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May 19 2016

Wendy’s Workers Get the Boot Because of Minimum Wage Hikes

Patrice J. Lee

When you pull up to the Wendy’s drive-thru window soon, don’t expect to find human workers. The nation’s third largest fast food restaurants is slashing its workforce and replacing those employees with self-service kiosks – i.e. robots – and it’s directly because of rising minimum wage costs.

Wendy’s announced plans to start installing self-service ordering kiosks this year in company-owned outlets. The company owns more than 6,000 locations and employs more 34,000 hourly workers. Franchises will decide on their own whether to invest in kiosks, but if their competing stores are able to widen the bottom line but lowering labor costs, they will likely feel the pressure to follow suit.

The move comes as company executives say labor costs have risen 5-6 percent in the past year alone. A wave of city and state-wide minimum wage increases have swept the country, the most notable being California’s statewide $10 minimum wage that will gradually rise to $15 per hour over the next few years and New York City’s gradual minimum wage increase from the current $10.50 level to $15 per hour.

Wendy’s is the first chain to install self-serving systems on a wide scale but it’s only a matter of time before others follow. White Castle is thinking about replacing its workers with robots and McDonald’s has tested ordering kiosks at a Manhattan location.

The effects of the minimum wage hikes may be uneven but franchises will feel the impact most as Investor’s Business Daily explains:

It’s not surprising that some franchisees might face more of a labor-cost squeeze than company restaurants. All 258 Wendy’s restaurants in California, where the minimum wage rose to $10 an hour this year and will gradually rise to $15, are franchise-operated. Likewise, about 75% of 200-plus restaurants in New York are run by franchisees. New York’s fast-food industry wage rose to $10.50 in New York City and $9.75 in the rest of the state at the start of 2016, also on the way to $15.

The CEO of Wendy’s hinted last August that rising labor costs from minimum wage hikes would force the company to replace staff with automated services and this news is the fruit of those warnings:

“We continue to look at initiatives and how we work to offset any impacts of future wage inflation through technology initiatives, whether that’s customer self-order kiosks, whether that’s automating more in the back of the house in the restaurant,” Penegor said during the company’s second quarter conference call. “And you’ll see a lot more coming on that front later this year from us.”

Lost jobs aren’t the only hardship on American’s finances from minimum wage hikes. Some Wendy’s franchise have raised prices as well.

Sadly, this just the start. While protestors, the advocacy campaign Fight for 15, and progressive supporters have cheered the rise in minimum wage to the arbitrary, so-called “livable” wage of $15 an hour, they will be silent on the mass layoffs in the food service industry. Workers aren’t just being laid off with the possibility of being rehired in the future, they are getting the ax and those jobs will not return.

Policymakers, who’ve never worked a day in the for-profit world trying to keep the bottom line in the black, institute short-term band-aid policies that have long term, long-lasting harm.

The pain will continue for the 1.7 million minimum-wage workers in the food services and the 3.75 million workers making “near-minimum” wage in food preparation or service. Automation of services is a trend that has been on the rise and may be a natural way the industry is going, but minimum wage hikes speed up the process.

We need to focus our efforts on getting minimum wage workers the skills and knowledge to be employable now and in the future for the jobs that will become available.

 

 

IIndependent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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