“Tobor the Great……..”

Ahhh…nostalgia! In the early days of a new fangled invention called “television” one of the first science fiction series was born. “Captain Video and his Video Rangers” ran from 1949 to 1954. Captain Video had many thrilling adventures. Tobor (Robot spelled backwards) was a regular on the series. He was 9 feet tall and could do almost anything. 

Tobor was initially an evil character and an enemy of Captain Video, but Tobor was later reformed and able to control his capabilities for good causes. Tobor became so popular that a feature film entitled  “Tobor the Great” hit the silver screen in 1954 and a follow up TV series was planned, but eventually fizzled.

At the same time Tobor was at his peak of popularity, a fellow by the name of Ray Kroc brought  “franchising” to a new level after selling 8 milkshake machines to the McDonald brothers for their quick serve restaurant in California. He saw the future in their type of restaurant and Kroc persuaded the McDonald brothers to franchise their name/restaurant to him. He would take on all the risk as the McDonald brothers did not think it would work outside of warmer climates. He acquired the rights to set up franchisees throughout the country outside of a few areas in California and Arizona.  In 1955,he opened up his first restaurant in Illinois and started seeking new franchise locations and investors. The rest is history.

Fast forward to today, where the seemingly unrelated events of 60 years ago have collided and are making news headlines.

McDonald’s Ex-CEO Is Right When He Says A $15 Minimum Wage Would Lead To Automation…Forbes:

I was at the National Restaurant Show yesterday and if you look at the robotic devices that are coming into the restaurant industry — it’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who’s inefficient making $15 an hour bagging French fries — it’s nonsense and it’s very destructive and it’s inflationary and it’s going to cause a job loss across this country like you’re not going to believe,” said former McDonald’s USA CEO Ed Rensi during an interview on the FOX Business Network’s Mornings with Maria.

http://www.forbes.com/sites/timworstall/2016/05/26/mcdonalds-ex-ceo-says-15-minimum-wage-would-lead-to-robots-and-automation-hes-right/#415c10d37860

“McDonald’s” has become a household name. With over 14,000 restaurants in the USA and overall 37,000 world wide it is a powerhouse. However, it exists in an extremely competitive environment with many, many fast food restaurants that never existed 60 years ago. McDonald’s, as well as most other similar businesses, operate on very small margins. It is estimated that their “profit” is 6%. For every dollar that goes into the register, 6 cents is the actual “profit” realized after ALL expenses. If expenses are increased without a corresponding increase in revenue, that small 6% margin begins to disappear. Expenses are CLOSELY monitored…wages/benefits are on the top of the list as they represent a significant amount.

Enter the biggest self serving  labor organization in the country today, the Service Employees International Union (SEIU). The history of this group is rather dubious…but I digress. In their ‘pure and selfless’ pursuit of something called “workers rights” they have spent millions of dollars.

SEIU reportedly spent millions on minimum wage initiative as enrollment drops….Fox News:

The $70 million figure since 2012 is close to estimates from November, when it was believed that the SEIU had spent $80 million since 2012—a low cost compared to the potential of revenue it stands to make from unionizing fast food workers.

Unionizing just a third of the nation’s estimated 3.6 million fast-food workers could bring in more than $400 million per year in dues to the SEIU, according to one estimate at the time.

http://www.foxnews.com/politics/2016/04/12/seiu-reportedly-spent-millions-on-minimum-wage-initiative-as-enrollment-drops.html

No one I know thinks that anyone working at McDonald’s or any similar restaurant is not working hard. They work very hard indeed. The tasks that they perform though are routine, repetitive and require minimal skills. Nearly anyone can be taught in a short period of time to fill any of the jobs.

On the other extreme, a physician requires over 10 years of specialized education and passing numerous boards to be able to do the job. For many specialties it takes 14 years.

Our free market society recognizes this fact and the compensation for these jobs is the result. Employers respond by setting the wage the market will bear. When outsiders, such as the SEIU, try to manipulate the “market forces” for selfish reasons, the employers can respond in one of two ways….capitulate to the demands, or seek to mitigate the threat.

The “children” of Tobor the Great are here today.   Ed Rensi, former McDonald’s CEO, noted that robotics are the future and investing in them will replace literally millions (but not all) fast food workers. Europe and the rest of the world are way ahead of us in this area.

Tobor’s descendants  take the form of Kiosks, robotic arms, self-bagging robots, self-cooking robots, etc. There are tradeshows all over the world, such as the National Restaurant Show, that showcase the future.

Think about it, at $15.00 per hour it costs an employer about $31,000 per year in salary alone for someone to bag the French Fries. Add on taxes, benefits, etc. and it jumps significantly. If a restaurant is open 24 hours a day, it would take 3 employees at a cost of over $100,000. per year.

The robotic arm that is mentioned above costs a one time investment of $35,000. and some minimal maintenance. In year one, working 24 hours, it has saved $65,000. In year two, it has saved $165,000 and so on.

Employers are not heartless and they recognize the benefits of a smiling face and customer contact/service, but they also need to stay in business. For every “Tobor” that is eventually put in service, it will mean one or more less young person (50.4% of minimum wage earners are 16 – 24 year old) working their first job and learning about success in the “world of work”. Minimum wage jobs are “gateway” jobs and a staring point not a career job.  Keep this in mind as you are bombarded by the “$15 per hour” minimum wage crowd.

Say “Hello” to Tobor’s kids…….