John Claassen, in a “guest column” in the February 4, 2015 edition of the Los Angeles Daily Journal entitled “PROTECT THE VALUE OF HUMAN ASSETS,” quoted Bill Gates’ opposition to increasing the federal minimum wage as follows: “If you raise the minimum wage, you are encouraging labor substitution, and you’re going to go buy machinery and automate things.”
The tension between machinery and labor is an age old issue. This precedes the development of the cotton gin and other industrial revolution equipment. In a 1983 trip to China, I observed hundreds of laborers sweeping the streets with bamboo brooms; in my community, this work was then being done by street cleaners driving trucks. More territory could be covered, with greater effectiveness and less labor. China understood that, in 1983, if they automated this task, they would have an even higher unemployment rate, risking such dissatisfaction which might cause an overthrow of the then current government.
Owners and employers in a private enterprise economy are always seeking greater efficiency and profits. They make the choice between labor and technology based on many factors, only one of which is return on investment. To say that increased mandated compensation such as a minimum wage would promote automation is no doubt true; however, it was also true in the 1930s, the 1800s, the 1700s and likely will be true in the future. It is true in every industry and profession.
Society in the past has focused on the well-being of its populace, not just the numbers. This includes healthcare, minimum wages, regulations of civility toward one another and other aspects of human endeavor. We value human assets. We value new technology and research and development. New technology and increased efficiency improves our life and increases the well-being of all our citizens. We encourage the growth in each area of endeavor by tax policies and other approaches. If I read Mr. Claassen correctly, he suggests there is a tension between the two, and policymakers should not ignore nor discount the value of “lower wage workers.”
The legal profession understands this process. Thousands of lawyers have been laid off, fired or encouraged to retire since the Great Recession. Many of them were document review lawyers or lawyers with little or no marketing skills. In Mr. Claassen’s terminology, these were the “lower or middle income” lawyers of the profession. Such economic disruption never happened in the profession before. Despite the economic improvement of our economy, and law firm profitability, most of those jobs will not return. Why? Because technological improvements have made many obsolete or more expensive than clients want to pay. Discovery search technology is far more efficient and accurate than hundreds of document review lawyers. These jobs will not return. This is progress. Does it come with some pain to individuals? Yes. Should there be an economic soft landing for those affected? Perhaps. That is a matter for society to determine, but it is not reason to limit wage increases or disfavor research and development.