top of page
Paras Nemani

An Automated Future: The Impact of Increased Minimum Wage on Low-skilled Workers


As artificial intelligence becomes more prevalent in our day-to-day lives—customer service chatbots, personal assistants (i.e., Alexa and Siri), and even autonomous rideshare services—companies must adapt fast or fall behind. It has become apparent to many businesses that AI is an invaluable tool that can widen profit margins dramatically. In fact, industrial robot installations increased by 14% in 2021 not only because robotic labor is cheaper than manual labor but also because robotic workers do not have the inconveniences of their human counterparts; they don’t call in sick, they don't tire from work, and they don't need bathroom or lunch breaks. The abrupt rise of industrial automation has caused corporations to, even more so, look out for only their own interests, leaving their seemingly cost-inefficient low minimum wage employees out of luck. 


Amid the ‘robot revolution,' discussions about an increased minimum wage have emerged. The New York Times in 2024 reports that a majority of Americans believe that a minimum wage increase would boost the economy by vehicle of increased economic activity of low-wage workers. However, it's crucial to take into account the independent variable of AI: Will an increase in the minimum wage cause employers to just build robots, which come at a cheaper cost of labor? Well, 90 percent of companies are prepared to lay off their manual workers in favor of robotic ones, so, yes.


UC Irvine Economics professor David Neumark explains that in labor markets that could easily be automated, low-skilled workers saw much higher unemployment right after an increase in the minimum wage. In fact, he found that a $1 increase in the minimum wage created an 1% decrease in the employment of low-skill workers.


California recently passed the AB 1228 law, which mandates a minimum wage of $20/hour for fast food workers. While this may seem reasonable upfront, the San Diego Union-Tribune tells us that minimum wage floors only cause less job availability in the market and allow for fewer benefits and discounts. Economists predict this could spiral into business collapse, especially ones of a more minor nature, and perpetuate unwanted market displacement. 

The implications of job loss from an increase in the minimum wage are crucial to consider, especially for Americans living below the poverty line. In 2020, Harvard Business Review said that stable employment is the most significant indicator of social mobility and is directly linked to homelessness. Without a job, parents cannot provide for their children’s education. The National Center for Education Statistics highlights that children from low-income families are 4x less likely to graduate from college than high-income families, leaving them stuck in the cycle of poverty for generations.

 

Companies are already preparing for the rise of automation, understanding that inflation has caused many Americans to protest in hopes of receiving a higher minimum wage. However, we’ve seen that an increase in minimum wage accompanied by an ambitious switchover to automation will only eternalize job loss and provide large corporations with the perfect segway into complete automation. Although there could be research proving why a general increase in minimum wage benefits some in the past, in the status quo, a considerable rise in the minimum wage, whether paired with automotive concerns or not, will ultimately result in a tainted future for many low-income Americans. When millions won't even be able to put food on their tables and a roof over their heads, the American dream remains just that: a hopeless dream.


 

50 views0 comments

Comments


bottom of page