Leland Teschler's Editorial: An Accidental Stimulus

As the official unemployment rate tops 10% in more than one quarter of all states, the hot topic of the day increasingly moves toward how to stimulate more hiring. This is particularly true in states hit the hardest in the economic downturn. 

With this in mind, consider the annual trade show put on by the Packaging Machinery Manufacturers Institute last month. Despite the punk economy, show attendance was healthy. Many exhibitors reported a lot of interest in the packaging and food-processing equipment they had on the show floor.

One might wonder why, with manufacturing companies in such terrible shape, makers of food-processing and food-packaging equipment seemed to be doing relatively well. Part of the answer, according to a long-time PMMI board member, is that makers of automation equipment for the food industry are being helped along by recent legislation, but not in the way you might think.

This board member, who has held management positions in the food-processing-equipment industry for many years, wasn’t referring to stimulus spending. He was alluding to the rise in the minimum wage which took effect this past summer. The food industry is characterized by a significant number of low-wage workers, he points out. In the past, he’d noticed that every increase in the minimum wage resulted in an up-tick of orders for automation equipment designed to eliminate a few more jobs. He figures this past summer’s wage hike is shaping up to be no different.

Of course, you’ll likely never read this explanation for economic activity in newspaper headlines. One suspects that machinery manufacturers asked to publicly explain their improving business conditions tend to avoid giving politically incorrect answers. It is generally unwise to point out that your own good fortunes are partly due to missteps by politicians that have brought misery to others.

So at least for consumption in the press, expect to see more CEOs explaining their improving fortunes either with vague allusions to an improving economy or by boasting about their company’s superior execution, even if management realizes what’s really going on. After all, it is probably the lesser of evils to come across as a corporate cheerleader rather than as a heartless capitalist.

It looks as though automation suppliers may get another shot in the arm thanks to other proposals tied to health care. Some mandates being discussed include lengthy paid leave and a surtax on payrolls. As my PMMI source points out, anything that boosts the cost of employing a worker serves as one more incentive to automate and reduce head count.

Meanwhile, the rise in minimum wage hasn’t done entry-level workers any favors. Perusing Labor Dept. figures reveals that after Congress raised the minimum wage in July, the black teen jobless rate climbed to 50.4% from 39.2% in just two months.

All in all, things are looking up for engineers designing robotic equipment. But the next time you hear whining about a jobless recovery, bear in mind there is an unspoken link between wage levels and the payback on new automation.

— Leland Teschler, Editor