The recent push for a fifteen-dollar per hour minimum by burger flippers may result in their replacement by the ultimate substitute; technology.
Some weeks ago my wife forwarded to me an email featuring a new technology marvel; the automatic hamburger-making machine. Capable of producing 320 hamburgers per hour according to its manufacturer Momentum Machines it will enable the company that employs it to use better quality ingredients and produce a better product for less cost. A little Internet research reveals that this isnt the only fast food automaton on the market. There are more which may bode ill for the average fast food worker.
Why is that you might ask? Well lets look at some numbers. The machine featured in the original email was made by a San Francisco based company so lets buy American and use it as our example.
The company advertises the cost per machine at $12000 to $15000. Lets go on the high side and take the $15000 figure. Divide that number by 40 hours per week and them by 52 weeks a year and the result is approximately $7.21 per hour. Call that $7.50 per hour which approximates the current minimum wage. That looks like a break even result. But wait theres more.
When the employer factors in the cost of hiring an employee which includes the employer share of FICA taxes and any benefits" that may be applied the cost may rise to as much as thirty percent of the hourly wage. But we are dealing with the fast food industry so limiting that to ten or fifteen percent is more reasonable than thirty percent. But either way at thirty percent or fifteen percent the math favors the machine.
Lets take it a step further. If our machine costs $15000 the expense will be amortized over perhaps five years lowering the cost about $3000 per year. We may assume that the machine may need to be replaced after five years to keep up with new technology if for no other reason. So during that five year span the machine costs including an amount for maintenance and repairs perhaps $4000 per year. The human will cost over $15000 per year each year. The cost of the machine wins.
But wait theres even more than that! The lower cost of the machine enables the owner to use better higher quality ingredients. Vegetables can be sliced on demand rather than in advance. Better quality fresher and perhaps more appetizing products may bring in more business. And then there is another fact. The machine can process your order and take your money eliminating the need for a paid cashier. This militates in favor of the machine and against the employee still further. The machine wins hands down.
Finally when we consider that some folks are militating for a $15.00 per hour wage which would essentially double the cost of human labor; it makes the machine even more economical.
Now to be fair Ive never eaten one of these machine made hamburgers. They may be terrible but then if they are this particular machine wont sell and will certainly be replaced by a model that makes something that the public will like. In any event this device is a harbinger of things to come. Business people will be moving in this direction soon enough and the only way for people to compete is by providing a better product at less cost. That may no longer be possible in the fast food market. If machines can make hamburgers they can also make fish sandwiches tacos and fried chicken. The human element only becomes valuable when you are at a full service sit down restaurant where the wait staff is part of the experience and where you want that environment. There you will also be willing to pay extra.
One of the main issues that has recently made headlines regarding fast food jobs is that some people see them as long term lifetime jobs" with which they expect to pay for a family living which also appears to be the main reason why activists have been demanding a living wage" for fast food employees. These activists have been ignoring a number of facts that date back to the origins of the fast food industry in the late 1950s. The vast majority of such work was performed by young folks; high school and college age people who needed to make some money while in school. It was never considered to be a long-term thing unless you were an owner or manager and made commensurate money.
At the time economic reality being what it was people could actually make pretty decent money in these jobs. However since then the economy has changed considerably and fast food jobs have moved with increasing speed to the bottom of the skill and pay ladders. While still suitable for high school and possibly college students as part time while in school jobs it is not really suitable for the longer term except where they may provide emergency additional income again on a short-term basis. People looking for serious long-term employment that pays a higher wage should set their sights higher.
Unfortunately a lot of people today are not setting their sights higher or if they have they have reached a decision that they should receive more money for jobs that are not considered skilled or requiring the education that usually goes with such pay scales. They are looking to get professional level pay for an entry-level job that they should have probably left years ago.
Technology is the ultimate leveler in business. It has changed almost every existing business to some extent and everyone should be aware of the fact that it will continue to do so. The methods of doing business change but the rules dont. Otherwise we would all be driving around with horses and buggies like folks used to do 100 years ago. The people who want more money will have to change with the times or find themselves not only without a pay raise but without jobs.
