Robbing Peter to pay Paul is not progress

There is a union effort underway in NY to double the wages of fast food workers. On the surface, that seems like such a noble effort: it’s tough to get by on low wages, especially in an expensive city like NY.

But why stop at fast food workers? Or New York? Why doesn’t Congress pass a bill today that doubles wages for everyone? Think how much better life would be if everyone had twice the money!

But would prices have to double to accommodate higher labor costs by businesses? Labor is only one component of doing business. This law would not double prices of commodities, raw goods, machinery and other non-wage costs, right? So prices would surely go up, but would not need to double to maintain profitability? And utility costs and rents would not double? So we’d actually be ahead of the game, the wage/price ratio would be higher?

If this is true, then why stop at double? Why not quadruple, or x 100? If raising all wages would cause prices to rise less, even slightly less, let’s raise them to the moon, because it would give everyone more buying power. Why, you could wipe out poverty overnight.

And therein the ridiculousness of this idea is exposed. As well as a prime economic axiom.

The truth is that raising wages would result in precisely the same increase in all prices. So doubling wages for everyone would change nothing, as $20 would simply buy what $10 does today.

And what is the axiom? Well, if doubling wages exactly doubles all prices, then there is no non-wage price component to any product or service. I.e., there is no intrinsic cost to any non-human thing. All costs are derived, directly or indirectly, from labor costs.

Without people, there would be no cost at all for anything. If you were the only person on earth, everything you find would be free. Diamonds and gold you found would cost you the same as sand, a rock, or a lemon from a tree: zero.

A thing has a cost only insofar as its extraction, packaging, manufacturing, marketing and delivery to you has humans putting in time and effort.

To test this another way, make a list of the things you can get without involving a single other human. Air. Dirt. Rocks. Leaves. If you are by the ocean, ocean water and sand. If my theory is correct, you should be able to obtain any of these things for free. And so you can.

So now you can see it’s impossible to artificially raise wages fairly. The only way unions or governments can succeed in raising wages is by benefiting some at the expense of others. Only by creating unfairness can a union or wage law provide any benefit. And as usual, the people that get screwed the worst by actions borne of greed and executed by force are the poorest among us, who have to pay more for the things they buy.

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One thought on “Robbing Peter to pay Paul is not progress

  1. I’m all in favor of people voluntarily forming and joining labor unions, as well as engaging in collective bargaining. At the same time, I’m in favor of management / ownership deciding whether the demands of their labor force are deemed reasonable, or if the company would be better served by sacking the employees if they can’t come to terms. A third option is exemplified by what just happened to Hostess—shutting down the company all together. In that instance, labor thought that management was bluffing. They apparently were not.

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