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How California’s minimum wage increase will add more robotic automation in logistics

A warehouse worker is shown here at Logistics Team in Industry. (Photo by Walt Mancini/Pasadena Star-News)

By Kevin Smith

California’s minimum wage hikes are going to force logistics firms with low-paid warehouse workers to invest more heavily in robotic technology, according to Inland Empire economist John Husing.

Husing said most of Southern California’s warehouse employees who earn minimum wage are working part time. But the newly approved pay hikes that will boost the state’s current minimum wage of $10 per hour to $15 per hour by 2022 will still place financial pressures on logistics companies.

And they’ll be looking for ways to increase efficiency while reducing costs.

“It will increase the introduction of robotic technology with these companies,” he said. “That’s the conveyor belts and things that pack boxes and move them down the belt. That sort of thing is going to increase, and it’s already been increasing.”

Husing cited a state-of-the-art Skechers distribution center in Moreno Valley as a prime example. The 1.8 million-square-foot facility opened in late 2011 and is equipped with a variety of energy-saving features, including solar panels. But people? You’d have to look pretty hard to find any.

“It’s entirely robotic,” Husing said. “There’s no one inside other than the people who handle the care and feeding of the main computers and air conditioning system. We’re seeing less and less of those places where people are picking things up and moving them. That’s been replaced by systems that can pack and sort. We’re seeing less and less actual handling of products.”

Other companies that have large warehouse operations in Southern California include Amazon, Wal-Mart, Aldi, FedEx and Stater Bros.

Technology is taking an increasingly bigger bite out of warehouse staffing. But Husing also noted that nearly every logistics company boosts its staffing with seasonal workers when the holidays roll around because of increased product demand. And with California’s minimum wage going up, that equates to higher labor costs each year.

“During the Christmas season they all have to add people,” he said.

Logistics Team, an Industry-based logistics company with 1,200 full-time employees scattered throughout California, Texas, Indiana, New Jersey and Georgia, pays its warehouse employees $1 to $2 more than the prevailing minimum wage, according to James Lin, the company’s chief executive officer.

A warehouse worker at Logistics Team in Industry moves boxes for shipment. Many warehouse workers are earning minimum wage and when minimum wage hikes beging to kick in, it will fuel more robotic technology, according to economist John Husing. Jame Lin, CEO of Logistics Team, said he already pays his warehouse workers $1 to $2 above minimum wage. (Photo by Walt Mancini/Pasadena Star-News)

Figures from show the median annual salary for warehouse workers in Ontario is $28,452, not including bonus and benefit information. But depending upon skills and experience, that could rise as high as $32,477 a year.

Los Angeles is a bit higher with an average annual salary of $29,572 a year. But higher skills and experience could boost that as high as $33,755 a year, not counting bonuses or benefits.

Lin said his company is looking to deepen employee skills.

“We do additional training with our workers because we want them to become more functional,” he said. “We want to increase their abilities. Many other companies have not chosen to do that, but this increases our efficiency and makes us more productive.”

Logistics Team deals with a variety of retail products, but the bulk of its business involves the movement of consumer electronics.

“We ship about 50 percent of the U.S. televisions,” Lin said. “With our warehouses, our goal is to pay 20 to 30 percent above market wages. We’re searching for the top talent. We’ve reduced our labor costs over the past three to four years by 30 to 40 percent by using increased data, cloud computing, analytics and better tracking of product movement using mobile devices.”

Logistics companies that fail to increase their productivity and efficiency will be hurting when the minimum wage hikes begin kicking in, he said.

“Some companies will experience stagnation and a lot of them will be closing,” Lin said. “Other companies will have to pass the increased costs on to their customers.”

How California’s minimum wage increase will add more robotic automation in logistics