One Law Away from Utopia

As goes the adage, “he who never studies history is doomed to repeat it.” Unfortunately the same can be said about economics. Going through life with an imperfect understanding of economics in effect condemns someone to a hamster-wheel in which demanded corrections of economic problems wind up requiring more corrections, ad infinitum.

A recent instance of this is California’s Fast Act, which took effect on April 1^st, 2024. Labor unions representing the restaurant workers had denounced low wages and thus lobbied to increase the minimum wage to $20 per hour. Their wish granted, chain restaurants are now forced to pay the new, higher minimum to workers… so restaurants are downscaling human labor in favor of automation. The few human laborers remaining will scramble to fill the downscaled workers’ roles, which is how you get the front-house fast food worker simultaneously handling the cash register, fielding phone calls, taking and filling drive-through orders, sanitizing tables and counter-claiming bad reviews on Yelp.

Undoubtedly the labor unions will denounce the restaurant owners as greedy… but what about the customers? By some accounts, the cost of fast food (that is, food which people expect to be affordable) has risen in California by 33% at some franchises. That means customers will curtail indulgence in fast food, as from three times a week to just one, which in turn means fewer restaurant workers are needed for the reduced demand. Are customers greedy for wanting to economize by packing a lunchbox?

Nearly eighty years ago, Henry Hazlitt published Economics in One Lesson (1946), which spoke about the seen and the unseen of economic policy. The book spoke about governmental interventions which seem to remedy a given economic woe, but which merely displace it to another segment of the population. In the case of California’s restaurant workers, we see those who remain now earning a higher wage, but we do not see those workers who are displaced because it becomes more cost-effective to automate their role. Nor do we see those workers who will never be hired (such as seasonal students or re-integrating felons) because the higher required wage leaves fewer resources available to train them up to comparable levels of production.

By next year, I expect the labor unions will demand that government force restaurants to subsidize training employees in robotics and the software to operate apps for ordering fast food. Maybe California is just one law away from the utopia of having robots kidnap unwilling customers and forcing them to spend money they don’t have

.