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The real impact of increasing minimum wage

Automation of services

It’s started.

On Thursday, I walked into my local Target store. Where six manned checkout counters had been the night before stood an equal number of glittering new self-serve ones, with a single person overseeing them all.

On Friday, I took my daughter to see “The Peanuts Movie” (good, but not worth paying for the 3-D version). There was no one, not a soul, selling tickets where three employees had been stationed a month ago. Instead, there was a wall of gleaming, new automated kiosks, again with one employee assigned to watch over the whole operation.

I can’t prove that rising minimum wages — like the $15 in New York for fast-food workers, from the current $8.75 — is the reason for the automation I’m seeing. But it’s only logical that it is. McDonald’s has been installing food-ordering kiosks in places with high minimum wages to mitigate costs. And who can blame the company? Business executives need to turn a profit for shareholders, and if cutting payroll costs by installing automated kiosks is what they need to do to achieve that, install them they will.

A few weeks ago, I criticized the New York State Business Council for demonstrating “pronounced docility” to Gov. Andrew M. Cuomo’s minimum wage plan when he announced it at the group’s annual dinner. (On Tuesday, the governor said he unilaterally would create a $15 basic minimum for all state workers over the next six years.)

Turns out I wrote too soon, and I owe the council an apology for questioning its resolve. The council was then in the planning stages of a now-announced, multi-pronged effort to educate New Yorkers about the true consequences of a dramatic minimum wage hike, namely its effect on low-wage workers and on mom-and-pop businesses working on tight margins. The Business Council will be joined in its efforts by the New York State Farm Bureau, the New York Restaurant Association, the Associated General Contractors of New York and others.

The group has its work cut out. The $15 minimum wage increase is hugely popular in New York, according to public polling. And why would it not be? Who doesn’t want the lowest wage workers among us to do better? I do.

But what we fail to think about when the pollster calls are those pesky unintended consequences that often make great-sounding ideas less than great in the end.

E.J. McMahon from New York’s Empire Center for Public Policy, for example, estimates that the $15 wage hike would cost New York 200,000 jobs under one projection model. Under two others, somewhere between 432,200 and 588,000 jobs could be lost in New York, and the critically important work experience they provide.

I called a friend, a senior executive at a major national retail chain, and asked him whether his New York stores are planning to put in kiosks.

“We absolutely would,” he said. “If the wage goes that high, we’d have no choice, other than to close underperforming stores in New York. Labor is our number one expense, more than inventory.”

“I can only imagine what it would cost you in overtime expenses,” I muttered.

There was a pause on the line.

“Overtime? There’s no overtime anymore in retail, Billy,” he said. “No one’s allowed to work over 30 hours or we’d have to pay Obamacare.”

Those pesky unintended consequences.

Godspeed to the State Business Council in its efforts.

William F. B. O’Reilly is a Republican consultant.

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