Soaring minimum wages in states like California have a disproportionate effect on businesses that employ low-skilled labor. The farming industry is among the hardest hit with substantial labor inputs required to perform low-skilled tasks like harvesting, pruning and weeding. The problem (or opportunity depending on your perspective), of course, is that higher labor costs make returns on capital projects that much more enticing.
For our political friends that focus more on the narrative of providing a "fair wage" and not so much on the math, please see below for a very simplified example of why minimum wage hikes ultimately just lead to the permanent unemployment of the people you're trying to help. In our simple example we assume that a $1mm capital investment, on the purchase of a couple of robots for example, can replace the work of 5 people. Using California's 50% increase in minimum wage (the "Fair Wage Act of 2016"...don't you just love the branding) would drive the payback period of such an investment down from a "marginally attractive" 10 years to a "no-brainer" 6 years.
And thus, 5 people find themselves out of a job. But that's ok, just more people to be dependent on the Nanny State who can easily be brainwashed into believing their plight is the direct result of "rich people" not "paying their fair share" rather than the misinformed policies of our math-challenged political elite.
With that said, we thought we would share with you a couple of companies looking to take advantage of the soaring costs of labor in states like California. Business Insider recently highlighted 7 robots that are replacing farm workers around the world and below are just a couple.
First there is Wall-Ye, a robot developed in France that helps growers prune and harvest grape vineyards.
Then there is the BoniRob that can destroy weeds faster than any human or herbicide.
Of course farm workers aren't the only ones being replaced by robots. New technology is being developed to replace fast food workers (see "Robots Made Fast-Food Workers Obsolete: Now They Are Coming After These 791,200 Jobs"), construction workers (see "Is This How Trump Will Build The Wall Cost-Effectively?") and a number of other low-skilled positions in a variety of industries.
The question isn't so much whether low-skilled positions will be replaced by new capital investment but rather how quickly the transition will occur. Certainly, setting artificial floors on the cost of labor only serves to accelerate the technology development process. Then the only remaining question is how societies around the world will cope with the mounting job losses.