Low wages and supply and demand for people

One has to have a great deal of sympathy and understanding for those fast food workers demanding a living wage and one also has to fear that the supply and demand for bodies will keep them down.

There are lots of other people, out of sight and/or not counted,  struggling to survive on low incomes.  They too deserve compassion and understanding.

It has been said that the profits of the fast food industry are sufficient to double the wages of all its workers.  This is not the issue.  The issue is that wages are determined by supply and demand.  The reality is that there are more people than there are jobs.  Some firms have demonstrated they can make good profits by paying their employees well but human nature is such that most employers will continue to pay as little as they can.

Technology has reduced the need for workers and reduced transportation costs have increased the supply of workers from other countries.

With the world economy in crash mode the plight of low-income people is likely to continue and even get worse. At the same time a few will continue to get richer.  The one thing which could level the field would be hyperinflation which would hurt everyone.

Another indication of the oversupply of workers is the declining power of private sector unions.  Public sector unions are still doing well because they have monopoly and political power.  I would have more respect for teachers’ unions if they were to go on strike demanding an increase in well fare rates.

I believe subsidies should be given to consumers rather than producers.  Therefore I would like to see some sort of universal income scheme such as a guaranteed annual income or the negative income tax proposed by Milton Friedman.  This probably would not halt the economic decline but would be fairer than the way we now treat people.  It may be that the American dream is just a  dream.

A universal income scheme

I believe we should have a collective responsibility to ensure everyone has the opportunity for a standard of living similar to most others.  I also believe our technology is such that everyone should not have to work throughout their lives, that subsidies should be given to consumers rather than producers, and that there is a need to change the way in which we create money.

I have been asked by a member of LinkedIn to elaborate on the collective responsibility.  The other things are important to the answer.

In some small-scale societies the collective responsibility takes the form of a sharing economy where people share their food and other production with relatives, clan members or anyone who needs it.  We probably need something a little more formal and impersonal.  One way would be a universal income scheme.  Milton Friedman proposed a negative income tax which is a good place to start a discussion.

The key to our high-tech society is the number of people for whom each agricultural worker can produce enough food.   That is clearly somewhat high which means the rest of us can be doing other things.  Sometimes it seems what most of us do is to work  to keep the military-industrial complex going.

Subsidies to producers distort prices and interfere with the efficiency of the economy.  Therefore subsidies should be given to consumers.  A universal income scheme would be a fair way to do this.  I see this as being good for the environment and as a transfer of decision-making from government and bankers  to individuals.

I believe the most funny of all money creation schemes is the fractional reserve banking system.  Interest is charged on the money created, bankers are very powerful and too important to let fail, and it is all a Ponzi scheme.  One alternative could be to take  the concept of the Local Exchange Trading System (LETS) and expand it into a National Exchange Trading System (NETS)  It would probably be feasible to include a national income scheme into this type of money creation.

With the world economy in trouble and with so many indications the slide will continue for some time more and more people, through no fault of their own, are going to find themselves unemployed and without an income.  Thus it gets more and more important for us to live up to our collective responsibility to ensure everyone has the opportunity for the same standard of living as everyone else.

Some of the ideas in this post are included in the essay “LETS go to market: Dealing with the economic crisis” on this weblog.

Wages, union bashing and supply and demand for workers

The media has recently been giving some space to union-bashing right-to-work legislation and the low wages being paid to unskilled workers such as hotel maids and fast food workers.

One of the most basic laws of economics is that price is determined by supply and demand and this also applies to wages and working conditions for employees.

During the long period of almost continuous economic growth there was generally a need for workers.  During this time unions gained strength, wages went up and working conditions improved.  We are now in a situation where growth is stagnating or maybe even going down and there is high unemployment.  Wages can be sticky going down but some how or the other they are going to continue dropping. .

We also have such a high level of technology that it should not be necessary for everyone to “work” most of their lives.

One way to limit the exploitation of workers would be with and income scheme such as Milton Friedman’s negative income tax or my proposal for universal subsistence payments outlined elsewhere on this weblog.

The evil Wal-Mart and offshore competition

Some people love to bash Wal-Mart.  This article is from 2003 but I suspect a lot of current critics would like it very much.

If you want to make money by far the best way is to go into a field where government legislation restricts competition – become a doctor or a teacher or something with  patent and copyright legislation.

There probably isn’t much legislation to restrict competition in retail sales so firms in that business have to sharpen their pencils or use marketing tactics.  Reading this article it is clear that Wal-mart is or has been very good with the pencil.  I am more opposed to legislation that restricts competition and marketing tactics than I am to firms that use sharp pencils.

