Automation is set to hit workers in developing countries hard
<p><pre><code>  EDIT:  If you are going to down-vote this please have the courtesy of reading it
  and replying with a counter-argument based on mathematics.  I went through the 
  trouble of doing the math for you and providing objective support for my claims.
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Ironically it is populist policies that might push automation past the inflection point.  Yes, I am talking about the $15 per hour minimum wage.<p>To a politician this $15 per hour battle cry is great.  They have nothing whatsoever to lose.  It&#x27;s something they can promise and buy votes with that promise.  They can even fight to get it implemented and actually have it pass.  Why?  Because all politicians need votes and this is an easy way to buy those votes from the masses.<p>But, what does this $15 per hour minimum wage do?  And, please, do extrapolate past $15 per hour, because it is in the interest of politicians to keep feeding the drug, even if it kills the patient.  The more miserable the masses are the better for populist politicians.<p>Source:  No less than the entire history of every Latin American country.<p>A higher minimum wage is great for politicians.  They keep their jobs.  They might even ascend the ranks and make more money.<p>For workers?  Bad idea.  Why?  Because there&#x27;s a limit to COGS for a business.  We are in a competitive global economy.  You can&#x27;t sell something for $30 when others are selling it for $15 or $20.  And so, given labor cost hikes, you have very few choices on the table.  Automation and offshoring are two of them.<p>At $15 per hour is likely to cost an employer about $18 per hour in real terms.  That&#x27;s $36,000 per year for someone who will work 2,000 hours per year on average (50 weeks @ 40 hours per week).  If you don&#x27;t understand how this works, here&#x27;s a quick article by a CPA explaining the add-ons:<p><a href="http:&#x2F;&#x2F;cpainerie.com&#x2F;how-much-does-your-employee-actually-cost&#x2F;" rel="nofollow">http:&#x2F;&#x2F;cpainerie.com&#x2F;how-much-does-your-employee-actually-co...</a><p>It goes beyond that.  A forced rise in minimum wage will hike all costs in an organization.  Let&#x27;s take a hypothetical.  I&#x27;ll use Oregon&#x27;s current $9.75 minimum wage because I was just talking to a friend who lives there.  Let&#x27;s say you have a company with the following full time labor arrangement:<p><pre><code>  5 warehouse employees at minimum wage ($9.75)
  10 office employees at $15 per hour
  5 managers at $25 per hour
  3 top level managers at $50 per hour
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Total labor costs for the year, assuming 20% costs above basic wages (see article link provided above) would be:  $1,137,000.<p>Now give the first tier a raise to $15 per hour.  That&#x27;s a 54% raise.<p>The second tier won&#x27;t be happy.  You have to give them a raise.  How much?  Same percentage or same dollar amount?  Let&#x27;s go with same dollar amount.  They go from $15 per hour to $20.25.<p>The other groups are affected as well, so wages go up by the same dollar amount for everyone.  In other words, everyone is making $5.25 more per hour.<p>Total annual labor cost just went up to $1,426,800, about a 25% hike.  An increase of $289,800, of which only $63K was due to the minimum wage workers getting $15 per hour.<p>And, BTW, as you fold Obamacare insurance into this, the numbers are significantly worst.<p>$289,800 is real money.  It&#x27;s $24,100 per month.  Where is that money going to come from?<p>What does a business do?  In a real competitive environment you can&#x27;t have your expenses go up by $24K per month and simply raise your prices.  It doesn&#x27;t work that way at all.<p>Oh, yes, let&#x27;s not forget the other parts of the COGS equation.  I won&#x27;t even try to quantify this one but I&#x27;ll mention it because it is important.  If you source materials and services from other US-based companies and all of them see their wage costs go up by 25% you can bet some of your costs will go up.<p>At this point you are faced with the two options I mentioned above:  Automate if possible or Offshore.  I&#x27;ll add:  Fire a few people to the equation.<p>Well, guess what?  All three of those options produce the same result:  People lose their jobs.<p>Nobody is going to go to Walmart and pay 25% more for a product when the one next to it (probably sourced from China) costs less.  The same with online shopping.  If your product is sold on, say, Amazon or your own website and your competition doesn&#x27;t have to deal with government-imposed COGS hikes, your products will not sell.  People look for good pricing.  They won&#x27;t pay 25% or 50% more so you can keep your employees and pay them more.<p>That&#x27;s the heartless mathematical reality of business.<p>In all of this politicians lose nothing.  They get the masses rattled about inequality and give them the gift of a $15 per hour minimum wage.  They get the votes and continue on a sweet ride in government.  In the meantime, the tsunami starts to build and millions are likely to lose their jobs.<p>Automation is likely to be a solution for a lot of companies.  If a $40K to $100K robot can replace a $15 per hour employee, work two or three shifts and not have the management complexities of a human worker.  Well, guess what, it is very likely it will happen wherever that option makes sense.  Another group will ship jobs to China and a small group will hike their retail pricing because they can and keep the jobs here at a higher wage level.<p>The cold hard truth is that automation in business is purely about the mathematics of running a business.  In a free market there would always be a push-pull where people could find jobs at lower wages if they need them.  By having politicians interfere with this (mostly for their own benefit, because few others will benefit) they probably have succeeded in creating the conditions to push automation through the inflection point and what&#x27;s on the other side isn&#x27;t going to be pink unicorns for everybody.<p>Once the genie is out there is no way to stuff it back into the bottle.  Even scarier than that is low wage countries adopting automation as well.<p>If anyone objects to my conclusion they need to fire-up Excel, go through the simple math I presented and explain why it is that what I predict is wrong.  Mathematically.  I don&#x27;t care about feelings or theories.  You have to show how this would work at the most rudimentary business level without losing any jobs.