But not the price you can sell at, unless the demand curve also shifts in proportion to the increase in supply.
> Those burger flippers are compensated poorly because you need a lot of them to run a restaurant that serves cheap food.
They are compensated poorly because there exists other supply of burger flippers willing to flip burgers at that level of compensation, and because burger purchasers are only able/willing to pay a certain amount for burgers.
> You still need proper government policies that drive unemployment down to reap these benefits.
You need government policies to restrict the supply of labor because the increase in supply of labor is not being met with a proportional increase in demand for labor. Hence overtime, vacation leave, parental leave, minimum age, taxpayer funded education, etc.
McDonalds made $11 billion in 2019. They employed 210,000 people. They therefore made ~$52,400 per worker in profit.
A $10 / hour burger flipper makes ~$19,500 per year.
Those burger flippers are compensated poorly because of labor market competition. The value they provide only puts a ceiling on what it is possible for them to earn for their job to exist.
The actual prevailing wage is determined by, frankly, how desperate the low skilled pool of labor is. If unemployment goes up, that means greater desperation. If public sector compensation goes down, that means greater desperation. If social services are cut that means greater desperation. If overseas workers in a country that practices chattel slavery starts taking orders, that means greater desperation. If prison workers start getting in on your industry, that means greater desperation.
All of these things mean wages go down.
This all has absolutely fuck all to do with automation. It is largely about power.
The Roman empire also had mind-bendingly high levels of income and wealth inequality and they weren't exactly automating everybody out of their jobs. They were a society built on the selective application of extreme violence.
Automation does provide the perfect excuse for paltry, declining wages though, largely because it's nobody's fault. If I were an industrialist I'd for sure be gently guiding the pointy pitchforks in the direction of the robots while I outsource, use prison labor, lobby for reining in public sector wages/pensions, cutting social services and gorging myself on gargantuan profit margins. I'm squishy and they are not.
The other useful aspect of the automation narrative is that it plays well with outsourcing. Americans don't see the labor intensive factories that leave its shores in search of more impoverished, cheaper, possibly even slave labor.
What they do see are the factories that didn't bother offshoring - the ones that required a small amount of highly skilled labor to maintain automated production lines, where the headache of offshoring wasn't worth the hassle.
There's lots of money that goes to franchise owners though.
An operation like McDonald's will end up paying higher wages due to automation, but to fewer employees. As the revenue per employee goes up things like training and churn become more expensive than increasing wages.
> McDonalds made $11 billion in 2019. They employed 210,000 people. They therefore made ~$52,400 per worker in profit.
Don’t forget that McDonalds is mostly a franchise business. They could have 0 people flipping burgers and still make 10 billion profit
I'll try recalculating for Starbucks, since not having franchisees makes the calculations easier:
Starbucks in 2019:
* Made $26.5 billion dollars
* Employed 346,000
* Average barista wage ~$12 / hour = ~$25,000 per year
* Average profit per employee = $76,589
Hold on a minute, that's Starbucks' revenue, not profit. You haven't accounted for any non-labour expense.
From its financial data (https://finance.yahoo.com/quote/SBUX/financials?p=SBUX) (Yahoo link for convenience), that $26.5b revenue is directly offset by $19b in cost-of-goods-sold (including some salaries already paid). Other overhead and depreciation accounts for another $3.5bn, and interest expenses contribute $235m.
The net pre-tax profit for Starbucks is $3.9bn, and if that were distributed equally among all employees (from your figure) it would result in about $11,200/worker over and above their existing salary.
That's closer to the break-even-wage-rate that Starbucks could conceivably offer, if it's intended to have zero return on capital (about $19bn in current assets for FY2019). And that figure is volatile; if you repeat for this fiscal year you'd calculate about $3200/worker.
When Amazon made zero gross profit for a decade (or was it two?) it wasn't because they weren't making profits.
Check the financial statements again. The $26.5b figure you cite is gross revenue, of which $24.4b is operating revenue. From that revenue you deduct the $19b cost of goods sold (including salaries) to find $7.5b of operating profit, and from that you deduct depreciation and administration expenses.
New investment does not show up as an expense on a financial statement, since it builds capital -- at the accounting level it's a transformation of one asset (cash) to another (land/equipment/etc).
That is not the reality at all. People in industrialized economies today have, on average, vastly higher standards of living and thus consume vastly more resources than in centuries past.
While a typical person 100 years ago may have been happy with 2 or 3 pairs of shoes, a half dozen changes of cloths, a bicycle and a radio. A person of similar socio-economic status today has a dozen pairs of shoes, a hundred articles of clothing, a car, a tv, multiple radios, a mobile phone, etc, etc. This massive increase in physical possessions for the same (or less) labor output is due in large part to automation increasing the overall efficiency of dozens of industries.
What the "automation will take all our jobs" and "UBI for everyone" proponents seem to fail to realize --just as people who espoused similar views in 1910 failed to realize -- is that there is no limit to human desires. People can never have enough. People will always want more and better. Because people don't measure their wealth in absolute terms, but rather terms relative to those around them.
Thus, even with increased automation, the increased demand will help to provide more employment (if in somewhat different jobs). This has all happened before and will happen again.
I don't see how that's meaningful. If it takes skilled human effort, we expect it to be well compensated. What does it matter whether that skill makes use of much existing technology?
A racing driver relies on an impressive stack of technology. Should we consider their job to be under a high degree of automation?
> humans consume a fixed amount of resources
This could not be more wrong. [0][1]
> Those burger flippers are compensated poorly because you need a lot of them to run a restaurant that serves cheap food
This doesn't explain why they're poorly compensated. It implicitly assumes the competitive survival of the restaurant, and treats employee compensation as a function of the employer's needs. That doesn't work. The employees are poorly compensated because people will do that job for that level of compensation.
Employers don't tend to pay more than the market requires them to.
> If you had a way of increasing their productivity 2 fold you can afford to pay them twice as much. I said afford.
What does it matter what the employer could afford to do, if we're talking about the actual compensation of the employee?
[0] https://en.wikipedia.org/wiki/List_of_countries_by_energy_co...
> If it takes skilled human effort, we expect it to be well compensated.
Because this is true
> The employees are poorly compensated because people will do that job for that level of compensation.
I would rephrase to:
“If the supply of labor is low relative to demand, and the purchaser has the ability to pay, we expect it to be well compensated.”
We don't actually pay people based on skill. Take the example of an old man making phyllo dough by hand - he gets paid based on the weight of the dough produced, not based on the work he puts in or the skill to produce the dough.
This was really prevalent in the Industrial revolution, where expert artisans were replaced by factories.
Even human decency only gets you so far. Restaurant margins are thin, and a different restaurant owner won’t hesitate to start selling burgers at a lower cost if lower priced labor is available. And most people are very price sensitive when it comes to commodity food items.
Only one of those is paid poorly. Hint, it's not the machinist, whose productivity has massively improved thanks to automation.
Software developers are well compensated despite the extremely high degree of automation in their jobs.
The reality is that humans consume a fixed amount of resources and have a variety of jobs that produce value. As long as the value you produce is bigger than the resources you consume you can employ an infinite amount of people in a job. Automation increases your productivity and thus increases the amount of value you can produce.
Those burger flippers are compensated poorly because you need a lot of them to run a restaurant that serves cheap food. If you had a way of increasing their productivity 2 fold you can afford to pay them twice as much. I said afford.
You still need proper government policies that drive unemployment down to reap these benefits. However, without automation you are doomed to a low salary, no matter how well the economy is doing.