Economic Policy
July 12, 2022

Erase the Minimum Wage

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Submitted by Jeff Ronne.

Ideally, the Minimum wage - Wikipedia should be eliminated if a reasonable Universal basic income - Wikipedia is implemented to replace it.

A Minimum wage - Wikipedia is far better than nothing as it comes close to providing a living wage for those working fulltime.

My rationale is as follows.

Universal basic income - Wikipedia in comparison is a better solution as it replaces the minimum wage and the negative economic effects associated with the minimum wage.

The problem is that as the Minimum wage - Wikipedia rises, investment capital is deployed to reduce the number of increasingly expensive human workers with ever cheaper ever more intelligent machines to permanently replace these workers. The most profitable businesses succeed in the marketplace which are the businesses with ever cheaper ever more intelligent machines and fewer increasingly expensive human workers.

So here we are with rising wages that leads to widespread pervasive job destruction. Most jobs if not all in the end will become automated. This is only a question of when not if.

I greatly prefer the following which I will extensively argue is inevitable

  1. the elimination of the Minimum wage - Wikipedia
  2. the elimination of most government Welfare - Wikipedia
  3. the implementation of a substantial level of universal basic income - Wikipedia that starts at a level that equals existing welfare benefits and minimum wage levels

Automation is a threat because society has yet to acknowledge automation is happening let alone effectively address it.

Machines have no healthcare costs, no sick leave, no vacations, no employee turnover, no employee dissatisfaction, the elimination of human errors, declining costs over time as these machines become cheaper, etc … I could trivially list over 100 reasons why ever cheaper ever more intelligent machines will always be vastly superior to human workers for the vast majority of jobs.

The key point is that in the past machines automated human muscles. We are now well underway in automating the human brain and the human senses. Ever cheaper ever more intelligent machines have senses that are vastly superior to humans, as they can see, touch and hear in multiple directions simultaneously - as well as detect infrared radiation (heat), ultrasonic energy, etc … These machines are and will be superior to human workers in every aspect. When was the last time any human answered more questions correctly than Google - Wikipedia?

Intelligent automated machines are now essentially automating the human brain as these machines learn faster and more precisely than most humans with regard to required job skills for performing work in a growing number of fields. Furthermore, these intelligent automated machines are less prone to error and far cheaper than humans. These intelligent automated machines simply represent more efficient and economic workers with regard to producing less costly economic goods and services compared to the vast majority of human workers. The incremental cost of scaling up the business is very low as the incremental cost of replicating a machine is very low. Adding an additional human worker is very high by comparison.

While many incorrectly argue that automation has been going on for centuries and humans have and will always find other means of making a living by creating new jobs in new fields, these same people also incorrectly argue that nothing ever changes. This is known as the Luddite Fallacy which is now proven false. The STEM Fallacy is a sound refutation of the Luddite Fallacy.

For instance, automated systems will self-diagnose, self-correct and self-repair at least 90% of the time trending well above that over time. It is a fairytale myth that human workers in any substantial number will be required to run these systems. The design and implementation goal of these automated systems is to remove as many error-prone costly human workers from the process. The goal of businesses is always fewer human workers not more.

So we have a permanent growing excess of displaced human workers that are increasingly not economically competitive. This means fewer jobs and declining wages for the median human worker as time progresses.

As a person that has made a very good living in Silicon Valley - Wikipedia by permanently eliminating the jobs of others for 32 years, this issue is real for me. Silicon Valley - Wikipedia employs and will always employ a small minority of humans. The specific intellectual demands required only suit a minority of humans. It is analogous to the issue of why the majority of humans will never win a Nobel Prize - Wikipedia like my physics professor Hugh David Politzer - Wikipedia did. All humans are equal in value but have vastly differing skills and intrinsic abilities.

So here we are as ever increasing levels of economic goods and services are produced by ever cheaper ever more capable intelligent automated machines coupled with permanently declining human jobs and declining wages.

What is likely required is that universal basic income - Wikipedia needs to be phased in gradually over the coming decades at ever increasing levels as an ever increasing share of economic goods and services are produced by ever cheaper ever more capable intelligent automated machines. This creates a permanent growing excess of human workers with a sustained permanent deflationary trend in the median wage for all human workers. As intelligent automated machines get more proficient and cheaper by the year, businesses that replace human workers with ever cheaper ever more capable intelligent automated machines are the inevitable long term economic winners.

The naive wishful thinking that humans can economically compete with these ever cheaper ever more capable intelligent automated machines is just that wishful thinking not grounded in reality. Any new jobs created will be also automated at an ever increasing rate.

