I saw two ire raising online posts a few days ago about the minimum wage. One primarily made the disingenuous argument that workers should be paid according to their productivity and (out of concern for low wage workers) that any [low] wage is greater than no wage. The problem with this position is the onus of productivity is placed completely on the workers as if managers and business owners have no control over production.
I look at the minimum wage from a completely different perspective. By setting a minimum wage, the government expects that all businesses operating within its jurisdiction do so with sufficient efficiency to ensure their employees are able to earn some preset minimum wage. The effect is twofold: assurance that the standard of living does not slip below some minimum and promotion of profitable business practices, that is, demands all businesses have a good business plan. Business owners and entrepreneurs are still free to pay themselves as they see fit.
The second post added, on top of the above argument, a hypothetical: employee wages absorb all the business profits so owners cannot use their profits to expand into another location. Since the expansion of low wage work does not build healthy economies, I propose a different narrative… what if some of these ‘profit pilfering’ employees save enough of their wages to start their own business (or support their children’s education to the same effect). These novice entrepreneurs would seek out unmet niches in the market, thus increase the diversity of local enterprises. And municipalities with diverse business bases are better buffered against market forces and more capable of responding to changes in supplier, manufacturer and consumer demands. All good reasons to improve worker wages.
P.S. Service work does not have to be low wage. Here are two examples of successful service worker heavy business plans in operation (see here and here).
Monday, May 26, 2014
Friday, May 2, 2014
What are the First Principles of Economics?
Physics has the General theory of Relativity, Quantum theory, String Theory and the Theory of everything.
Chemistry has the Atomic Theory.
Biology and medicine have the Germ Theory of [infectious] disease and the Theory of Evolution.
What does economics have? Public debates over the economy frequently come down to differences between planned vs. market systems. But there are more than a tinge of political ideology in such debates. A more pointed question is ‘what are the natural laws of economics?; the first principles on which all economic systems depend’. History and current events suggests these principles exist… (1) All modern economies, regardless of economic system, undergo non-seasonal cycles of recession and expansion. (2) The collapse of nations and empires (modern examples are Somalia and the British Empire) do not eliminate market commerce. (3) Even in the most straightened of circumstances where capital and goods are in short supply; infrastructure is nonexistent and social structure best described as absent (such as refugee camps), trade can commence and economies birthed. These examples show that geopolitically determined economic systems are not essential for functional commerce and thus the growth of economies, suggesting the possibility that economies are self-organizing entities directed by rules which economist have yet to determine. Any economic debate in the absence of understanding of these elemental principles are arguably futile.
For example, a basic principle which has been proven invaluable in the field of medicine is the the germ theory which postulates germs cause [infectious] disease: The observation made by Alexander Fleming that some microbes secrete a substance which kills germs was worthy of further exploration because… maybe microbial secretions can kill the germs which cause disease. And a revolution in the fight against infectious disease was born.
It is perhaps unfair to compare the social science of economics to three mature fields of physical science but economics plays a role in public policy that is second to none. In fact, economic policy arguably has a greater impact on the everyday lives of every person on the planet than much of the cutting edge research in all the physical sciences. This being the case, all people have a right and duty to expect the highest and most rigorous standard of theoretic and applied economics be practiced when used to determine policy which effects the lives of everyone within its sphere of influence.
Chemistry has the Atomic Theory.
Biology and medicine have the Germ Theory of [infectious] disease and the Theory of Evolution.
What does economics have? Public debates over the economy frequently come down to differences between planned vs. market systems. But there are more than a tinge of political ideology in such debates. A more pointed question is ‘what are the natural laws of economics?; the first principles on which all economic systems depend’. History and current events suggests these principles exist… (1) All modern economies, regardless of economic system, undergo non-seasonal cycles of recession and expansion. (2) The collapse of nations and empires (modern examples are Somalia and the British Empire) do not eliminate market commerce. (3) Even in the most straightened of circumstances where capital and goods are in short supply; infrastructure is nonexistent and social structure best described as absent (such as refugee camps), trade can commence and economies birthed. These examples show that geopolitically determined economic systems are not essential for functional commerce and thus the growth of economies, suggesting the possibility that economies are self-organizing entities directed by rules which economist have yet to determine. Any economic debate in the absence of understanding of these elemental principles are arguably futile.
For example, a basic principle which has been proven invaluable in the field of medicine is the the germ theory which postulates germs cause [infectious] disease: The observation made by Alexander Fleming that some microbes secrete a substance which kills germs was worthy of further exploration because… maybe microbial secretions can kill the germs which cause disease. And a revolution in the fight against infectious disease was born.
It is perhaps unfair to compare the social science of economics to three mature fields of physical science but economics plays a role in public policy that is second to none. In fact, economic policy arguably has a greater impact on the everyday lives of every person on the planet than much of the cutting edge research in all the physical sciences. This being the case, all people have a right and duty to expect the highest and most rigorous standard of theoretic and applied economics be practiced when used to determine policy which effects the lives of everyone within its sphere of influence.
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