cooking the patty. The same gentleman from earlier brought my burger to my table.
All told, only three employees and a robot were there to serve me my lunch. Total time from order to first bite: about 2 minutes and 30 seconds. In a restaurant that used to employ four cashiers, nevermind the rest of the back kitchen staff required to make a burger.
Thank you, California’s $15 minimum wage.
Published in General
Deflation is truly a cancer that destroys growth. However currently the method that stats on econ issues like deflation are calculated carefully lumps everything and everyone all together, such that the results do not match any person’s true experience.
For instance, we might be told that immigration is good, because it “adds two percent to the GDP.” In reality, when a wave of immigrants hits a community, there are big winners and big losers. In Calif the big winners would be the real estate people who now can build more apartment buildings and double the rents on the properties they already own. It is unlikely their gain is 2 percent – it might be closer to 20%.
Meanwhile the last wave of immigrants are now among the losers, as they might find themselves unemployed, as the new wave of people are willing to work for even less than the prior group. (Especially given that in Calif., it is mandatory for the Social Services crowd to award new immigrants with housing vouchers, food stamps, AFDC and more. But the older immigrants have already timed out of their allotted five years, and now have no jobs or welfare with which to face the loss of their jobs, the higher rents, food and fuel costs etc.
Why did they purposefully flatten the chart?
There is historical evidence that isn’t true. Look at any Mises guy’s video on the subject. The only issue is, the government, political system, and financial system looks very, very different.
The whole planet has a horrific debt to GDP now, and the robots + globalized labor (i.e. deflation) is colliding with that.
Our Rulers are too stupid and corrupt to manage this. Which means we are all doomed. Anarchism makes more sense than what we are doing now.
Rufus you have to contend with the psychology that accompanies deflation: people aren’t going to like their paychecks getting smaller no matter how much their “purchasing power” goes up, nor are they going to spend today what they can get for half price tomorrow.
This points to the ultimate problem here. The inflationism changed everyone’s behavior and psychology, and the structure of the economy after 1914. Prior to this time, business and households dealt with it and living standards went up. People preferred “harder” money only, no matter what and adapted.
The question is, can we do this with inflationism now? Believe me, that is my preferred option. I just don’t see it happening.
Ford Motor Company execs realized way back in 2016 that something needs to change regarding how we do business in the USA. The execs brought forth a successful ad campaign that lured young Americans into the auto show rooms, but few had enough good credit or the required high wages needed to purchase new cars. Their president began pitching the idea that maybe high wage jobs need to return here, or the economy is going to L curve forever.
Trump understood this was happening as well, which is why if you ask anyone who likes Trump the reason for their approval, the number one response is “Jobs.”
An eon ago the late Sixties, when I was in my late teens, half the guys I knew were already making $ 17 to 25 an hour due to the steel mills. Houses in the area where under $ 30K, a new car could be had for $ 2,400. Now we are moving into an era where the wages for Burger King staff might reach $ 15 an hour, but robots will soon be replacing those workers. Only the Investment Class is in Congress. The last three Presidents in the Oval Office rarely even uttered the expression “middle class.” And as I type this, it appears that Trump is not going to rock the boat on tariffs, or jobs because he has been surrounded by ghouls like Giuliani, in addition to being hammered by Rosenstein and Mueller.
This is a great discussion. It’s literally there most important one. Reps. Steve Scalise, Jason Lewis, and Tom Emmer get it. There may be others.
A zillion podcasts and no Austrian economists.
Here is the other thing, and I mean this 100% seriously. Other than the hedge fund guys that are paid to watch this crap, and the Big Finance parasites that only exist because of it, the Fed is treating us normals like lab rats. They want to, and ultimately force behavior in the masses. That is what they want. It’s as evil as any force-oriented behavior is rightly considered wrong or evil.
The cashless society they want is just going to put it on steroids.
I 100% mean. that.
People wonder why people don’t delay their gratification anymore. I just explained it.
In about 2004 or 2005, I was traveling for business and met a guy in a bar in Chicago. He was a Canadian, working as a economist for the Fed. He explained to me over several beers all the things the Fed was doing to drive up home ownership.
Three years later, those things nearly destroyed the global economy.
I agree with you 100%.
The reality is, it’s ultimately a system for geopolitical power that ends up screwing it’s citizens regressively. Better us than them, but now that the world has opened up so much, it’s a real bitch to manage. China is even worse in this sense.
100 years from now, after WW4, the whole planet will adopt all Mises-ian principles and become the utopia only imagined by the useful idiots of the Democrat party.
Mises.org is right about everything.
No. It’s not.
