The New York Times (paywalled, but also available here) reported last month:
At Sansan Chicken in Long Island City, Queens, the cashier beamed a wide smile and recommended the fried chicken sandwich.
Or maybe she suggested the tonkatsu — it was hard to tell, because the internet connection from her home in the Philippines was spotty.
Romy, who declined to give her last name, is one of 12 virtual assistants greeting customers at a handful of restaurants in New York City, from halfway across the world.
The virtual hosts could be the vanguard of a rapidly changing restaurant industry, as small-business owners seek relief from rising commercial rents and high inflation. Others see a model rife for abuse: The remote workers are paid $3 an hour, according to their management company, while the minimum wage in the city is $16.
The workers, all based in the Philippines and projected onto flat-screen monitors via Zoom, are summoned when an often unwitting customer approaches. Despite a 12-hour time difference with the New York lunch crowd, they offer warm greetings, explain the menu and beckon guests inside.
The jobs that are most often used to explore the disemployment effects of the minimum wage include fast food workers and retail workers. If those jobs can increasingly be off-shored to foreign workers not subject to the minimum wage, then it seems to me that the disemployment effects of the minimum wage (which are still contested in the literature - see the links at the end of this post) are likely to become more substantial.
To see why, consider the price (wage) elasticity of demand for labour in fast food restaurants (or retail). One of the factors that affects the price elasticity of demand is the availability of substitutes. Foreign workers in the Philippines connecting virtually to the restaurant are substitutes for in-person workers in New York. When new substitutes become available, demand becomes more elastic - the buyers become more sensitive to the price. In this case, the availability of cheaper foreign workers makes employers' demand for local workers more elastic.
To see why the disemployment effect would be larger with more elastic demand for labour, consider the diagram of the labour market below. The equilibrium wage is W0, and the equilibrium quantity of labour is Q0. The minimum wage is shown by WMIN. At that wage, the quantity of labour supplied (the number of workers wanting a job) is QS, and with the original (more inelastic, or steeper) demand for labour (DL0), the quantity of labour demanded (the number of jobs available) is QD0. The minimum wage creates unemployment equal to the difference between the quantity of labour supplied (QS) and the quantity of labour demanded (QD0). The disemployment effect of the minimum wage is the number of jobs lost, which is the difference between Q0 (the number of jobs without the minimum wage) and QD0 (the number of jobs with the minimum wage). Now, if the demand curve is DL1 (more elastic, or flatter), then the quantity of labour demanded is QD1. The amount of unemployment is the difference between QS and QD1, which is larger than when the demand curve is less elastic. The disemployment effect of the minimum wage is the difference between Q0 and QD1, which is also larger than when the demand curve is less elastic.
So, the takeaway message from our model is that we can expect the transition to more remote workers in fast food and retail will increase the disemployment effects of the minimum wage.
[HT: Marginal Revolution]
Read more:
- A bunch of research findings on minimum wages in New Zealand
- The disemployment effects of Canadian minimum wages
- Jeffrey Clemens on the disemployment effects of the minimum wage
- The impact of an online minimum wage
- Seattle's minimum wage, revisited
- The latest evidence supports negative employment effects of the minimum wage
- Latest research suggests the minimum wage DOES reduce employment
- More empirical support for the disemployment effects of the minimum wage
- The minimum wage and job vacancies
- The minimum wage and hiring standards
- The employment effects of the minimum wage, from American Community Survey data
- The minimum wage and homelessness
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