The state's new minimum wage law, signed into law Monday by Gov. Jerry Brown, is expected to give a boost to Silicon Valley's burgeoning robot and automation industry as businesses seek to replace increasingly expensive workers.
With wages rising and technology advancing and becoming cheaper, agriculture, restaurants and hotels are expected to turn more to automation. It's an unintended consequence of a law designed to improve the lives of lower-paid workers struggling in pricey California.
"The higher the compensation, the greater the incentive to replace labor with capital. The other thing to figure in here is the declining cost of automation," said Mark Muro, a senior fellow at the Brookings Institution, a Washington, D.C., think tank. "Likely there will be some greater demand for automation, but meanwhile, others will likely find other solutions using the people they have."
The law raises the minimum wage incrementally to $15 an hour through 2022.
"Clearly, a large enough minimum wage is good for our business," said Steve Cousins, CEO of Savioke, a Santa Clara company whose Relay service robots deliver items to guests in six Bay Area hotels, including the Holiday Inn Express in Redwood City and the Grand Hotel in Sunnyvale. "Delivery's the obvious low-hanging fruit, but there's a lot of possibilities -- staging things, or observing things or even just answering questions, as in a mobile kiosk."
At E la Carte, a Redwood City company started by Lyft ride-booking co-founder Rajat Suri, calls from potential customers of E la Carte's automated restaurant ordering and payment system began increasing after last week's wage-hike announcement. "There was demand before but now it's gone up even higher," said Suri, an MIT dropout who spent time as a waiter. "Back in the day, restaurants would just have to absorb higher minimum wages. Now they actually have the tools, like ours, to find ways around it.
News of the wage increase also generated calls to Blue River Technology of Sunnyvale. The firm makes the Lettuce Bot, an automated lettuce-thinning machine that's operating in the Salinas, Central, and Imperial valleys, as well as in Yuma, Arizona. "Rising wages make automation more palatable, make more sense," said Blue River vice president of business development Ben Chostner.
The state's farmers already face a labor shortage, Chostner said. "They see a solution like Blue River as something that can help them address both of those problems, both the shrinking labor pool and the increased labor costs."
Bryan Little, employment policy director at the California Farm Bureau Federation, said rising wages will probably push some farmers to automation. Producers confronted with competition from other states and countries won't be able merely to jack up their prices to make up for higher labor costs, Little said.
Increased automation in agriculture could change the types of crops grown in California, Little said. "What you may see would be people electing to grow more of the kinds of commodities that lend themselves to machine harvesting," Little said. "It might mean more almonds and walnuts, more non-fresh-market tomatoes."
Those products, and lower-grade wine grapes produced in California's Central Valley, are so far the most amenable to automated harvesting, Little said.
For the restaurant industry, effects of mandated wage increases are likely to play out in dining areas more than kitchens, suggested Erik Thoresen, principal at Technomic, a food-service industry analysis company. "A lot of the processes that happen back-of-house aren't that easy to automate," Thoresen said.
However, restaurants with a focus on efficiency over culinary wizardry are likely to have greater opportunities to automate, Thoresen said. The robotic burger maker by San Francisco's Momentum Machines, for example, can produce 360 burgers per hour, according to the company. Thoresen pointed to barista jobs as vulnerable to replacement by machines requiring only a push of a button, but he noted that "sometimes there's a big difference in quality and that's a big concern for operators."
The ordering process in restaurants will probably see the most automation as labor costs go up, Thoresen said. Already there are automated front-of-house services in restaurants, such as E la Carte's tablet-based system that can be found in about 20 Bay Area establishments.
To what extent California's new minimum wage will spur automation is hard to predict because most research has addressed smaller mandated pay hikes, Muro said. "It's not clear whether $15 is a threshold that would motivate different decision-making," Muro said.
To be sure, machines have been taking human jobs since the Industrial Revolution. And automation's net effect on jobs isn't guaranteed to be negative, said Andra Keay, managing director of Silicon Valley Robotics, a Bay Area industry association. "One of the things I've noticed looking into technology rollout over the last couple of centuries is how surprisingly same the unemployment rate remains," Keay said.
Contact Ethan Baron at 408-920-5011; follow him at Twitter.com/ethanbaron.