Also many people aren’t even thinking about gratifying anything. Those on the edges are dying off, literally. It is of no importance to a person if the economic experts want inflation or deflation, if they have outlived their carefully projected time line in terms of retirement savings. Women who planned on being here til they were 85 now find they might be here til 95. And suddenly when they are 90, it is a choice between paying the utilities, buying the meds or having food.
Young people would say, “Too bad their kids won’t help.” But women outlive their kids as well as their husbands these days. On top of that they are ripe for scammers. I know of two women in their late eighties who have both lost over 50K to scammers, probably off in Pakistan somewhere. In one woman’s case it is a large scale effort – the same group that called her in Los Angeles has called my household in Northern Calif. This should be a priority for District Attorney offices – as the scammers took the LA woman’s money and set up a company in Utah. But she was told, “This happens so much we can’t do a thing.” W-h-a-t?
What other crime is allowed to be over looked because it is happening on a pervasive level?
Go on.
The Fed has 800 economists. Doing what?
How many of them think they can guess the right interest rate? I say all of them.
The trillions in U.S. government and mortgage bonds they bought throw off interest. Where does it go?
The U.S. Treasury.
Which reduces the deficit by 10%.
And it effectively pays the Fed’s budget. It’s expenses. All of them.
What happens if the Fed sells these bonds–this free ride– like they “should”? Deficits go up by 10%.
Plus the interest on the staggering government debt would go up, too.
And the stock market would collapse.
So it will never happen.
And pensions, insurance companies, and savers won’t get any interest on their fiat money.
The lesson? Central planning is stupid.
Great twitter feed.
Welcome or not, resistance is futile.
The Feds—Congress and the Fed— can make this be a positive or they can make it be a disaster. It’s up to them.
Statism. Inflationist government.
Give it up.
Listen to the last Jonah Goldberg interview of Russ Roberts and the last two Econtalk’s of Nassim Taleb. That’s what’s going on, and it’s a lot more palatable and intelligent than anything I’ll ever say.
In California? Pretty much all of them. I hear Ventura recently adopted an ordinance that says the police won’t do anything about a homeless vagrant until they receive reports of 25 misdemeanors by that same person. Yes, I said 25! California continues to slide into socialist hell.
Central planning is criminal…
I highly question how all of these parts fit together or how it’s all supposed to work anymore.
You raise a very interesting question! Let’s make it more specific, so have a well-defined question.
cus on those we are interested in. Suppose there were
would you still say “we would still probably maintain an inflationary economy” with these three added conditions, all else equal?
I think inflation (which can’t really be measured very well in reality) makes credit more available, but in the long run it gets unmanageable no matter what. Then people vote to “fix” it, which just makes it worse.
No, the deflation rate is equal to the growth in real GDP (a measure of our material well-being), all else equal. So it is more like the opposite of a cancer that destroys growth.
Deflation is the inevitable consequence of growth, all else equal, especially, the money supply and the quantity of labor and other inputs used.
= = = = = = =
Those who are mathematically inclined will want to see the proof of this.
We consider the equation of exchange:
MV=PY
where M is the money supply, V is the velocity of money, P is the price level, and Y is real GDP. If M and V are constant, and real income Y is growing, then the rate of growth in price level is the negative of the rate of growth
If the supply of labor (or total factors) is constant, then growth comes from increased productivity of labor (or total factors).
In theory, yeah. If the economy is producing more and more goods and services, but the amount and velocity of money stay the same, then the only way to account for the greater amount of goods and services is to charge less for them. Of course, the problem with the phrase “other things being equal” is that other things are never equal. In the theoretical expanding economy you describe, the velocity of money would have to increase. The supply of money will also increase as banks increase lending (without any action by the central bank). If commercial banks are already at their effective limit for lending, then the price of credit (i.e., interest rates) will increase. That in turn will become an inflationary pressure. So this deflationary economy is not stable. (By the way, the government will also jump in to inject inflationary pressures – it is not going to tolerate tax revenues going down as GDP goes up. The government always wants its cut.)
All of that is to stay in accord with your assumptions that money supply and velocity remain constant. But they never do for the simple reason that if consumers realize that their money will buy more tomorrow than today, they start hoarding their money. Which slows down the velocity of money and slows the economy.
In any event, I am not aware of any deflationary economy, in any country, ever, that has not resulted in very bad consequences. Or vice versa – deflation usually results from an economy already in recession. These two effects lead to a “deflationary spiral,” which was the principal driving factor in the Great Depression of the 1930’s.
All of this comes down to who you choose to believe about the economy from 1870 to 1907 and who you believe about what caused The Great Depression of the 30’s.
All I know is the propeller heads in the central banks have run of interest rate guesses.
This is a very, very big deal and no one ever talks about it.