Incomes keeping up with cost of living

“Can someone explain to me why it’s so hard for companies to increase wages in Vancouver?”

This question was asked recently on the Reddit Vancouver forum.  I suspect it is a question which could be asked in many cities across North America and around the world. The question was asked because for many people the cost of housing and the cost of living in general has been rising faster than incomes.

A number of reasons were given in the discussion – maximizing profits for shareholders, a cultural shift towards laziness, in some fields there is a conspiracy to drive down wages by saturating the field with desperate new grads willing to work for peanuts, foreign buyers are driving up the cost of housing, and supply and demand.

Having studied economics this blogger prefers the last one, supply and demand for bodies, but also believes it is a symptom of a much larger problem.

For the most part wages are, with some exceptions,  determined by supply and demand. When unemployment rates were low, workers were able to demand and receive a living wage.  As there have been more and more unemployed people we are seeing more people not keeping up with the cost of living.  Some employers have learned they can do well by paying higher than going wages.  But this works because they can attract the best workers and probably would not work for all firms.

The exceptions to the law of supply and demand are those occupations which are protected from competition by government legislation such as licensing requirements.  Very often licensing is said to be required to protect standards of service to the public.  Doctors must be licensed to ensure we get quality medical care but the licenses also restrict competition and keep doctors incomes high.  Teachers are paid well because they have licenses and strong unions in a legal monopoly.  People are required to send their children to school and mostly the schools are operated by the state.  Government employees also have strong unions and employers that have a monopoly.

The moral of the story is that if you want to have the wages to support a good standard of living, choose an occupation that is legally protected from competition.

Most of us are aware the economy is going through a difficult time but believe it will return to continuous growth.  This blogger is an exception.  Our economy is in trouble because we have used up the most easily accessible energy and mineral resources.  There are lots left but the energy and effort required to extract them make them mostly useless.  If this theory is correct, then we are probably faced with a long period of economic stagnation during which the standards of living of a lot of people will go down.

The answer to the question is that it is hard for companies to increase wages in part because wages are determined by supply and demand and in part because the economy is started into a period of decline during which it will be hard for companies to even stay in business.

Monopoly education, unions and parental responsibility

A bitter teachers’ strike in this blogger’s corner of the world, British Columbia, Canada illustrates how public education has become monopoly education and has taken from parents responsibility for schooling their children.

 The founders of this country believed that all children should have an equal opportunity for schooling and established publicly funded schools.  Through the years this has developed into a huge infrastructure and bureaucracy.  We now have a legal requirement that parents must send their children to school.  There are a few private schools and some home-schooling but the public school system is an effective monopoly. 

We also have the British Columbia Teachers Federation which has used its strength to appropriate the monopoly profits for its members.  Education is such an emotionally important thing that in the past the threat of a strike has been enough for the government to give in.  This strike, now resolved after two weeks before the summer break and three weeks in the new school year,. has shown the lack of alternatives.  Public  education has become monopoly education with all the problems associated with monopolies including high prices and mediocre services.

The current strike appears to be a conflict between the union and the government over who is going to control the education system and especially spending decisions.  It appears the government is taking a stand and refusing to put lots more money into the system.

I believe education is first of all a parental responsibility, something which has been forgotten as the BCTF and the government fight for control.  Most parents have the skills and knowledge to teach their children but chose to hire others to do that for them.      Parents should have the right to determine curriculum, the philosophy of education and which teachers educate their children. 

One way to accomplish this would be a voucher system which would allow parents to decide which school their children would attend according to their values.  This would be true to the wishes of our founding fathers and most of us that all children should have an equal opportunity for an education.  It would also transfer decision making and power from the bureaucracy to parents.  Expect the people currently employed in the system to scream.

Other occupations thrive on competition. If teachers had to compete for students they would be innovative and find the stimulation invigorating.  Most of them would be more satisfied and pleased to see what it does for students.

This blogger’s recent experience of schools has been limited to an annual Christmas concert at the local elementary school, but during the strike  I was hearing complaints from teachers of up to five or six special needs students in each class.  I am horrified.

This may be an old issue already won by parents who want their children to be treated as normal and included in the normal school system.  This should be revisited.  We want all children to be educated to their full potential but not everyone has an equal potential.  Trying to teach children of vastly different potentials in one classroom must be asking for problems. How well do students learn from a teacher who is about to have a nervous  breakdown?

While this post was waiting for its final editing the strike was settled and monopoly power reigns supreme.  Poor students,

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.

Ministers, teachers and consumer power in the economy

How much power do consumers have in our economy?  In theory they have all the power but in reality their power varies according to the degree of competition in any industry and their own personality.

Economic power means the ability to make decisions about what and how much is produced. If we lived  in small self-contained communities such as a Pacific island these decisions would be made mostly by people for themselves.  If we had perfect competition we would also make these decisions for ourselves and the market mechanism would transmit our decisions to producers.  As there are lots of people who want to make decisions for others one of the conflicts of our society is over economic decision-making.

Two examples illustrate how decision-making by individuals can vary according to competition in the industry.  The provision of spiritual services is, at least in Canada, the industry which comes closes to perfect competition.  Education is a mostly a monopoly.