The recent push for a fifteen-dollar per hour minimum by burger flippers may result in their replacement by the ultimate substitute; technology.
Some weeks ago my wife forwarded to me an email featuring a new technology marvel; the automatic hamburger-making machine. Capable of producing 320 hamburgers per hour according to its manufacturer Momentum Machines it will enable the company that employs it to use better quality ingredients and produce a better product for less cost. A little Internet research reveals that this isnt the only fast food automaton on the market. There are more which may bode ill for the average fast food worker.
Why is that you might ask? Well lets look at some numbers. The machine featured in the original email was made by a San Francisco based company so lets buy American and use it as our example.
The company advertises the cost per machine at $12000 to $15000. Lets go on the high side and take the $15000 figure. Divide that number by 40 hours per week and them by 52 weeks a year and the result is approximately $7.21 per hour. Call that $7.50 per hour which approximates the current minimum wage. That looks like a break even result. But wait theres more.
When the employer factors in the cost of hiring an employee which includes the employer share of FICA taxes and any benefits" that may be applied the cost may rise to as much as thirty percent of the hourly wage. But we are dealing with the fast food industry so limiting that to ten or fifteen percent is more reasonable than thirty percent. But either way at thirty percent or fifteen percent the math favors the machine.
Lets take it a step further. If our machine costs $15000 the expense will be amortized over perhaps five years lowering the cost about $3000 per year. We may assume that the machine may need to be replaced after five years to keep up with new technology if for no other reason. So during that five year span the machine costs including an amount for maintenance and repairs perhaps $4000 per year. The human will cost over $15000 per year each year. The cost of the machine wins.
But wait theres even more than that! The lower cost of the machine enables the owner to use better higher quality ingredients. Vegetables can be sliced on demand rather than in advance. Better quality fresher and perhaps more appetizing products may bring in more business. And then there is another fact. The machine can process your order and take your money eliminating the need for a paid cashier. This militates in favor of the machine and against the employee still further. The machine wins hands down.
Finally when we consider that some folks are militating for a $15.00 per hour wage which would essentially double the cost of human labor; it makes the machine even more economical.
Now to be fair Ive never eaten one of these machine made hamburgers. They may be terrible but then if they are this particular machine wont sell and will certainly be replaced by a model that makes something that the public will like. In any event this device is a harbinger of things to come. Business people will be moving in this direction soon enough and the only way for people to compete is by providing a better product at less cost. That may no longer be possible in the fast food market. If machines can make hamburgers they can also make fish sandwiches tacos and fried chicken. The human element only becomes valuable when you are at a full service sit down restaurant where the wait staff is part of the experience and where you want that environment. There you will also be willing to pay extra.
One of the main issues that has recently made headlines regarding fast food jobs is that some people see them as long term lifetime jobs" with which they expect to pay for a family living which also appears to be the main reason why activists have been demanding a living wage" for fast food employees. These activists have been ignoring a number of facts that date back to the origins of the fast food industry in the late 1950s. The vast majority of such work was performed by young folks; high school and college age people who needed to make some money while in school. It was never considered to be a long-term thing unless you were an owner or manager and made commensurate money.
At the time economic reality being what it was people could actually make pretty decent money in these jobs. However since then the economy has changed considerably and fast food jobs have moved with increasing speed to the bottom of the skill and pay ladders. While still suitable for high school and possibly college students as part time while in school jobs it is not really suitable for the longer term except where they may provide emergency additional income again on a short-term basis. People looking for serious long-term employment that pays a higher wage should set their sights higher.
Unfortunately a lot of people today are not setting their sights higher or if they have they have reached a decision that they should receive more money for jobs that are not considered skilled or requiring the education that usually goes with such pay scales. They are looking to get professional level pay for an entry-level job that they should have probably left years ago.
Technology is the ultimate leveler in business. It has changed almost every existing business to some extent and everyone should be aware of the fact that it will continue to do so. The methods of doing business change but the rules dont. Otherwise we would all be driving around with horses and buggies like folks used to do 100 years ago. The people who want more money will have to change with the times or find themselves not only without a pay raise but without jobs.