May 03, 2018
The NYT described the problems that fast-food restaurants are having in getting and keeping workers as a result of lower unemployment. It describes several ways in which restaurants have been able to maintain sales with fewer workers. It also suggests that many restaurants are likely to go out of business since they will not be profitable if they have to pay the wages necessary to keep workers.
This is how productivity increases in a market economy. Some restaurants will be able to find ways to make a profit even while paying higher wages. Other restaurants, which are less productive, will end up going out of business. The workers that had been employed at these restaurants will mostly end up at businesses that make better use of their labor.
The growth of fast-food restaurants described in this piece is a drag on the economy’s productivity. When a larger number of workers are employed in very low productivity jobs, it reduces average productivity in the economy. If higher wages ends up reversing this process, it will mean more rapid productivity growth.
This is essentially the story of the transition of the United States from being a primarily agricultural economy to an urban one. Manufacturing and other industries in urban areas offered higher pay than was available in rural areas. This forced farms to either become more efficient or go out of business. This is mostly a positive story of rising living standards, although there always will be some people hurt in the process (e.g. farmers or restaurant owners going out of business.)
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