Should Ireland Increase Minimum Wage

There’s been talk of late, especially from the Junior Minister of increasing the Irish minimum wage from €8.24 to €11.50. It’s been interesting to listen to both sides of the argument, in expensive locations like Dublin city center, with high rents and cost of living many suggest that €11.50 is a “living wage”. While IBEC has pointed out that increasing the minimum wage makes Ireland highly noncompetitive to our EU and Brexit counterparts. In other words, people will import products rather than buy Irish because while they want to buy from Irish companies they aren’t willing to pay the premium. Think of the rise of the foreign supermarkets (Lidl, Aldi, Tesco) and other big chains in clothing and electrical.

What I’ve been contemplating though is the short term thinking of the policy makers. With a relatively short shelf live of our politicians and lets be frank, a lack of prolonged sectorial experience are these people qualified to evaluate the outcome of the decisions? Sometimes I think of the Borris and Brexit situation, where a politician says they want something because it looks one way to take that stance, but deep down know that the reality would cripple the economy. However, by proposing a loose concept (extra money for those who need it), they look good and the common sense politician looks bad as they try to explain complex reaction theory to those likely not to be able to understand.

While in Japan recently I ate in a fantastic restaurant, where there was minimum staff. Orders were placed on ipads at the table. Food was prepared by a mix of robots and humans, then delivered by conveyor belt. It was novel, enjoyable and the meal was high quality but remarkably cheap. Not only was the lack of waiters or waitresses not a problem… in this scenario it was a benefit. Two deserts? Who was there to judge me. Turnover up, cost of service down, cheaper dinning experience and the restaurant next door was empty yet there was a 40 minute queue to get into this place when I was leaving.

Its a supply and demand issue. Assuming people will always choose the low cost item for the same or better utility (in this case a product) then if cost of delivering goes up, in the short term consumers will be less likely to embrace the new prices immediately. So for a period people will be open to new methods of making their money stretch further and in this period the old model businesses that created minimum wage jobs will begin to become redundant, jobs between the old rate and the new minimum wage will be proportionally redundant.

There will be an even bigger divide between the have and the have nots, because if the leap to get on the bottom of the ladder is so high many may never even start a career.

Taxi, Truck and Courier Drivers – Driverless car automation
Cashiers – Auto checkout, think of the current supermarket model
Builders – 3D printing of whole houses, office blocks and hotels
Accounting and Admin functions – replaced with rules automation and machine learning.
Warehousing – automated picking and packing
Restaurants – Robot preparation.

Its not as far away as people think.

The issue then becomes that the only entry level jobs available are those that runs the machines and develop the systems. High level, high paid and the skill set is of those with huge qualifications. Not ones that would previous received a minimum wage.

While progress is good and I love technology, I have a deep fear that the politicians and leaders of the western world have their heads in the sand when it comes to these issues. We need a plan for when these jobs become obsolete, social welfare at scale doesn’t work and until such a time that we have upskilled our workforce to add a minimum value of 11.50 we simply cannot accelerate the replacement of the lower wage jobs by automation.

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