The upside in the future is that in that humans are not predestined to work for a living as that is precisely why we have ever cheaper ever more capable intelligent automated machines. Technology will continue to advance at an increasing rate but the real change is that an increasing fraction of humans will no longer need and / or be able to work for a decent living.

This short video describes the future.

The economic details and rationale of why this will happen is as follows:

There is and will continue to be fewer well paying jobs and rising wealth inequality as positive GDP growth occurs with declining employment as the rate of worker productivity increases exceeds the underlying rates of business and GDP growth.

The existing economic framework of exponentially rising worker productivity creates rising wealth inequality as ever cheaper, ever more capable intelligent automated machines continue to inevitably replace the majority of low and medium skill workers.

The majority of remaining jobs are lower paying service jobs which may keep unemployment temporarily low but only increases the issue of rising wealth inequality and underemployment.

Capital Investment seeks the greatest Return on investment. The greatest return on capital investment is achieved by investing in ever cheaper, ever more capable intelligent automated machines as opposed to creating jobs for ever more expensive humans. As time passes human workers have rising costs whereas these intelligent automated machines that replace them have decreasing costs.

What Silicon Valley has been, is, and will be doing in the future is reducing the cost of and increasing the supply of an ever increasing array of economic goods and services. The most efficient use of Venture capital is to use Capital Investment to replace human jobs with ever cheaper ever more intelligent automated machines. Society should learn to accept this inevitable economic process as the vast majority of jobs in the end will be automated over time. This automation process has been well underway for over 3 decades.

This is the business model of Silicon Valley, the home of the largest most profitable corporations on Earth, where the goal is more profits, more sales, more productive employees and less employees. Amazon now has 45,000 robots in its warehouses. Wal-Mart's new robots scan shelves to restock items faster as "Walmart Replaced Me with a Robot".

This scenario of permanently replacing human workers plays out on Sand Hill Road on a daily basis where Venture capital is deployed to fund Startup companies with the goal of replacing workers with intelligent automated machines to increase economic efficiency. There is a growing ocean of Venture capital which seeks this destination as the future earnings are safely protected by United States patent law which reduces investment risk. Higher rewards coupled with reduced capital risk is optimal.

Estimating potential future cash flow is always uncertain to a degree, but the United States patent law is deliberately constructed to precisely mitigate this economic obstacle by protecting Intellectual property rights which are the sole property of the Startup company. As a Silicon Valley worker at many early stage startups, I am quite familiar with this process. The venture capitalists understand this as well so the risk is quite manageable now and indefinitely into the future which is why I am positive that many diverse industries will be increasingly automated within a few decades.

The first jobs to be replaced are the jobs with the greatest Return on investment that are low skilled, reasonably paid and repetitive. For instance manufacturing and transportation (Autonomous car) will be fully automated within a few decades. As time progresses, all higher paying jobs with a lower degree of difficulty will be partially automated and then fully automated. The last jobs to be automated in the end will be the jobs that create the automation process.

As far as whether universal basic income is adopted it is only a question of when - not if - for the USA. The advent of ever cheaper ever more capable intelligent machines will likely force the world to adopt a universal Basic income in the coming decades as many of the existing assumptions of Capitalism will no longer hold such as the vast majority of people can no longer work for a living without government assistance.

In the global economy there is no way to stop the increasing use of ever cheaper, ever more capable intelligent automated machines replacing a growing number of human workers. On a global basis, corporations that use humans lose while corporations that use ever cheaper, ever more capable intelligent automated machines win. In the end, increasing economic efficiency is unstoppable.

Universal basic income is a free market idea where citizens and consumers can decide how to spend their money in the Free Market of economic goods and services. It is far better than the government picking economic winners and losers, or worse yet, directly providing economic goods and services. Economic liberalism is a better model than government directed Socialism.

Universal basic income will allow consumers to purchase ever cheaper goods and services as most humans will be either unemployed or working in jobs with ever decreasing wages. Again raising the minimum wage is a spectacularly bad idea as it only accelerates the rate at which ever cheaper automated intelligent machines permanently replace human workers as investment capital is focused on replacing the ever more expensive human workers.

We need to transition to a society where work is optional as most people likely do not work to sustain themselves and instead rely on universal basic income. Europe is waking up to this new reality and the rest of the world needs to do the same.

Universal basic income is unconditional in that it is received by all citizens at the same amount regardless of income, wealth or assets. It does not depend on employment, lack thereof or age. The level / amount of universal basic income will likely be phased in over many decades increasing as time passes. The initial level will be minimal at best.

