Raising minimum wage will raise something else: An army of robots taking away folks' jobs

Raising the minimum wage increases the chance employers will automate low-skill jobs away, according to a paper published this week through National Bureau of Economic Research, a non-profit group of econ wonks.

In People Versus Machines: The Impact of Minimum Wages on Automatable Jobs, Grace Lordan, associate professor in health economics at the London School of Economics, and David Neumark, professor of economics at the University of California, Irvine, show that raising the minimum wage may have unintended consequences.

"Overall, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers," the paper says. "Our estimates suggest that an increase of the minimum wage by $1 (based on 2015 dollars) decreases the share of low-skilled automatable jobs by 0.43 percentage point (an elasticity of −0.11)."

Using census data from 1980-2015, the researchers found that the correlation between people with automatable jobs becoming unemployed following a minimum wage increase is most pronounced among those employed in the manufacturing industry and is largest among the oldest and youngest workers and among females and blacks.

"[T]he main message from our work is that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase," the paper says.

The paper's findings appear to buttress arguments that automation will lead to more unemployment, a scenario supported by another recent NBER paper, "Robots and Jobs: Evidence from US Labor Markets." That paper found that where industrial robots were deployed, between 1990 and 2007, both employment and wages declined significantly.

Yet Neumark, in a phone interview with The Register, scoffed at the notion of robot-driven mass unemployment. "There's an age old debate about automation and jobs," he said. "If we believed what that debate had to say, then no one would have a job anymore."

"Some jobs will disappear," said Neumark. "That always happens. If you were a buggy driver, cars stunk."

Automation will happen even without raising the minimum wage, said Neumark, and it will reduce the use of labor.

"There's a really deep question that's really had to get at," he said. "Does that mean this is a bad thing? We don't want to say making labor more efficient is a bad thing."

Neumark stressed the research is not trying to suggest a particular policy response. "I don't think it's clearly good or bad," he said. "There are some costs to raising the minimum wage. ...There are winners and losers and policymakers have to make some choices." ®