Governmental interference with Natural Pricing / by kevin murray

Basic economics tells us that the supply and demand of any commodity or labor, for that matter, fluctuates, depending upon the amount of goods or labor available at a particular price for those things, so that, it is a general axiom, that all things being equal, goods that have been lowered in price but without any sacrifice in their intrinsic value, will be purchased at a higher quantity, than goods that have been raised in price, without a corresponding increase in their intrinsic value.  This means, in a nutshell, that if the price of gasoline was to drop overnight from $2.25/gallon to $1.25/gallon, that more people would purchase appreciably more of that gasoline, especially if they were unaware of how long the price would remain this low.  On the other hand, if gasoline was to suddenly rise from $2.25/gallon to $3.75/gallon people would be more circumspect in their driving habits, and would, if the price of gasoline, remained higher for a long period of time, look at alternatives to gasoline as well as looking at their driving habits, perhaps deciding as a result to car pool more, or purchase a more gas efficient car, or perhaps purchase even a vehicle that ran on something other than gasoline.

 

When pricing fluctuates, consumers, for the most part, will make the proper adjustments to these occurrences by buying more when the price is lower, and by buying less when the price is higher.  However, when the government gets involved, for whatever reason, or for whatever purpose, these governmental incentives or governmental penalties typically upset the natural order of things, so that certain favored industries or certain favored things get preferential treatment, whereas, un-favored industries or un-favored things get punished.  While this type of interference may or may not benefit the consumer over the short or long term, it does, for a certainty help or hurt industries so that, whatever their budget and projections were previously, now and into the future, must be recalibrated and recalculated because of this governmental intervention.

 

While the government may have legitimate or good reasons for the actions that they take, there are always and without exception, unintended consequences that occur because of this artificial intervention.  For instance, the price of labor is an extremely important part of business expense for most every business, so that, if the governmental minimum wage is mandated to jump from $7.25/hr to $15/hr, it will materially affect all and every business that currently uses labor within that hourly wage and even up to a few dollars more per hour, such as up to $20/hr, because those that see the floor of wages been raised to within a reasonable range of what they are currently making, will naturally want more.  All of this labor cost, which has increased over a short period of time, or is mandated to ladder up to these new mandated wages over a relatively short length of time, will, if perceived to be a new unassailable law, necessitate material changes within that enterprise.

 

This means, for a certainty, that businesses which have previously run on "cheap labor" will, and must find a way to run on "living wage" labor and they will do so by various means, which will often include: more capital equipment and robotics, a more stringent labor selection process and vetting, along with squeezing more work out of the labor force that works there.  All of this will equate to a new dynamic which is higher wages for those that work there who will also be more qualified, more efficient and more productive than those that use to work there and thereby less labor in the form of the overall quantity of laborers will be utilized.  This follows the law of economics, that when government interferes with the price of labor, by forcing that labor cost to rise higher than its natural price point, inevitability you will create as an unintended consequence, more unemployment, because of a labor surplus of those people that no matter how you slice the bread, aren't viable employees at $15/hr.