Force Companies To Pay More And Jobs Are Lost

in LeoFinance2 months ago

This is a reality that career politicians and their think tank associates in academia seem to ignore. Of course, none of them ever ran a business or had to meet a payroll so they just make up rules (laws) to buy votes.

In reality, and anyone who can read a simply income statement understands, when companies are forced to increase labor rates, if they cannot adjust prices accordingly, then jobs are lost.

Obviously, in an economic downturn as we are in now, the idea of raising prices is not feasible. Instead, companies will opt for door #2.

Of course, this is lost on clueless politicians.


The City Council in Seattle feels that grocery store workers, some of them at least, deserve hazard pay. It added a $4 per hour mandate for companies to pay employees.

This sounds great in the interviews and in talking points. The politicians are heroes to the working class. Let's give them a round of applause.

Although we might want to pause rolling out the red carpet. When politicians are involved, things rarely go as these corrupt beings imagine.

Kroger is one of the largest grocers in the country. Anyone who is familiar with that business understands that they do not operate on a large profit margin. The average of public chains in this industry are about 6%.

Naturally, the idea of a $4 per hour surcharge was not going to work for a company like this. So what does Kroger do?

Kroger said it would close two Seattle stores after local officials there imposed a mandatory $4-per-hour raise as hazard pay during the COVID-19 pandemic for large grocery operators.

Instead of receiving a $4 per hour increase, the employees at these Kroger shops are getting a 100% salary decrease.

Welcome to the unemployment line.

Certainly, many will make the case that this is not high end employment and the people are not happy in jobs like this. While that could be true, the fact is people at this income level desperately need the wages. Whatever the size of the paycheck, it is badly needed.

Of course, this omits the fact that the people where these two stores are located lost out on location to do food shopping.

This is not a new approach. The chain did the same thing in Southern California in response to another hazard pay mandate.

The closures come two weeks after Kroger announced it would close two other stores in Southern California after local officials there also imposed mandatory hazard pay.


This takes on added meaning since the United States Congress is working on passing a bill that will pay workers a minimum of $15 per hour, increasing over a couple years.

Once again, we see career politicians operating in an area they are clueless about. These people are going to congratulate themselves and backslap each other over how they are defenders of the "little person" and taking on big business.

Mark my words, if these idiots were ever held accountable, and the truth was revealed, these people would be hung from a string on the nearest tree.

Do you know what $15 an hour does? It accelerates the ROI on automation. The more that is required to pay, the bigger the potential cost savings by getting rid of employees.

Of course, this will not happen according to the nitwits on Capital Hill or from their educational institutions who do their "studies". That is nothing but propaganda.

Except that it isn't.

Here is another grocer that is looking at making automation a central part of their future plans.

For the more than 500,000 Instacart gig workers fulfilling grocery orders at supermarket chains such as Giant, Food Lion, Costco, among others, the delivery service is exploring ways it can eliminate human workers by employing robots at warehouses, according to a new report via Financial Times.


Again, one might make the case that a gig job is not the best in the world. Nevertheless, the people filling these jobs are dependent upon these wages for their survival. Whatever is coming in, it is needed.

I guess the fact that we are in the age of automation is lost on most of these policy makers. Perhaps they should pull their head out of their ideological asses for a few moments to realize the impact that they are creating.

Technological unemployment is actually being ENHANCED by these nitwits. They are taking action to ensure it comes into being.

In the U.S., the largest employer, at least in terms of jobs added over the last few years is Amazon. They are adding warehouses and personnel to their fulfillment centers. The challenge is this company is doing so as a temporary measure. Their goal is to be end-to-end autonomous, from order to delivery.

Thus, one of the largest job creators is, at some point, going to automate much of their workforce out.

I can guarantee you, the more they are forced to pay in wages, the better the ROIT looks on any automation.

What is humorous is the union in the first article is up in arms about what Kroger did. Here is another example of people who never ran a business not learning from history. The UAW had to learn the hard way what happened when their numbers diminished due to the fact that automation started in the 1980s in that industry. Jobs were lost by the thousands and there was nothing they could do about it.

The more they fought and tried to get more, the quicker the jobs were lost.

Go into areas of Wisconsin, Michigan, and Ohio, where manufacturing use to thrive and see what is there. They areas are ravaged with poverty since commerce is basically dead. People are suffering because they have no jobs.

We are going to see the same thing in many different industries. The retail sector is primed for this.

Speaking of Prime, Amazon, owner of Whole Foods, is now starting to sell the technology for their AmazonGo stores.