As most of us Canadians have a strong commitment to freedom of religion people are free to attend the church of their choice or not at all. This means governments do nothing to restrict competition. Anyone with an inclination to preach can rent a school or community hall on Sunday mornings and some congregations allow anyone to do services.  No licenses are required by the government although some denominations use ordination, a form of licensing.  A minister’s career path is determined by his ability and his/her reputation. The Bible and most other religious texts are not copyrighted.  Churches receive no government subsidies other than an exemption from property taxes (which makes entry into the business easier).

On the other hand governments interfere extensively in education.  Parents are required by law the send their children to school, teachers must be licensed and governments closely supervise curriculum. Teachers generally must be licensed and are very difficult to fire.  Job security goes with length of service rather than teaching skills.  The result is a monopoly which is strongly defended by its employees.

In the spiritual world the customers are kings and make their own decisions.. :People can and do express dissatisfaction with their feet and some people go church shopping.  Ministers can be and are fired.  (My observation is that ministers are asked to leave for one of two reasons:  They get into an inappropriate relationship or they stay too long.)  Those people with the right skills rise to the top and those without the skills drop out.  To survive churches and staff must satisfy the spiritual needs of their congregations.

In education the customers (or their parents) make very few decisions.  They have no say in the curriculum and very little over who teaches their children.  Education is one of the most important things parents should give their children, yet it is where they have the least control.  This may be why home schooling and private schools are appealing to those who can manage them.  I believe education is too important to leave all decision-making to those employed in the field.

In other sections of the economy producers have to be more creative in influencing customer decision-making. Governments are usually willing to limit competition with licensing, tariffs, subsidies, patents and copyright.  Some firms can use the media to make emotional appeals to customers. Consumer power comes from being able to switch to another provider. The reaction to emotional  appeals may vary by person and personality. Maybe those people who don’t watch television have it easier when it comes to economic decision-making.

Another aspect of economic control is money creation.  The fractional reserve money we currently use creates money when bankers make loans.  This gives bankers a great deal of power to decide what economic activity happens and who does it.  On the other hand creating money  via a national exchange trading system as proposed in the essay “LETS go to market: Dealing with the economic crisis” on this weblog would transfer this power to individuals.

Some of us like to make our own decisions, some people like to make decisions for others and probably some people don’t care.  As one of those who likes to make his own decisions I like the perfect competition model.

 

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.

School vouchers and public schools

Here’s a link to a report that mothers are generally in favor of a voucher system for schools in which parents are given a voucher and can use it for education at a school of their choice.

The idea behind public schools is excellent but one that has gone in a different direction.  All children should have the opportunity for the best possible education.  This has not always been the case and in many parts of the world still is not the case.

The result  (at least in British Columbia) has been  schools run by a huge bureaucracy and controlled by people who claim to be professionals.  (True professionals have specialized knowledge they can use to help one out of a crisis situation.)

A voucher system should allow for schools based on different curriculum, different teaching philosophies and different approaches to discipline.

Education should first of all  be the responsibility of parents. A voucher system would return that responsibility to them and allow them to determine how they want their children to be educated.  It would still allow the state to ensure that all children get educated.

Education is much too important to leave to a monopoly.

Feeling defeatist about the economy

Today is a day for feeling defeatist especially  on hearing the results of the French and Greek elections.

A lot of the economic hot air currently being generated is based on a faith that all our problems can be solved with the “correct” policy which will return the planet to economic growth.   The correct policy varies according to the economic theology of the writer.

My own economic theology is that a return to economic growth probably is not feasible because the root cause of the crisis is resource depletion, or rather the depletion of those resources which are easily extracted.

If this is true then there is no politically feasible solution because as well as getting most people to recognize the problem one would also have to get everybody to voluntarily reduce their standard of living.

Here in British Columbia  teachers are taking job action to support claims for a wage increase.

I would feel a little less defeatist if they were to use  their monopoly power to demand increased benefits for the homeless and welfare recipients.

Education problems

Two items on the INTERNET this morning got me going on schools and education. First, CBC news reports British Columbia teachers have voted 90 per cent in favor of strike and will likely take job action in September. The second was a defense of teachers by a Huffington Post columnist.

I can easily accept that most teachers are sincere, intelligent and exceptionally caring people. Teaching can be a highly stressful occupation although I suspect a lot of the stress comes from administration rather than students.

I have three concerns that probably put me in conflict with most teachers’ unions.

First, education should be primarily the responsibility and under the direction of parents. Thus I like the concepts of charter schools and vouchers so that parents can choose the education their children get.

Second teachers should be considered as servants rather than professionals on a par with doctors and lawyers. We go to professionals because we are in a crisis situation and we hope they have specialized knowledge which will help us out of the crisis. We hire teachers to do a job which we could do ourselves but choose not to.

The third is that education is a monopoly industry. It is an industry in which the monopoly profits go to those people who work in it and one which suffers from all the problems of a monopoly. It should be possible to introduce some competition and maintain our commitment to provide a basic education to all children .

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