On the theory that firms relying on legislation to restrict competition would be heavy into lobbying, I googled “Wal-Mart lobbying.”  It appears Wal-mart has not put much effort into lobbying although it is now starting to campaign for online retailers to be required to collect sales tax.

The issue appears to be that offshore competition, showing up in Wal-mart, is forcing some American manufacturers to go out of business putting their employees out of work.  Firms going out of business is a normal, and sometimes necessary thing.  The way to deal with that is a universal income scheme such as the negative income tax proposed by Milton Friedman or my own proposal for universal subsistence payments.

We should not feel guilty about buying things made in other countries.  Trade is a social activity and we want other countries to buy things from us.

I’m not a fan of Wal-Mart but I do occasionally go there.  I pride myself that most of the time I leave the store with only those items I had planned on buying.  I also know from experience they don’t always have the lowest prices and I can’t recall ever seeing Wal-Mart advertise quality.

In the retail segment of our economy there are lots of firms and lots of competition.  They all use marketing tactics to give them an edge. Therefore we should remember the old saying: “Buyer beware.”

 

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Poverty

In exploring the world beyond the view from my study window (a large, lush green yard surrounded by tall trees and the mountain beyond the river valley) I came across a discussion of reasons for giving money to the poor.

I believe we have a collective responsibility to ensure that everyone has the opportunity to experience the same standard of living as everybody else.   This should apply to all the people of the  world.

This does not mean that everyone should have to take that opportunity. If a person chooses to do something else that is okay whether it be a life of poverty and medication in a cave or a life ruined by  drinking.

I also believe that full employment is not a realistic goal.  Nor is full employment desirable if it means working for the sake of working when there are other things people could do if they wanted. Nor is full employment desirable if it means using up scare resources or destroying the environment.

I also believe subsides should be given to consumers rather than producers.

And I believe that we as individuals should be able to make our own decisions according to our own values.

Therefore we should deal with poverty and/or ensuring everyone has the opportunity with some sort of universal income scheme.  Milton Friedman proposed a negative income tax.  I take the concept further and suggest an income scheme combined with a new way of creating money in the form of universal subsistence payments.

In either case the income scheme would replace all subsidies to producers and all other income support to individuals.

This approach would require some heavy-duty changes in our ways of thinking and behaving.  Many people would find it difficult to get their minds around these changes.  However, considering the current economic crisis and all the threats it may be that we need drastic changes.

Friedman, capitalism, freedom and a negative income tax

Another Milton Friedman book. This time Capitalism and Freedom.  I was a little surprised and quite relieved when I got to Chapter 12, the second last, and found Friedman advocating a negative income tax.

I was surprised  because one hardly ever hears about this part of his economics in spite of so many people claiming  to be followers.

I was relieved because as I read I liked most of what he said.  However, I believe we have a collective responsibility to ensure that everyone has the opportunity to share the same standard of living as everyone else.  I also believe full employment is not a realistic goal.  Therefor we need some sort of income plan.

If you think about it Friedman without the negative income tax proposal provides a rationalization for the who what to say “to hell with everyone else.”  I must say I figure this applies to only a few of the people who like his approach.

There are two groups of people to whose attention his negative income tax should be brought..

The first are all those who want a smaller and less intrusive government.  We can have that without destroying the lives of many other people so long as we combine it with a negative income tax or some other universal income scheme.

The second group is those who reject a market economy on humanitarian grounds. These are the people to whom “economics”. “profits”, and “business” are dirty words.  I suspect a few of the people who want the government to intervene in the economy are people who like to tell others how to live their lives.

If these people were to study the competitive economic system they would find it promotes a high degree of equality and minimizes profits, goals of which they should approve.

When these two groups have adapted their thinking to a negative income tax or a guaranteed income scheme they should have no trouble coming to a consensus that we should be moving towards a market economy based on the principles of perfect competition.

The problem then would how to deal with those who don’t care about others and those who think they have a right to tell others how to live their lives.

In conclusion I would like to state I believe there is a need to change the way we create money and that an income scheme should be part of  a new monetary plan.  For more on that see the essay “LETS go to market: Dealing with the economic crisis.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Subsidies distort prices

Here is a  news report that the Quebec government is giving a $58 million subsidy to an asbestos mine in that province.

I am opposed to this subsidy because I believe subsidies should be given to consumers rather than producers.

Subsidies given to producers distort prices and encourage us to make poor purchasing decisions.

The article says there are “predictions that worldwide demand for asbestos would increase — especially in India — while the supply would drop.”  If this is correct then prices would go up and the mine would be able to reopen without subsidies.

Subsidies should be given to consumers in the form of a guaranteed income scheme or a negative income tax,

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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