Universal basic income replaces all existing public assistance programs such as the existing regrettable welfare program that reduces benefits as income rises (an absurd negative economic incentive).

Let the free market decide what a fair wage is by eliminating all Minimum wage / living wage laws. If someone wants to work for $5 / hour let them. Higher wages only accelerates the rate at which Capital Investment is used to replace human jobs with ever cheaper ever more intelligent automated machines. A higher minimum wage and an expected future minimum higher wage increases the expected return for the Capital Investment making it more profitable and lower risk. The economic goal for Venture capital in Silicon Valley is to use Capital Investment to replace human jobs.

Universal basic income is funded by taxing corporations which indirectly taxes the work of the ever cheaper ever more capable intelligent automated machines that work autonomously 24 x 7. Humans workers will be the exception going forward as the vast majority of economic goods and services will be produced by ever cheaper ever more capable intelligent automated machines that work autonomously 24 x 7. These robotic workers do not care if their work is taxed by the way.

As time marches on, an ever decreasing fraction of human workers will be highly economically productive. This fact is independent of whether or not universal basic income is implemented. This is pretty obvious from observing Silicon Valley where the most highly valued successful companies focus on employee productivity, intentionally not hiring more workers and instead only hiring the absolute best workers. The median human worker simply will never be valuable enough to contribute meaningfully to the required innovation that is Silicon Valley.

Furthermore while many people can recognize the problem of growing global wealth inequality they incorrectly assess blame and propose counterproductive solutions such as living wages and an ever higher Minimum wage which in fact only increases the growing global wealth inequality.

I have worked over 30 years at over 20 companies making a great living permanently destroying the jobs of others through automation and productivity software. Often times it comes in the form of productivity software which allows 1 worker to do the job of what previously would require N workers to do, reducing the number of jobs by (N-1). It's time for most to wake up and intellectually digest what has been, is and will be happening in Silicon Valley. Positive economic growth requires fewer human workers not more human workers as these ever cheaper, automated intelligent machines are essentially unpaid slave labor.

Unfortunately there will be a growing excess of human labor which will cause the wages for the remaining jobs (nannies, painters, musicians, artists, etc …) to plummet as the supply of workers greatly exceeds demand.

This makes the idea of universal basic income an attractive solution to this issue because the possibility of working for a decent living is disappearing rapidly for the vast majority of human workers. This is the direct result of the unstoppable inevitable rise of ever cheaper, ever more capable intelligent automated machines.

The companies using robots to produce economic goods and services will win in the marketplace while the companies using human workers will lose. This is an optimal desirable economic result. These ever cheaper automated intelligent machines are more economically productive than the average low-to-medium skilled human worker. The long-term economic race has already been lost forever for all these low to medium skill workers despite the fact that most humans are in denial, for obvious reasons, as losing to a machine is embarrassing.

The key issue to resolve is the political economic transition as machines, not humans, increasingly generate the majority of economic output. The economic gains will not be distributed evenly causing a growing wealth disparity. Intellectual property holders will reap a growing share of wealth as is happening today. On the whole, the world will get richer, but the average worker will likely get poorer as the wage deflation rate will exceed the deflation rate of produced economic goods and services.

Traditionally the wages of human workers has been taxed to fund governments. Going forward, the robotic workers will need to be increasingly taxed somehow to account for this revenue shortfall. So much for the wisdom of reducing corporate tax rates.

What is happening, and will happen, is a massive deflationary continuous event both in terms of human wages and produced economic goods and services. Ironically any minimum wage, or even worse, a rising minimum wage, will insure that the vast majority of human workers will lose at a faster rate as the intelligent automated machine becomes ever cheaper while the human worker becomes more expensive.

A sample of current articles documents that this process has been well under way for years. This is not news to anyone who has been paying attention in the last several decades.


Can universal basic income counter the ill-effects of the gig economy?

While aid donors embrace transformation, India mulls a universal basic income

What universal basic income could mean for the future of work

Basic Income Is No Silver Bullet, But It May Still Save Us

iPhone manufacturer Foxconn plans to replace almost every human worker with robots

Chinese factory replaces 90% of human workers with robots. Production rises by 250%, defects drop by 80%

Bill Gates says it's too early for basic income, but over time 'countries will be rich enough'

Bill Gates says robots that take your job should pay taxes

Elon Musk doubles down on universal basic income: 'It's going to be necessary'

Where It’s Made: A Ford Car in China

A Robot Revolution, This Time in China