Minimum wage is on the rise — Is it a blessing or a curse?
| September 01, 2017
Impeccable service can only be delivered by a well-trained, friendly staff. Accordingly, the service industry is labor-intensive and employs a large number of skilled and unskilled workers.
The recent employment report released by the U.S. Bureau of Labor Statistics also suggests that food services and drinking places (or restaurants), professional and business services, and healthcare are the three key sectors that contribute to the employment growth in July.
Yet, what may seem to be an exciting update for the labor market turns out to be concerning. Some critics pointed out that the job market was unhealthy because "too many" people were working in restaurants (the number increased by 53,000 in July 2017). The leisure and hospitality industry, which includes restaurants, added 62,000 jobs in July and a total of 313,000 over the year.
What are the concerns?
- Restaurant jobs are growing at a faster pace than healthcare, manufacturing or construction jobs.
- For decades, restaurants have remained labor-intensive, with few improvements over time.
- Most restaurant workers are earning low incomes, usually at the minimum wage or about 50 percent of the national average.
- Both ends of the restaurant industry, meaning either the quick-service or high-end restaurants, are still growing and performing well, but casual-dining family restaurants are facing challenges.
Is raising the minimum wage a remedy?
One may argue that these concerns are the result of the wages of restaurant or hotel workers being too low. Once the minimum wage increases, there would be no more concerns.
In fact, raising the minimum wage may also result in another outcome — it can possibly have a ripple effect in which everyone, including those who are making above the minimum wage, will get a raise. The gap between minimum wage and the national average would probably remain unchanged (if not become bigger).
However, prices are going to increase as employers pass the higher labor costs to consumers. In some rare and extreme cases, restaurants have explicitly added a "minimum wage" fee to the bills.
In the end, the increase of minimum wage is unlikely to help those living on a minimum wage to save more or improve their quality of life. What we discussed here can explain why places like Birmingham, Cleveland, St. Louis and Illinois freeze or even lower the minimum wage.
Then, is increasing the minimum wage still a good thing?
Yes, it could be. Increasing the minimum wage can push businesses to find ways to lower the operation costs through innovations. We have recently observed many innovative changes in the hospitality industry. To name a few examples:
- A restaurant with no hosts, no waiters and no tables
- Robots that can cook in a kitchen or make coffees
- Servers being replaced by self-ordering kiosks
- Robots that can deliver food inside a building or out on the street
- Robots that can provide butler service in a hotel
- Automatic drink dispensers
- Personal assistants who are also robots
- Cars that can drive themselves
- Robots that can pick up and pack online orders
What does the future hold?
By 2025, the hospitality industry is expected to go through some transformational changes due to the advancement of new technologies. Moreover, as the cities we are living in are getting "smarter," businesses are getting up to speed, too.
Now, here leaves the question that we all need to think about: What can we do to avoid being replaced by machines at work?
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