Minimum wage hike ignores impact of Artificial Intelligence
The minimum wage is rising in many parts of Canada. Recently, Ontario’s Liberal government announced it’s hiking its minimum wage to $15 an hour, matching the move by Alberta’s NDP.
In the United States, the push for a higher minimum wage began in 2013 when brave fast-food workers in New York walked off their jobs. The movement, known as Fast Food Forward, was aimed at fast-food chains but garnered political attention, prompting changes in the minimum wage across the United States. To date, several cities and the entire state of New York have adopted minimum wages for various workers. In 2018, San Francisco will become the first city in the U.S. to have a $15-an-hour minimum wage. Vermont, Hawaii and a few other states are also gearing up to pass a $15 minimum wage next year.
Implications of this change for the agriculture, food processing, retail and even food service sectors will be momentous. Alleviating poverty and wealth redistribution are certainly key drivers. But beyond the politics, there is much more to it than just wanting to provide the working class with better wages.
Let’s start with farming. Agriculture is becoming more digitized. Drones are used to spread the proper amounts of fertilizers. Cows are milked by machines throughout the day. Many industrialized poultry and egg farms have one worker, who likely earns more than $15 an hour, to ensure that the operation’s information systems remain in working order. The trust in machines is palatable. For Canadian agriculture to keep its level of competitiveness, change is inevitable. In fact, to keep workers in rural Canada, higher wages are integral.
In food processing, where working conditions are at times much less enviable, most workers earn more than $15 hourly already. Such a threshold won’t make much of a difference. Automation and business analytics are making inroads in this sector. Required skillsets are changing and employees need to be trained for optimal usage of state-of-the art technologies. Companies will capitalize their operations only if they have the right people to use newly acquired assets, and that tends to cost more money, and translates into higher wages.
A $15 an hour minimum wage will likely not put more pressure on operational costs for the near future. In fact, it may entice these sectors to adopt new technologies sooner.
Retail, though, is different. More than 26 per cent of workers in food retail and hospitality earn wages much lower than $15 an hour. Many small- or medium-sized enterprises and specialty stores rely on a lower minimum wage to keep a decent level of service. Small enterprises and start-ups, often credited for being key job creators in our economy, will struggle with this new constraint.
Larger outfits have anticipated a higher minimum wage for quite some time. McDonald’s, for example, is now installing more automated tellers so that customers can place orders by using an intuitive touch screen. As with farming and processing, these companies rely on quality continuance to support their business model; accordingly, a highly qualified workforce capable of using sophisticated technologies only makes sense.
Most of the larger chains will survive and do well regardless of a higher minimum wage. But for smaller restaurants in which human interaction is considered a welcome difference from big chains, a $15 minimum wage will become an impediment to growth.
A minimum income for all?
For the workers themselves, implementing a higher minimum wage is a double-edged sword. Several studies suggest that higher minimum wages will discourage small enterprises from creating jobs. That is a known fact. Other than students who need extra cash to support their education, many baby boomers retiring who are either bored or have not saved up enough for retirement are working in these jobs. Moving too quickly on the minimum wage could very well penalize those who governments are trying to help.
But what needs to be underscored is the seismic shift currently affecting the food industry. The $15 minimum wage battle is a provisional solution to a complex issue. The rise of Artificial Intelligence will force us to rethink how we produce, process and distribute food. Human beings may have very little to do with food production in the years to come – or at least much less than they do today. Some estimates suggest that more than half of the workforce involved in food businesses could disappear within the next 30 years due to AI.
Decades from now, when looking at what is happening in food from farm to fork, a guaranteed minimum income for all is likely inevitable. AI will change the food industry landscape to farms without farmers, processing plants using robotics, distribution centres operating with barely anyone in them and restaurants becoming more automated. AI has reached the point where it can do a better job than humans, especially when consistency and quality control are at the core of a business.
Given its capital-intensive nature and its risk- mitigating infatuation, the food industry is likely to embrace the consistency provided by AI. However, food is about connecting and sharing, and consuming food is intrinsically human. In this light, AI does have limitations.
Nonetheless we should put minimum-wage politics aside and instead envision the landscape a few decades from now. In doing so, it becomes clear that the $15-an-hour argument lacks scope and is nothing more than a vote-grabbing scheme. What’s really at stake is the human face of food retailing and service, and how we can provide a decent living to those affected by the next technological revolution.
Dr. Sylvain Charlebois
Dean, Faculty of Management