Amazon on Monday announced it will now offer its cashierless store technology, called “Just Walk Out,” to other retailers. The technology uses a combination of cameras, sensors, computer vision techniques and deep learning to allow customers to shop, then leave the store without waiting in line to pay. This is the same technology that today powers the Amazon Go cashierless convenience stores and Amazon’s newly launched Amazon Go Grocery store in Seattle.


To deny what companies are or what they will do is insane. Public corporations have a responsibility to their shareholders to maximize profits. Period. We can talk all we want about stakeholders and other niceties but the reality is that this is what CEOs are judged upon. Failure to meet the numbers means CEOs will be replaced by ones who will.

Of course, politicians might want people to lose their jobs. The more people who are dependent upon the government for their sustenance, the better from a politicians standpoint. This only increases their power, something that helps come election time. The ones who promise the most money to people usually win.

Either way, no matter how it is sliced, jobs will be lost. Technology is providing alternatives that corporations are certain to take. The faster the ROI makes sense, the quicker they will implement them.

Raising wages during an economic crisis is only going to push them further down the path of automation.

This is a given.

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Unfortunately I’ve worked on automation for manufacturing and we justify the cost by calculating the ROI based on reduced salaries. It’s a fact of life and progress.

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That is what companies look at. Like you said it is a fact of life and this is not going to change. Wishing it were different is not going to amount to anything different.

For all the talk about stakeholders, the bottom line is our system is constructed in such a way that the bottom line is the most important metric. People want to think that things can be changed within the system but they cannot.

The discussion is about investing differently. Yeah that is until a money manager is about to lose a ton of money because a CEO is socially conscious yet losing money hand over fist.

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The system just won’t change. I’m kind of cynic about the whole thing.

It's a huge problem and it is even worst for small businesses. It's either shut down or cut down employees because there is only so much money to go around. Unless you can improve the businesses finances, there is no incentive for them to take a hit for no reason. This is why our politicians are so clueless and it will not solve the poverty question.

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That is true although, in this instance, the Seattle law didnt apply to small businesses.

Nevertheless, the bill passed by Congress would apply to all businesses and you are spot on. They ultimately have to figure out how to do more with less. That means jobs.

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I haven't nodded so much in a long time while reading a blog post. Any chance you can pop to the UK and give some of our voters a reality check? We have a Labour Party here whose answer to everything is "Chuck money at it." having said that, our current Conservative Government has been giving money away like sweets you would have thought the Socialists would be happy or at least STFU? Sadly they still want more money. Thing is, TAX in the UK is going to burst through the universe to pay for it all which will be manna from heaven for Labour voters as they accuse Tories of squeezing the poor totally forgetting and ignoring all the handouts pretty much everyone has had. #LeSigh

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Politicians operate on the principle of who can buy enough votes, regardless of party or country. That is why being tied to a party is foolish in my opinion, they are really one party systems with minor variations. The rhetoric might be the same, but the result is close to the same.

As for the throwing money at things, right now, since they decided to collapse the economy, it is needed. The draconian measures adoption, especially by Johnson, are ridiculous. Do these people not thing what happens when you crash the economy more than ever took place in the last 300 years?

Obviously not.

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The loss for small businesses will be immense. Too bad is this really happen to them.

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Look at Spain, 20% of unemployed but thanks we have socialism and a minimum wage at 950€, they want to increase it to 1200€.

The privilege of few.

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And that will likely push it to 25%.

If nothing else, they get people more dependent upon government which politicians, of any party, love.

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You hit the nail, the current government is starting to assign monthly welfare of 470-1100€ per person without any income, while our deficit is above 10% and debt is above 120% of GDP, crazy.

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Governments around the world are addicted to the cheap money. This is going to be a problem when interest rates go up which they will have to after defaults start to happen.

Then it will get a lot harder for them to engage in their antics.

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Japan has been leading the world in fully automated stored for years now. Amazon and some startups are making the user experience even better. Due to COVID-19 scare (mostly made up by mainstream media and political entities), people might just be more open to a shopping experience that has zero to minimal human contact.

It is just another win for the technology sector and startups and a major loss for minimum wage workers.

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It is just another win for the technology sector and startups and a major loss for minimum wage workers.

Yep. It is a cleaning out process.

Of course, I can make the case that many of the jobs created over the past couple decades, most of them were worthless and not of much value to begin with. We had a tendency to create jobs just so we could say we created jobs.

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We had a tendency to create jobs just so we could say we created jobs.

That is very true. "Journalists" are one of the obvious examples. Even when it comes to finance, we have lots of people who merely move money from place to place without even doing proper research. There are many jobs in HR that are high paying but turns out to be glorified charades,

The downside to all this automation is the lack of real-life human interaction. AS a race, we then become more insular, intolerant and more incapable of having meaningful relationships.

Again I would turn to the excellent documentary that was sent back in time to warn us all of what the future holds. I of course am talking about Demolition Man.

Humans NEED other humans, this interdependency is what keeps us sane and functioning as a coherent society.

Automation is great, freeing up leisure time but this cant be at the expense of human connections. Of course, this also brings up the point of how to enjoy leisure time without cash and that brings us back to the advantages of a Universal Basic Income.

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Humans NEED other humans, this interdependency is what keeps us sane and functioning as a coherent society.

This is actually being challenged as people are getting emotionally attached, especially in Japan, to their robotic caretakers. And people for years have become attached to their pets, often using them as a substitute to human interaction.

Everything we think we know is being or will be challenged in the next 15 years. All disciplines are going to find what they held as fact is mistaken. This is in psychology, economics, finance, and the law.

...that brings us back to the advantages of a Universal Basic Income.

And the disadvantage is that it increases the power of government and people's enslavement. Do you want your income based upon political whims?

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AS always, I appreciate you taking the time to respond @taskmaster4450 but.....

Humans need humans for much more than emotional dependency! Interdependency is created for the need by one person for something another person can produce. We cannot be individuals, living within our own tiny island producing everything we personally need.

The problem I fear with decentralisation of the human race, which is what you are saying, is that the more it decentralises, the more opportunity there is for a rogue actor to attempt to take complete control. There have to be checks and balances in play to protect people from this and the possibility that weaker members of the race get left out or left behind, we need a decentralised voluntary social network but this won't happen in a selfish, I centred world.

And the disadvantage is that it increases the power of government and people's enslavement

I feel this is a libertarian logical fallacy. There is always governance, always those who wish to be in control, to have power, normally linked to 'how much' they have. There are many forms of governance! Like there are on this blockchain for example!

AS for complete tokenisation, not going to happen. Who in their right mind would trust their entire worldly wealth to a computer network that is CONTROLLED by someone, somewhere whichever way you look at it!

WHats going to change? If a government or any other rogue actor pulled the plug on the internet, either in their own domain or maliciously in someone elses domain, you lose everything!

The future of the world must be laid in humanitarianism which basically gives each individual the right to do whatever they want, as long as it provides zero or positive effect on any other individual with whom we share the planet.

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Kroger is one of the largest grocers in the country. Anyone who is familiar with that business understands that they do not operate on a large profit margin. The average of public chains in this industry are about 6%.

I can actually testify to this because that is where my uncle worked before he died....

You are correct...@taskmaster4450le

If companies pay less to its employees then we get in a vicious circle as workers consume less. This has been explored the past recession with awful results for low middle class people here in Europe, here was called austericide (from austerity + suicide).

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If companies pay less to its employees then we get in a vicious circle as workers consume less.

Another misguided notion.

Before a lowering of consumption takes place, on a mass scale, deflation hits means that less pay can equate to lower prices.

Academics love to create simply models for what takes place while overlooking the fact that economies are holistic in nature.

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Forcing companies to pay is not the right way because its leading to the loss of jobs. Whoever loses the job because of this is sad for them. Its better to get paid less than nothing because covid has made the job market competitive and keeping a job is one of the challenges.

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Even before covid and after covid ,there will still later be so many job loss when automation takes over in the future,I think what everyone should be doing right now is to prepare for the future and be ready to adjust to the change which will happen to the society in the coming years...that is not dreams....this is reality....

My area in South Texas has benefitted from unions pushing up wages up north. I live on the Texas-Mexico border. Machining jobs that pay $25/hr up there can be done for roughly $12-$15/hr. And, greater savings can be achieved by shipping the rough work across the river, to Mexico. The products are then brought to the US for finish work. For now, we still have an arbitrage advantage. This is a main draw that our local leaders use to attract manufacturing to the area. That and unions aren't very strong in Texas.

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That is true and business always followed the lowest cost of labor. However, the lowest of all is automation.

At some point, as that arbitrage window is closed, we will see more incentive for automation by major corporations.

Once the process starts, we will see things accelerate. COVID-19 could be the thing that kickstart this process, or take it to a greater degree.

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you could raise the minimum wage but taxing it less or not at all, that would make companies and employees happy

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Governments are running major deficits, which means that massive tax cutting is not going to take place.

Plus all that would do, if successful, would set off inflation which is another problem of this.

Of course, the central bank and the government have been itching for inflation for decades, without much success.

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@taskmaster4450le job loss will occur defnitely if the company have to pay more...and the sad thing is that lack of jobs will lead to higher rate of poverty in most cases...

That is true. That is why just focusing upon wages, in isolation, is not the answer. Yet that is all politicians and academics can do.

It is sad that these people have so much power.

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Bang, I did it again... I just rehived your post!
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