Using Technology to Replace Low-Wage Workers

With minimum wage requirements potentially on the rise many small business owners are considering using technology to replace minimum wage workers. Increases in minimum wage hurt small business owners’ bottom lines by obliging them to spend more on payroll, related taxes, and benefits. Many owners are starting to feel the pressure after having seen the minimum wage increase in nearly every state in the past six years. Unlike major corporations, small business owners often struggle to absorb increases in labor costs. Many owners are forced to raise prices, however this option risks a decrease in sales revenue. In fact many owners have already done this to compensate for rising operating costs such as gas prices and health care premiums.

The pressure to keep prices low while operating costs rise is causing many small business owners to turn to technology to replace some of their low-wage workers. Replacing workers with new and cheaper technologies will not only lower wage expenses but also simplify operations for the small businesses. One small business owner, Carla Hesseltine believes that in order for her Just Cupcakes LLC to stay profitable in the face of potentially rising labor costs, the customer-ordering process “would have to be more automated” at her Virginia Beach chain.

Hesseltine is considering buying a few tablet devices for her bakery that would make it possible for customers to select what they want straight from the counter. She figures she could install tablet devices that would display photos of her cupcakes allowing customers to scroll through the options and place their order on their own, rather than have a customer-service worker jot down their order on a piece of paper and pass that along to another employee who fills it. With the implementation of the tablets Hesseltine could eliminate the 10 workers who currently ask customers what they would like to eat.

Carla Hesseltine is considering using tablets to replace low-wage workers at her cupcake business

Carla Hesseltine is considering using tablets to replace low-wage workers at her cupcake business

With the decrease in hardware and software prices in the past decade, technology has become more affordable to small firms. For example, the average price of a tablet—the kind Hesseltine is looking into—dropped to $394 by the end of 2012 from more than $1,330 three years earlier. The combined cost of two such tablets, plus a customized application for displaying products with descriptions and processing orders, ranges from $5,000 to $15,000 to implement. But in recent years, online app-building tools have become available at substantially lower costs.

Another small business owner, Tarang Gosalia, of Cambridge, Mass., hopes he can get away with having fewer employees by using Square, a three-year-old technology brand designed to streamline credit-card transactions. He is planning to test it out starting in June to see if it will make accepting payments easier and faster for the staff at his three hair-salon franchises and one frozen-yogurt outlet. Gosalia could potentially downsize about 70% of the 35 employees who work for his combined businesses.

Some entrepreneurs have begun to capitalize on the need for technologies that can be implemented in small businesses to help them streamline operations and due away with low-wage workers, or retrain them for higher-skilled jobs. An example of this currently in development is an automatic hamburger flipper which could replace low-wage line cooks at a burger joint. Also a $22,000 six-foot-tall robot with flexible arms, a face screen and rolling pedestal might replace low-wage workers at small manufacturing firms that can’t afford traditional automation. However, these robots would likely require an employee to program them.

The downside of implementing these simple technologies includes initial installation costs, maintenance upgrades, and repairs. Additionally, small business owners may not have the know-how to operate more complicated technologies. Also eplacing low-wage workers may be more complicated than it seems because many employees tend to attend to a variety of tasks such as answering customer questions, maintaining store displays, and performing sanitation procedures.

For more information please read: http://online.wsj.com/article/SB10001424127887323501004578386321069156006.html?mod=WSJ_Tech_LEFTTopNews

 

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7 thoughts on “Using Technology to Replace Low-Wage Workers

  1. As technology continues to be evermore innovative, the need for human labor is slowly starting to decrease. The idea presented in your post deals with the very pressing issue of technology vs. labor. Technology is now capable of performing many tasks that only humans were once able to perform, and with this increased use of technology in small businesses, people’s jobs are being replaced by technological devices. It begs the question, is technology really beneficial and helpful if it just causes higher unemployment? The minimum wage has been increasing for a reason, usually because the cost of living in the United States is growing and minimum wage workers cannot live above the sustenance level. However, if small business owners decided to replace these minimum wage workers with technological devices because they don’t want to pay them more, the effect will only worsen the livelihood of these workers. It’s hard to determine whether technology is really improving society if it leads to more unemployment.
    This is also the first time I have ever heard about the automated hamburger flipper that you mention in the article. It makes me laugh to think that I might soon walk into a local fast food restaurant and see some type remote hamburger flipper making my McDouble!
    I liked how you mentioned the falling prices of technology, directly related to Moore’s Law, and how it is becoming more affordable to people, as this is a very big reason for the increased desire of small business owners to switch to tablets and computers. It was also helpful that you included a link to an article related to this topic so that I could read more about it.

