Home PublicationsCommentary Increasing the Minimum Wage Will Help the United States Compete with China on AI

Increasing the Minimum Wage Will Help the United States Compete with China on AI

by Daniel Castro
Person looking at Flippy interface

There are growing calls to raise the minimum wage in the United States. While most arguments favor an increase to help workers, missing from the debate is that raising the minimum wage would also accelerate digital transformation in many industries. In particular, higher minimum wages would force many businesses with low-wage workers to consider how they can leverage emerging technologies like artificial intelligence (AI) to increase productivity. And faster adoption of AI will help the United States stay competitive as China seeks to challenge its lead in the global AI race.

A number of states, including California, Florida, and Maryland, have already passed laws to phase in a $15 minimum wage over the next few years, while President Biden signed an executive order in April establishing a $15 minimum wage for federal contractors. But proponents continue to push for Congress to pass a $15 federal minimum wage, arguing that the current $7.25 federal minimum wage, which has remained unchanged for more than a decade, is insufficient to meet the needs of workers and their families.

Undoubtedly, establishing a $15 federal minimum wage would help many low-income workers. The Congressional Budget Office (CBO) estimates that it would raise wages for nearly 17 million workers and lift 900,000 workers out of poverty, and the Center for American Progress has shown that it would especially help women, including Black and Latina women, who are overrepresented among low-income workers. However, in addition to creating fairer wages, raising the minimum wage would also push many businesses to increase investment in automation so as to increase labor productivity. In particular, this change could be the necessary catalyst for many businesses to begin using AI.

Greater adoption of AI is exactly what the United States needs. China is challenging the United States for dominance in AI, and while the United States remains ahead on many key indicators, it lags in AI adoption. As of 2018, 85 percent of Chinese companies reported either adopting or piloting AI, compared to 51 percent of U.S. companies. Greater AI adoption will not only help U.S. companies be more competitive, it will also create a virtuous cycle as AI developers offer up new solutions.

Indeed, this dynamic is playing out right now as many restaurants and retailers that find they must pay higher wages to attract workers are taking a closer look at the benefits of investing in AI. Miso Robotics charges restaurants $2,000 per month to lease Flippy the robot, a kitchen helper capable of cooking burgers and frying chicken fingers and french fries. Beyond simple automation, the company’s AI software also guides kitchen staff to reduce food waste, improve food safety, and ensure quality, such as by preventing staff from undercooking items on the grill and coordinating orders to ensure food is fresh when delivery drivers arrive. At $7.25 an hour, many restaurants might just break even using these robots, but with higher labor costs, using robotics can generate significant savings. Fastfood chains like CaliBurger and White Castle have already hired Flippy for some of their kitchens.

Growing demand for these types of technologies has created a surge of investment in AI in the food industry over the past year. For example, McDonald’s, Sonic, and Checkers have all begun experimenting with using AI to automate taking drive-thru orders from customers. GrubHub plans to roll out food delivery robots to 250 college campuses this fall, and Kellogg’s has partnered with Chowbotics (recently acquired by DoorDash) to build a “Bowl Bot” to allow hungry college students to order custom mix-and-match cereal bowls from an automated vending machine.

Digital transformation will not come easily, and the United States needs to continue to pursue a robust national AI strategy, but a higher minimum wage can accelerate this change in many low-wage sectors.

Image Credit: Miso Robotics

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