Why Every Robot Should Love the Senate's New Minimum-Wage Bill
Democrats want to raise the minimum wage to $10 while handing small businesses tax breaks for technology. The results could mean fewer workers and more machines.
President Obama is reportedly ready to back Senate legislation that would up the federal minimum wage to $10 an hour and allow it to automatically rise with the cost of living. While the bill is bound to be politely ignored in the House, it's a sign that if the Democrats ever control both Congress and the White House, the lowest-earning Americans could be in for a healthy raise.
But there's something sort of odd about this bill that might make a few workers nervous. In order to assuage employers, who hate, hate, hate the idea of of a minimum wage hike, Senate Democrats are offering a tax break that would let small businesses deduct the total cost of investments in equipment, up to $500,000 in the first year.
In other words, this bill would make it more expensive to hire workers and cheaper to buy the technology to replace them. From a political horse-trading perspective, this makes total sense. From a job-creation perspective, it's a little alarming.
According to New York Times, this odd policy coupling isn't actually new. "Including such a provision helped persuade the Senate to vote overwhelmingly in favor of the last two minimum wage increases," it reports. But it's worth dwelling on whether the impact might be a bit more pronounced this time around. After all a $10 minimum wage would be quite high by historical standards—not far from its all-time inflation-adjusted high of $10.56 in 1968. (Chart below courtesy of CNN). Add in a generous tax break, and a McDonald's franchise owner, for instance, might start thinking long and hard about trying to swap in touch screens for some of their cashiers.
That's not necessarily a reason to kill the bill. Higher paid workers and more productivity is usually good for the economy. Putting more spending money into the pockets of minimum wage earners might also help grow jobs elsewhere. But there's a little part of me that wonders if the Democrats aren't accidentally crafting the "Replace Workers With Robots Act of 2013."
(Or, to use a Congress-style tortured acronym: the ROBOT Act, for Replacing Our Bodies Overnight with Technology).