“Supply and Demand” A Privileged Arguement

One of the first things you learn in any intro economics class is the theory of Supply and Demand. What you will be told is that the supple of a product and the demand of a product will impact the price of said product. When prices are higher, suppliers are willing to supply more. When prices are lower, demanders will demand more. The final price will fall where there will be not too much back order, nor too much surplus. In layman’s terms, that is the theory.

However! This theory is VERY simplistic. This theory only takes into account the price of the product and no other factor — such as the factors that go into determining price.

The phrase “supply and demand” arises frequently in discussions about wages — ESPECIALLY the minimum wage. You may hear arguments or comments similar to these:

Burger flippers shouldn’t make as much as an ambulance driver.

Nonskilled people shouldn’t be making more than our armed forces

They should go to college.

They should get a better job.

These are just a few off the top of my head that I have heard or read. The argument that is typically used to defend the person’s stance is … you guessed it! SUPPLY AND DEMAND! I would like to propose that as a privileged argument. Not everyone can be a CEO of fortune 500 company. Besides, if it REALLY was about supply and demand, our teachers and armed forces would be paid better.

The Other Factors

Some of the factors that go into accepting a wage or salary at an organization:

  • comparable wages and salaries
  • communication expenses
    • phone
    • internet
    • etc
  • type of work
    • is it entertaining/enjoyable?
    • does it come with well being risks?
    • is is prestigious?
    • etc
  • human capital (if you have more or less skills than your co-workers)
  • fixed expenses
    • car payments
    • debt
    • etc
  • cost of living in the area and surrounding areas
    • housing
    • food
    • entertainment
    • etc

Those are obvious. You may even be able to think of a few more. Yet, there are is one factor is not included in that list and is seldom thought of from those of privilege (for which there are many levels) — the alternative.

If a job is not obtained, what will happen? Will you have housing? Will you be able to eat? Will you have transportation? Will you be able to make your fixed and necessary expenses? The answer to these questions influence people’s wage demand and tolerance toward unemployment.

A person’s access to housing AND alternative housing will influence their ability to attain a higher paying job and thus the demand for such a job. For example, what if you are offered a well paying job, but it requires a move for which they won’t pay for. Before you accept, consider these:

  • You will need first and last months rent
  • Application fees
  • housing permit fee
  • down payment for electricity
  • moving van
  • gas for move
  • groceries between then and first check
  • transportation to work and errands between then and first check
  • mini trip before hand to scout out areas and apartments
    • hotel
    • travel expenses
    • food

Could you afford a hotel for a few weeks if you couldn’t get an apartment right away? Keep in mind, not everyone has family who can give them a few hundred dollars to get them by until EVENT X. Not everyone has family they can stay with until EVENT X.

Sometimes bad events happen, but you still need a roof over your head, a hot meal in your stomach, and bills to pay. Sometimes you can’t say “no, you must pay me more” because if they disagree then you have to look again which takes time–which you might not have much time. If you are in that situation, it can make it difficult to do the more that is needed for more. If you take that bad paying job, you may not have the money to get a better education — or you may not have the time or energy. You might not even be able to assist your child or dependents in getting educated or trained. Thus, a cycle is started. You can’t so you don’t so you can’t so you don’t so you can’t so you don’t ….

Conclusion 

Any person who works what our society deems a full time job should be able to afford the necessities in life — and yes, a smart phone is a necessity in the 21st century, though it can be substituted by other technologies if needed.

An argument against raising the standard wage (minimum wage) is inflation. If the minimum wage is raised than the cost of goods and services will skyrocket … and that is the other issue we have as a society. You should not need an above average salary to afford decent housing, health care, etc. Slum lords shouldn’t be a thing.

To solve all our aliments as a society, we will need to tackle these issues from multiple points: regulation (because some people behave unethically whether it is legal or not) and from ethics education (because some people need to taught that whether an action is legal or not it is unethical).

Tell me what you think!

Deflating the Fed?

The Fed Is Swimming Dangerously In Uncharted Waters by Scott Minerd

Many people from all walks of life are terrified about what is happening at The Federal Reserve. The Fed’s balance sheet has dramatically increased over the last several years. The reason this has happened was because we have learned our lesson from the Great Depression — do nothing and things will get MUCH worse.

The author is right these are uncharted waters. Janet Yellen and the other central bank leaders have to be cautious about shrinking their respective balance sheets. The problem is that we don’t  have an example to go by. With the Great Depression we learned that an influx of capital can help stabilize the economy – even if just a little. We have not seen either a successful or unsuccessful reduction of capital. Therefore, all the concern is warranted.

