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Monday, September 30, 2013 7:05 PM

Strawberry Fields Forever; Is a Higher Minimum Wage Really the Answer? To What?

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Japan Times reports the Latest Robot can Pick Strawberry Fields Forever

Fruits of ingenuity: Agricultural machinery maker Shibuya Seiki and the National Agriculture and Food Research Organization demonstrate a robot that can pick ripe strawberries at the annual Auto-ID and Communication Expo at the Tokyo Big Sight convention center Wednesday. | AFP-JIJI

The device, unveiled Wednesday, can pick a piece of fruit every eight seconds by using three cameras to determine which strawberries are ready to pick. A mechanized arm then darts out to snip each one free and place it into its basket.

The 2-meter robot moves on rails between rows of strawberries, which in Japan are usually grown in elevated greenhouse planters.

It “calculates the degree of ripeness from the color of the strawberry, which it observes with two digital cameras,” said Mitsutaka Kurita, an official at Shibuya Seiki, the developer of the machine.

“It also uses the images from the two cameras to calculate the distance from the target, then approaches the strawberry it is aiming at,” he said.

A third camera takes a detailed photo of the fruit, which it uses for the final calculation before moving in to snip it.

Strawberry farming is highly labor-intensive, requiring 70 times the work of rice farming and twice that of tomatoes and cucumbers, according to the National Agriculture and Food Research Organization, which helped develop the robot.

The robot will go on sale early next year for about ¥5 million. Strawberries are available all year round in Japan and typically fetch ¥500 for a small basket.

In his December 2012 Outlook, Pimco's Bill Gross also wrote Strawberry Fields – Forever? It's worth a recap now.

Whoever succeeds President Obama, the next four years will likely face structural economic headwinds that will frustrate the American public. “Happy days are here again” was the refrain of FDR in the Depression, but the theme song from 2012 and beyond may more closely resemble Strawberry Fields Forever, as Lennon laments “It’s getting hard to be someone but it all works out.” Why is it so hard to be someone these days, to pay for college, get a good-paying job and retire comfortably? That really was the economic question of the 2012 election towards which very few specifics were applied from either side.

There are numerous structural headwinds that may reduce real growth even below the New Normal 2% rate that Bernanke has just confirmed, not only in the U.S. but in developed economies everywhere.

They are:

1) Debt/Delevering
Developed global economies have too much debt – pure and simple – and as we attempt to resolve the dilemma, the resultant austerity should lower real growth for years to come. There are those that believe in the “Brylcreem” approach to budget balancing – “a little dab‘ll do ya.” Just knock a few percentage points off the deficit/GDP ratio, they claim, and the private sector will miraculously reappear to fill the gap. No such luck after 2–3 years of austerity in Euroland, however. Most of those countries are mired in recession and/or depression.

2) Globalization
Globalization has been an historical growth stimulant, but if it slows, then the caffeine may wear off.

3) Technology
Technology has been a boon to productivity and therefore real economic growth, but it has its shady side. In the past decade, machines and robotics have rather silently replaced humans, as the U.S. and other advanced economies have sought to counter the influence of cheap Asian labor.

Erik Brynjolfsson and Andrew McAfee at MIT have affirmed that workers are losing the race against the machine. Accountants, machinists, medical technicians, even software writers that write the software for “machines” are being displaced without upscaled replacement jobs. Retrain, rehire into higher paying and value-added jobs? That may be the political myth of the modern era. There aren’t enough of those jobs. A structurally higher unemployment rate of 7% or more is the feared “whisper” number in Fed circles. Technology may be leading to slower, not faster economic growth despite its productive benefits.

4) Demographics
Demography is destiny, and like cancer, demographic population changes are becoming a silent growth killer. Numerous studies and common sense logic point to the inevitable conclusion that when an economic society exceeds a certain average “age” then demand slows. Typically the dynamic cohort of an economy is its 20 to 55-year-old age group. They are the ones who form households, have families and gain increasing experience and knowhow in their jobs. Now, however, almost all developed economies, including the U.S., are gradually aging and witnessing a larger and larger percentage of their adult population move past the critical 55-year-old mark.
Yen vs. U.S. Dollar

At What Cost Does It Pay to Hire Robots to Pick Berries?

A strawberry fields robot sells for 5 million yen. The cost in US dollars is 5,000,000/98.35 or $50,838.

The minimum wage in the US is $7.25/hour. A picker at minimum wage (counting corporation Social Security contribution of 6.2%) would cost $15,080 + $935, or about $16,015 per year (plus Obamacare, plus benefits, if any).

At minimum wage, the robot would pay for itself in three years (assuming a robot replaced one person working full time for a year).

At a $15.00/hour wage that unions are clamoring for, the robot would pay for itself in half that time.

Is a Higher Minimum Wage Really the Answer? To What?

The higher the minimum wage, the higher the benefit level, and the lower the interest rate (thank Bernanke for that one), the more it pays to hire robots.

The math is simple enough, and it is happening now. 

Of course, a single robot may replace more than one human worker, and without griping about minimum wages.

With that, I offer a musical tribute.

Beatles Musical Tribute

Link if video does not play: The Beatles Strawberry Fields Forever

Mike "Mish" Shedlock

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