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.
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.
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