With that in mind, you can’t live in fear. We might now have the direct experience to learn from, but we still have other lessons. Such as, care for the masses. Now granted our politicians don’t really do that for the most part, but … luckily not all of our officials are politicians. Keep that in mind. Some of our leaders do actually care and have morals.

Shutting Down the IRS?

Members Of Congress Push To Shut Down IRS Forever by Kelly Phillips Erb

This is one of the most ridiculous ideas Congress has ever had. This and ever other attempt to pass the blame to someone else. House Speaker Paul Ryan’s ideas are not much better. Repealing several bills, acts, etc. that benefit MANY Americans is not the answer either. How about they reinstate The Glass-Steagall Act? Or, maybe properly fund our many different departments and agencies? After all, government spending is one of the biggest (if not the largest)  money multipliers. Then again, reducing the tax code to less than 10 million words might help as well, but that is the duty of Congress.

Elementary School Fundraisers … Parents be careful how you handle them!

During elementary school, I had mixed feelings about the school fundraisers. On one hand, I thought they were fun and the items in the catalogs were cool… and the rewards were even cooler, but … I was never able to sell a lot for the fundraisers, so I hardly ever got any of the prizes. This was in part to the lack of support from my single father. After all, when a 7 year old lives out in the country, how can she be expected to sell much?

It has been over a year — almost two years — since I have graduated college. Wow! Time flies! It has been a little difficult on the job front. Don’t get me wrong. I have been working, but I have been having trouble finding something that empowers me… that feeds my passions. Why is that? Well, for one. For the longest time, I refused to work a sales job. The trouble with that is many companies use their sales reps to vet employees for “hire up” positions, some of which I want(ed).

Why was I putting off getting a jobs in sales if I wanted a hire position – or a different position – that require such experiences? It is because sales scare the crap out of me — as do people but that is a different issue. Over the last few weeks I have been contemplating  why it is that I have such an aversion to  sales. After much contemplation and following train reactions, I have come to the conclusion that … it is my father’s fault.

In the third grade, I really wanted to do better than in years past. Being 9 at the time, so of course I would need parental help. Now,  I don’t remember how I approached my father on the subject; however, I remember his response — almost verbatim. “You are going to school to learn. Not to be a salesman.”

Since then until now I have been opposed to a sales position. There are other factors that have a played a role, but that was the defining moment that pushed me flying down that path. The other factors just kept me there.

Now, my advice is not to ensure that your kid gets the top price during the fundraiser. My advice is to be careful how you address the situation. This is a great learning opportunity for your child. Don’t pass it up, and most definitely don’t teach him or her the wrong thing.

The American job market is predominately a sales market. Your child will be selling one thing or another to one person or another. A few weeks ago, I received the most outstanding advice from someone on the Leadership team of The Oklahoman Media Company (which I don’t remember verbatim) — You are all in customer service. You are all selling a service. Wheth you are interacting with a customer or a co-worker, put your best foot forward, do your best. 

No matter what your child grows up to be. She or he will be selling  their services. So during the school fundraiser, take the time to teach them some important skills about interacting with people, sharing information, and other skills involved with selling.

I am slowly but surely cover coming the challenges of my upbringing. My last day with BigWing (a brand of The OMC) will be November 27th, and I start my next career on November 30th. Going from an Admin Assistant to a Credit Consultant — Inbound Sales for Progrexion.

This move will be an outstanding experience and much personal and professional growth is in my near future.

Wish me luck!

What Supply and Demand Does NOT Address

“Supply and demand” is a common response to many economic discussions. However, it is only PART of the discussion. There are MANY MANY MANY factors at play. NOT JUST supply and demand.

Last night I had a great (though short) discussion  with a peer about political candidates and the economy. One of the topics (BRIEFLY) discussed was the unemployment/underemployment of college graduates. His solution was to reduce the number of college graduates because … you guessed it … supply and demand.

He is right. If we reduced the number of college graduates available for businesses to hire, businesses will have to offer the graduates available more. Yet, something nags at me. Something is screaming at me that this is a bad idea. Part of my peer’s argument was that if we continue to increase the number of college graduates, they will continue to get less and less because the supply would be greater than the demand. Thus, we should NOT make college more affordable and accessible for the masses.

Yet, something nags at me. Something is screaming at me that this is a bad idea. That something is all other causes and effects. Yes, one of the effects of having a large college educated population is reduced “reward” for that education. Yet, there is more to it.

Do you know what else is a result of having a large educated (college or otherwise) population? All the benefits of education. You have people making a better contribution to society and making it a better place. You have people making gadgets and gizmos. You have people increase the efficiency of operations. You have people using personal, group, or public resources to improve the environment. You have a happier society.

