How You Can Profit From the Demise of the Minimum Wage Worker

REEM-C and REEM. Photo credit: JosepPAL via Wikimedia Commons

Should the federal minimum wage be increased? This is a complicated question. On one hand you have the fact that despite the increase in the cost of living, the federal minimum wage hasn't been increased since July 2009. On the other hand, you have the fact that the Bureau of Labor Statistics, or BLS, estimates that of the 58.8% of workers making an hourly wage in 2013, only 4.3% made at, or below, the minimum wage.

Regardless of where you fall in this debate, one thing you might not have considered is the possibility that minimum wage workers could be a dying breed, and that raising the minimum wage could hasten this demise. Here's why.

The technology curse
There's no question that technological advances have made our lives easier and more efficient. But, the flip side of this is the fact that in certain situations, machines can now take the place of human employees. For example, in a restaurant in China -- appropriately named "Robot Restaurant" -- robots cook, wait, and entertain diners, all while cutting costs for the owner of the restaurant.  

Atlas robot. Photo: DARPA via Wikimedia Commons.

In addition, San Francisco-based company Momentum Machines has developed a robot that can make 360 gourmet burgers per hour, all without human aid. More importantly, Momentum Machines says on its website(emphasis mine): "The labor savings allow a restaurant to spend approximately twice as much on high quality ingredients and the gourmet cooking techniques make the ingredients taste that much better." 

The above examples aren't the only robots in development, or use. Boeing (NYSE: BA  )  makes robots that are useful to the military. Unbounded Robotics is developing a "room service" robot that can deliver food, pick up trays, and inspect hotel rooms. And Google's (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) recently acquired Boston Dynamics makes the Atlas: a humanoid robot that could be the platform for a first-responder robot.

More importantly, these are just a few of the robots in development and currently in use, but they're an example of what robots can be used for, and how technology is advancing at a rapid pace. 

Why this could affect minimum wage workers
According to the BLS, there are a number of characteristics that make up the typical worker making at, or below, minimum wage:

  • They tend to be young: "Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the federal minimum wage or less." 
  • They tend to be unmarried -- approximately 66.8% have never been married, compared to 20.7% who are married, and 12.5%, which are listed as "other." 
  • They tend to be less educated -- approximately 28.1% don't have a high school diploma, 29.7% are high school graduates with no college, 28.3% have some college but no degree, 6.1% have an associate degree, and 7.9% have a bachelor's degree and higher. 
  • They tend to be employed in service-related jobs: "Almost two-thirds of workers earning the minimum wage or less in 2013 were employed in service occupations, mostly in food preparation and serving-related jobs." 

The above characteristics are important because they show that most workers making minimum wage or less are high school to college age and not married (and thus less likely to be supporting a family). And two, most of the people making minimum wage are employed in a position that doesn't require advanced skill.

Consequently, there are two things that can be extrapolated from these points from the BLS study: One, those employed in minimum wage jobs aren't there for a career (thus increasing turnover); two, because the jobs themselves require minimum skills, robots could be a perfect way to cut escalating labor costs. As Bill Gates stated on MSNBC months ago: "If you raise the minimum wage, you're encouraging labor substitution, and you're going to go buy machines and automate things -- or cause jobs to appear outside of that jurisdiction. And so within certain limits, you know, it does cause job destruction." 

The runaway technology train
Robots are playing an ever-increasing roll in everyday life. For workers making at or below minimum wage, this could be a problem. Labor costs are a significant portion of businesses' expenses, and increasing that could further encourage employers to look at the possibility of automating jobs, just like Gates said. That's not to say that raising the minimum wage is necessarily a bad idea, but it is to say that there could be unintended consequences in doing so. On the flip side, increasing the use of robots could be beneficial to higher-skilled jobs, thanks to a surge in demand for this type of technology.

Regardless of what happens, companies specializing in robotics stand to make a pretty penny as robots become more commonplace -- and it's almost inevitable that they will. Consequently, investors might want to take a closer look at the above companies specializing in robotics, or consider investing in an ETF such as Robo-Stox Global Robotics & Automation ETF (NASDAQ: ROBO  ) , a stock index focused on robotics, automation, and related technologies.

Are you ready for this $14.4 trillion revolution?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on Amazon.com at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2992961, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:29:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement