BUSINESS
09/09/2014 10:34 am ET Updated Sep 09, 2014

Krugman Demolishes Classic Argument Against Raising Minimum Wage

Paying fast-food workers $15 an hour won't cause big companies like McDonald's to cut jobs, according to Nobel Prize-winning economist Paul Krugman.

That's because fast-food worker jobs can't be outsourced overseas or performed by machines, the New York Times columnist said, debunking a classic argument against raising pay for low-wage workers.

“Minimum wage workers are almost all in the United States employed in non-tradable industries -- the production can’t move to China,” Krugman, who won the 2008 Nobel Prize for economic sciences, told Business Insider executive editor Joe Weisenthal in a video posted Monday. “They’re employed in areas where -- yeah, you can mechanize some but not very much actually.”

McDonald's CEO Don Thompson said in June that the company would support a bill, proposed by President Barack Obama, to raise the federal minimum wage to $10.10 from $7.25.

But, so far the bill has struggled to make it through a politically gridlocked Congress.

Last week, hundreds of fast-food workers were arrested as they marched for a $15 minimum wage during a nationwide strike.

While there have been some recent advances in burger-flipping robots, replacing line chefs with mechanical equivalents remains a pipe dream for business owners, as it has been for decades. Darren Tristano, a food industry expert at the research firm Technomic, told The Huffington Post last month that “robots are not going to replace humans in food service.”

Krugman said robots are still “decades away” from the kind of versatility a human service worker can offer.

“For the most part they’re in ‘common sense’ industries,” he said of minimum wage workers. “The reason you need a person is because you require the kind of flexibility that I think we’re still a few decades away from getting out of computers.”

HuffPost

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