Forgive the awkward title but I was attempting to build in
some nominal continuity with previous posts on issues economical (Don’cha just
love The Pirates of Penzance? ...but
I digress.) If you are a resident of The
People’s Republic of Kalifornia you should be aware that this past week the
servant of the people (Wait, do I have that backwards? Oh, well.) i.e., the
four-term Governor Interruptus, Jerry “Moonbeam” Brown, signed into law a new
minimum wage statute that requires the current mandated wage of $10.00 per hour
be escalated (elevators make me feel claustrophobic so I prefer the escalator…
watch your toes) to $15.00 per hour by 2022.
Oh there is a provision to protect the small (less than twenty-five) employer
by extending the schedule to 2023. Thank
you, your munificence!
“Hooray, “you say, “finally a champion steps forward to ease
the suffering of the people. Surely now
the gap between super rich and miserable poor will start to close. Huzzah!”
Well, my feeble brained protégés,
not quite. A caveat, I do not hold
myself out as an economist, although I was required to complete three courses
in the dismal science (emphasis: complete
…there is no assumption of mastery) to earn my business degree. But the experience did arm me with enough
argot that if I can’t dazzle you with my brilliance, I will at least baffle you
with my bullshit. So much for my bona fides, now back to the matter at
hand.
Please recall from earlier postings that Economics is the
study of human behavior in an environment of scarce resources. As with many terms, “scarce resources”
differs in meaning for scholastic economists than it does for your average
cafeteria worker. For the hair net set,
scarce means hard to locate or acquire.
In the world of John Maynard Keynes et al, it means of finite supply, no
matter how large that supply might be.
So right there we underscore one of the challenges of applying economic
theory to everyday life; economists make up their own definitions for words
with which we are intimately familiar.
Keep this economist’s notion of scarcity in mind as we
proceed with the discussion of the merits of an increase in the minimum wage,
or the existence of government mandated wage levels at all. The hair pulling populace lament the growth
of the lower (income) class (Honestly, isn’t America, after all is said and
done, at its heart, a classless society?
Yeah, I had to kind of chuckle while I wrote that too.) and the demise
of the middle class. No one ever
quantifies those numbers with any gusto.
But I have read essays that proffer more people have migrated from the
ranks of the middle income to the upper income than have fallen from the middle
to the lower. Rather conveniently, I
cannot recall the resource from which I gleaned this tidbit: But in absentia
does reinforce the aforementioned notion of resource scarcity.
The labor unit, i.e. worker, i.e. you, are a finite
resource. There are only so many of you (hey, don’t count me in that number, I
finagled my talents into an early retirement) to go around when it comes to
filling job openings. Here it is, the
dreaded discussion of supply and demand:
If demand (work to be done) exceeds supply (appropriately skilled
workers), the price of labor (wages) goes up naturally. If an artificial floor is established by
government, no matter the dollar amount, the mandated wage is still the bottom
rung on the ladder (Oh, okay Dale, the whole ladder thing makes sense now) and
eventually the system will adjust to the new calibration and $15.00/hr. tomorrow
will buy what $10.00/hr. bought today. Get it?
The value of any commodity (resource) will naturally set itself at the
right price vis-à-vis the rest of the
market. The hamburger flipper will be
earning 50% more that he did before Gov. Jerry worked his magic, but the price
of the hamburger will eventually go up that much as well. So will rent, car payments, beer… and so
there you are, washing dishes on the bottom rung of the economic ladder, making
$15.00/hr., if your job was not eliminated because it is now more practical for your former employer to
buy a new-fangled dish washing machine.
It is all interconnected, that’s why I like to think of
myself as the holistic economist-lite. In addition to this simplistic
illustration of the effect wage increases on product prices there are other
things to consider: Price elasticity, capital availability, economic vs.
financial profit, mustard (don’t get me started on the great mustard vs. catsup
debate of 1887). You can now see how
valuable proprietary argot can be in shutting down an argument.
As I see your eyes are beginning to roll back in your head,
we will now switch to our regularly scheduled Vogon Poetry Hour. See you next week.
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