Serving up an unpalatable minimum wage for the food industry

The effects of artificial intelligence and the rise of the digital world will force us to rethink how we produce, process and distribute food

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Governments jumping on the $15-an-hour bandwagon are missing an opportunity to look at how the next technological revolution will affect our food systems. And that’s a shame.

The minimum wage is rising in many parts of the country. Recently, Ontario announced it would raise its minimum wage to $15 an hour, to match Alberta.

In the U.S., the push for a higher minimum wage began in 2013 when brave fast-food workers in New York walked off their jobs. This movement, known as Fast Food Forward, was directed at fast-food chains, but has garnered political attention and is causing a change in the minimum wage across the United States.

Several cities and the entire state of New York have adopted minimum wages for various workers. San Francisco will become the first city in the U.S. to have a $15-an-hour minimum wage, in 2018. Vermont, Hawaii and a few other states are gearing up to pass a $15 minimum wage next year.

The implications for agriculture, food processing, retailing and food service sectors are momentous.

Alleviating poverty and encouraging wealth redistribution are certainly key drivers. But beyond the politics, there’s much more to it than helping the working class.

Across the supply chain

Agriculture is becoming more digitalized. Drones spread fertilizers. Cows are milked by machines. Many industrialized poultry and egg farms have one worker, who likely makes more than $15 an hour, to ensure the information systems work.

For Canadian agriculture to stay competitive, change is inevitable.

And to keep workers in rural Canada, higher wages are necessary.

In food processing, where working conditions vary, most workers earn more than $15 hourly. Automation and business analytics are making inroads. Required skill sets are changing and employees need to be trained to use state-of-the art technologies. Companies will capitalize their operations only if they have the right people with the right skills. That tends to cost more money and translates into higher wages.

A $15-an-hour minimum wage will likely not put more pressure on operational costs for the near future. In fact, it may entice these sectors to adopt new technologies sooner.

But retailing is different. More than 26 per cent of workers in food retailing and hospitality earn wages much lower than $15 an hour. Many small and medium-sized enterprises rely on lower minimum wage to keep a decent level of service. Small enterprises and startups, which are often called the job creation engine of our economy, will struggle with this new constraint.

Larger outfits won’t be surprised. Some restaurant chains have anticipated this for some time. McDonald’s is installing more automated tellers for customers.

Most of the larger chains will thrive regardless. But for consumer-interfacing food businesses for which humanizing the experience is important, a $15 minimum wage will be an impediment to growth.

Real victims

For the workers, a higher minimum wage is a double-edged sword.

Several studies suggest that higher minimum wages discourage small enterprises from creating jobs.

And those hurt most could very well be the people who governments are trying to help: those with the least skills and education.

Wrong antidote

But what needs to be underscored is the seismic shift affecting the food industry.

The $15-an-hour fight is a provisional solution to a complex issue. .

Some estimates suggest that more than half of the workforce involved in food businesses could disappear within the next 30 years due to artificial intelligence.

Decades from now, a guaranteed minimum income for all is likely inevitable. Technology will change the food industry landscape dramatically. We’ll have farms without farmers, processing plants using robotics, automated distribution centres and self-serve restaurants.

Artificial intelligence can do some jobs better – and cheaper – than humans, especially when consistency and quality control are at the core of a business. Given its capital-intensive nature and its risk-mitigating inclination, the food industry will embrace that consistency.

However, food is about connecting and sharing. And consuming food is intrinsically human. So artificial intelligence does have limitations.

Regardless, we should put minimum-wage politics aside and envision the landscape a few decades from now. Then we’ll see that the $15-an-hour argument lacks scope and is just a vote-grabbing scheme.

What’s really at stake is the human face of food retailing and service, and how we provide a decent living to those affected by the next technological revolution.

Sylvain Charlebois is  Senior Fellow with the Atlantic Institute for Market Studies, dean of the Faculty of Management and a professor in the Faculty of Agriculture at Dalhousie University, and author of Food Safety, Risk Intelligence and Benchmarking, published by Wiley-Blackwell (2017). 

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