ANASTASIA PYRINIS – MARCH 14TH, 2018
One of the greatest issues plaguing the United States is the wealth gap, which has been steadily increasing for the past several years. According to studies conducted by the Pew Research Center, the wealth gap between middle-income families and high-income earners has reached historic levels. 30 years of data collected by the Federal Reserve show that a wealth gap this large has not been seen in American history since the Great Depression. But with the development of new technology that can replace minimum wage and middle-income workers, this wealth gap may increase.
In the food industry, restaurants are already experimenting with increased usage of technology in order to reduce the number of employees they hire. In 2015, for example, McDonald’s opened its first entirely automated branch in Phoenix, Arizona. According to spokesman Paul Horner, McDonald’s expects to open more and more stores that follow the model and precedent set by the Phoenix location. Additional restaurants such as Eatsa and Chili’s allow the customer to order from convenient tablets rather than wait for a server.
The repercussions of this technological transition on minimum wage jobs and the economy are significant. Professor Erik Brynjolfsson of the MIT Sloan School of Management attributes the “sluggish employment growth of the last 10 to 15 years” to increased technological use in a wide variety of service-oriented businesses, an effect that will only be exacerbated in the coming years.
When there is a way to replace a worker with technology, the increased productivity of technology provide businesses with a clear incentive to utilize the technology. At the same time, technology lowers costs of production in the long run, which will allow more people to buy more products and drive consumption.
But is the future of employment in America as grim as it may seem with this technological advancement? Most likely not. Following the end of World War II, there was a similar shift towards technological use in production. Though technology had replaced workers in many different industries, despite temporary dips in employment, the economy still managed to rebound as a result of the development of new private sector jobs. According to UC Berkeley history professor Daniel Robert, while technological change has always greatly impacted the labor market, there is still long-term growth in the labor market.
One chief concern of scholars such as Brynjolfsson is whether or not the economy can adjust quickly enough to accommodate for the loss of many low-wage jobs through technological domination. Brynjolfsson points out that “rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and growth of inequality in the United States.”
Previously, after new technologies were introduced into industries, the American economy has stabilized and then experienced unprecedented amount of growth. The question, however, remains: is this era different? Will America’s economy stabilize in time or will low-income earners be harmed to even greater degrees in the future? These are questions that can only be answered with time.
McDonalds’ spokesman Paul Horner argues that, with the “high demand for a minimum wage of $15/hr and the protests getting worse every day, this [robots] is something we had to implement.” In their mission statement, Eatsa states that their revolutionized concept of service keeps in mind that the goal is to “provide better food, faster, and at an unprecedented price.” At the end of the day, this transition maximizes profits.
While advanced automated technology frequently depicted in science-fiction films and novels has yet to be realized in any practical sense, robotic automation in the service industry in the United States is the first step in that direction. While we do not what effect this will have on the economy in the short run as we begin this transition, we can be certain of one thing: the economy will eventually adapt, just like it has so many times before.
Featured Image Source: Foundation for Economic Education
Disclaimer: The views published in this journal are those of the individual authors or speakers and do not necessarily reflect the position or policy of The Berkeley Economic Review staff, the Undergraduate Economics Association, the UC Berkeley Economics Department and faculty, or the University of California at Berkeley in general.