  2. Great topic by the way I really enjoyed reading about it. This really is a pressing issue that as minimum wage rises it makes it harder for small businesses to be profitable. It is unfortunate though that it seems that the solution is to turn to technology and reduce jobs. In a country where unemployment is already too high loosing more jobs would not be a great scenario. I think at some point Americans need to understand that they have had it too good for too long and that they simply have to do work for cheaper than before. I have heard people argue that they dislike how unemployment is so high and that illegal immigrants are taking jobs away from American citizens. Obviously, the government is raising minimum wage, but I feel that if Americans would like to avoid losing jobs to technology or illegal immigrants than they will have to give up the incredible amount of prosperity that we have enjoyed up until this point. This is tricky because it appears to be in the best interest of these small business owners to install technology and downsize. Technologies often can make things more efficient but as you showed here they come at a price. Thank you for writing about this topic, it is very interesting and would not have crossed my mind had you not written about it. Also, great use of the picture and the link to the article. I thought that the one picture was enough and that the link was very nice to include.

  3. This is an interesting blog post, and this is a very crucial topic. With so much technology that can do our jobs for us, it seems that we moving towards a society where we don’t have to do anything. We have robots that can flip burgers for us. In CVS and other stores, there are self-checkout lines, which means cashiers are losing their jobs. People can buy bus and plane tickets online or at a computer device rather than engaging with an employee. We have combat drones that fly themselves, and there are even current innovations for cars that can drive themselves. It seems that technology is moving towards devices and robots than can do all of our jobs for us. The question is, what do humans do after that? I like that you bring up both the positive aspects of technology (lower costs, fewer employees) and the negative aspects (unemployment, cost of complicated technologies, and the loss of human capabilities). I also liked that you used examples from different businesses and included some quotes. Maybe you could include more multimedia in your post, but I really enjoyed reading this. It will be interesting to see if human intelligence/capacity is ever overcome by technology or if we will find that there are some aspects of humanity than cannot be replaced.

  4. This is an interesting blog post, and this is a very crucial topic. With so much technology that can do our jobs for us, it seems that we moving towards a society where we don’t have to do anything. We have robots that can flip burgers for us. In CVS and other stores, there are self-checkout lines, which means cashiers are losing their jobs. People can buy bus and plane tickets online or at a computer device rather than engaging with an employee. We have combat drones that fly themselves, and there are even current innovations for cars that can drive themselves. It seems that technology is moving towards devices and robots than can do all of our jobs for us. The question is, what do humans do after that? I like that you bring up both the positive aspects of technology (lower costs, fewer employees) and the negative aspects (unemployment, cost of complicated technologies, and the loss of human capabilities). I also liked that you used examples from different businesses and included some quotes. Maybe you could include more multimedia in your post, but I really enjoyed reading this. It will be interesting to see if human intelligence/capacity is ever overcome by technology or if we will find that there are some aspects of humanity than cannot be replaced.

  5. Great post. The situation seems grim for the lesser educated and the low wage earner in America. The cheap technology that can replace them is a very viable option for businesses. At some point it almost become a moral argument. Even as businesses expand, they can handle their growth by stretching their existing technology or by purchasing more tech instead of hiring a new employee. Its not only leading to firings, but also a lack in hirings.

  6. This topic brings us back to the first day of class where we talked about technology being a double-edged sword. Although the business owners will save money, many people will be left out of work. And it will be hard for them to find new jobs as unemployment remains high and they lack the education for greater job opportunities. As technology has become cheaper it has made the switch to technology much easy and this will only continue in the future, putting more low wage jobs at risk. Although the minimum wage will continue to rise it will not offset the rate at which technology replaces low wage jobs.
    Very interesting at the end in how you wrote about the disadvantages in converting to technology as it lacks the human ability to do many different tasks. Also it is very expensive at first and requires specific knowledge to fix and maintain which many business owners do not have.

  7. Pingback: Redbox as the Business Model of the Future | MI021 Class Blog

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