Increasing the education of the population may reduce the individual rewards, but it also increases the societal rewards. I recall hearing a comparison of today’s economy with yesteryear’s. The comparison goes something like the rich of yesteryear would be the poor of today.

That comparison reminds me of this discussion. A college education may not grant the same social-economic advantage as it did in yesteryear, but today’s society-economy is more advanced than yesteryear. Thus, progress and stuff.

In conclusion, supply and demand is not the entire answer. It is only part of the answer. What are other parts can you think of?

Highways, Banks, & Congress

Congress to Eliminate Billions in Wall Street Subsidies to Fund Repair of Nation’s Highways by C Robert Gibson a Contributor of US Uncut

Lawmakers Weigh Cut in Fed Payout to Banks by Ryan Tracy a Reporter for The Wall Street Journal

A US Uncut article popped up on my Facebook discussing Congress possibly defunding banks to pay for the repair of US highways. This tickled my suspicious nerves. Of course, I had to look deeper into it. Then I found The Wall Street Journal’s article. This could actually be a thing.

Here is the problem with cutting the Fed dividend rate from 6% to 1.5%: Banks are counting on that 3.5% difference when creating short term (yearly) and long term budgets. So Janet Yellen is right, this does have unforeseen consequences. For many of them, Congress members are just diverting their eyes away. Some of the bigger banks could make up for the difference by not paying their execs HUGE bonuses, but not only will that not happen, the smaller banks don’t have that leeway.

I have mixed feelings about this. On one hand I am all for requiring the rich to help keep this country great — or make it great again — by financing infrastructure directly and indirectly. On the other hand, a 3.5% drop in expected revenue/income/etc is a BIG drop to makeup.

As stated previously, the “big” banks have areas they could cut that would not affect their customers, clients, or the “average” American. These include: not remodeling the million dollar exec offices, lowering exec bonus, reducing “marketing” budgets for their largest clients (businesses spend money winning and dinning their clients, especially their big client. It is reasonable to assume banks do too), and much more. However, we can all assume that these reasonable adjustments will not be implemented. Instead, overage charges will increase, and loan terms will become less favorable and the “perks” will be reduced for the smaller clients.

Banks will react to this, they can’t not react. In the end, someone is going to be hurt, and I doubt it will be the wealthy.

Leading Employers: Local vs National

A few decades ago, GM was the largest employer in America — so I have been told and I am lazy and don’t want to look it up.
Today, Walmart is the largest employer in America — so I have been told and I am lazy and don’t want to look it up.

The problem that people propose is that when GM was the largest employer, people were paid well on average and the their was a large middle class. Since Walmart does not pay well on average, it is one of the causes of the decline in purchasing power of the middle class — among other issues.

My thought is this…. America is HUGE. Like super huge. Though I agree with the premise of this argument, there are additional factors at play. Yes, having a low wage employer dominate the job market does affect the quality of the middle class. That is on the macroeconomic scale. There is also the microeconomic scale.

You may or may not be aware that there are several magazines (FORBES being one of them) that publish on occasion Best/Worst Cities in America for Business/Middle Class/Whatever.

A single company is the leading employer in a nation because it has multiple locations. As the leading employer, its average wages does affect the national economy; however, that company is not necessarily the leading employer on a local level.

On a local scale, a manufacturer, bank, or other higher paying company may be the leading employer. Those companies have far fewer locations thus have far fewer employees than the nationally leading employer. This local leading employers have a greater impact on the economy.

During our fight reduce income inequality, we must identify our local leading employers and insure their feet are held to the fire too. This does not take from the social responsibilities for a company like Walmart.

Who is the leading employer in your area? What is their average wage?

Tips of Ending Poverty: #2 Reflect Productivity

You don’t want to bust your a$$ making someone else rich while you go no where. Do not make others do that for you either.

Why do so many people want to or do start their own business? There are so many reasons why people want to own and/or run a business. Get rich. Make their own hours. Answer to no one, but themselves. Stick to The Man. All these reasons and more, can be summed up with the fact that they are tired of working all the time and getting nowhere real quick.

A rare few start a business because they have a new idea to take to market. We aren’t talking about those individuals.

It is awesome that people have the gumption to start their own business. It is great fuel for our economy. However, it is despicable that people are motivated to venture out on their own because they are not being properly compensated.

It has been a while since I have looked at the numbers, so bare with me on this. Off the top of my head, productivity has doubled since 1970-ish. Since then the average household income has stagnated.

To put it simply, pay your employees what they are worth–which isn’t always in line with what the market pays them.