The Economic Realities Politicians Rarely Talk About

How does a producer decide whether to employ additional units of a resource? This question is posed in the 6th edition of a textbook titled "Economics: Private and Public Choice". We (the collective labor force) have been reduced to "units of a resource".

Another midterm election cycle is upon us and candidates from both parties have "on schedule" started repackaging the same truncated arguments from the last dozen or so election cycles. While our economy has added jobs for 52 straight months most of those jobs are low paying and offer no benefits. As summer turns into fall our television screens and mail boxes will once again be filled with partisan political rhetoric offering solutions to our current economic situation. Tragically, most of the solutions offered won't address the root cause of these problems: the labor force (at all levels) has been relegated to being nothing more than an appendage. This problem is systemic and can't be solved from Washington D.C.

One political party is offering wholesale deregulation: get rid of the minimum wage and cumbersome regulations and watch the economy grow. I'm sure the unemployment rate would be close to zero if the minimum wage was $2.00 an hour. Just think of the money that could be saved on hard hats and safety glasses in the manufacturing sector of our economy.

The other party is calling for unrealistic wage hikes and regulations that most small businesses can't afford. Sure it would be nice if the minimum wage was $15 dollars an hour, but how many businesses would be able to stay open? Who would take the risk of starting a business if your labor force is going to make more money than you?

I believe that we are at the tail end of a fundamental shift in business ethics. The same middle class Americans who would have led the marches and protests are now sitting on their hands and keeping their mouths shut. Their fear is rational in context to their eroding status in our society. In the professional sector productivity is at an all-time high due to the 70 plus hour work weeks; while low skill jobs have seen their wages stagnated for the better part of a decade. We have lived for 30 plus years with a business ethic in place that reduces work in all of its forms. Seeing labor (people) as "units of a resource" who exist for the sole purpose of generating revenue is a problem that I'm almost certain we won't see addressed in the majority of the political ads coming our way.

My fear is that we (as a country) are too distracted by the spectacle of pop culture: Duck Dynasty, Real Housewives of (insert your favorite city) and technology, and too fragmented over social issues: abortion and same-sex marriage to correctly identify and work towards solving the economic issues we are facing. So remember this fall when candidates A and B are "debating" the issues, the odds are they are both competing for the same campaign dollars from people who view you as "additional units of a resource".

A Sad Truth About The Minimum Wage.

It would be easy to raise the minimum wage and pull millions from poverty. There is, however, an unintended consequence that comes with doing this: a small percentage of the people who need the most help would be hurt as some jobs would be eliminated. There's enough Prima facie evidence for us to admit that low wages and depressed living standards are a structural part of our capitalists economy. Many industries are dependent on the supply of low-wage, unskilled and immobile labor. It's not a coincidence that the rise of capital markets occurred in coordination with the demise of labor markets.

As Americans, we tend to ignore the plight of the developing world. When we think of capitalist countries we rarely consider Mexico or Nigeria. The developing capitalist countries and the Asian countries who practice a mix of capitalism and communism have benefited from the offshoring of our manufacturing base. The relaxed labor laws combined with overall poverty levels have made those countries very attractive places to do business. As we continue the 30 plus year run of Neoliberal and Neoconservative economic policies I wonder: what's left for America? The move from an agrarian economy to an industrial economy wasn't a smooth one, but teaching farmers to work in factories has proven to be easier than teaching factory workers to work in information technology.

With so many multinationals feeding off of the poverty in the developing world, it's conceivable to think one day everything produced by companies with a few hundred million dollars in market capitalization will be made offshore.

Karl Marx was right in the Philosophic Manuscript of 1844. We have elevated the market to idol status. At the highest levels of a manufacturing and production based economy the function of money is to produce more human labor, who produce more goods, which leads to more capital. This isn't the case for investment banks and equity firms. The function of money is to produce more money. The interests of workers have been replaced by the interests of investors.

Just today I was watching international news. Parts of Spain are experiencing severe civil unrest and disobedience. I wonder: how long before this hits our shores? The idea that we can continue on this path without a negative reaction is as big a daydream as believing the market forces at play can be contained under the constraints of our current system. This monster is out of the cage and without any viable alternatives or remedies to fix this system, we could be living in the last days of the capitalist economy.

The sad actuarial truth is that a hike in the minimum wage would lift millions out of the category of the working poor, but it would also hurt smaller businesses with fewer resources. If the decision were made under utilitarian principles alone, the choice to help many over the few is a no-brainer. The tragedy of our current economic reality is that millions are working their fingers to the bone with no chance of getting out of poverty. The minimum wage can't keep up with inflation, but every little bit helps.