Quote:
Originally Posted by Mr Tonka
Isn't it impossible to know what a gallon of milk would cost without minimum wage?
And child labor would still be illegal and it's highly unlikely anyone would agree to work for pennies an hour? Unless you're talking about 1,000 pennies an hour.
Unregulated compensation for goods and services levels out. It does fluctuate but only when it's self levying after some kind of external factor unbalances it. When you work in the construction industry, BIDDING on all of your work, you see very clearly that there is a glass floor that people providing quality work will not go below. The same principle is applicable for employee compensation.
Surely you don't think that people who aren't willing to work for current minimum wage would all of a sudden be willing to work for less, do you?
I'll tell you, that when bidding on projects for work, things typically go exceedingly well. ....Unless you're bidding on a government job. Because on a government job, there are all kinds of concessions made for different types of "oppressed" business owners. Women owned, minority owned, veteran owned, etc... Its when the government allows these concessions for these supposed oppressed businesses, people who are working just as hard are left out in the cold in favor of someone else. So the help they give to someone negatively affects someone else.
Check this out. I was bidding on a job for the City of St. Pete main fire station. These are the bid tabulations.
I was the only non minority registered business who bid on this. Not how this works is that the SBE credits you see are only applicable for bidding and awarding purposes. Once awarded, the City will pay their full bid amount. Does this make sense? I'm the second in from the left. An honest, fair bid. Lower than everyone else's, left out in the cold. The only point is that when the government tries to get involved to "level" the playing field, they unlevel it for someone else. The business who could provide the goods and services for the least amount of money could also do it the fastest, but didn't get the job. 
Same thing happens with minimum wage. You have a business where you employ 10 minimum wage employees. Minimum wage gets raised which increases your payroll to the point that you can't afford 10 employees. Now you have 9 and one guy is out on his ass. That's just an immediate hands on example of the negative effects. The effect on society is worse. Minimum wage creates the idea of sustaining a life, spouse, and 2.5 kids on such a wage. Minimum wage has created the idea that a person earning, err... being paid said wage, should be able to buy a home, car, and an annual vacation to Disney. "We don't have to aspire to more, we just need the minimum wage increased."
I'm in the middle of a government project that is a Davis Bacon Wage Act project. You have to keep track of every hour, every person spends on the job site and they MUST be paid at much or more than what the government determines a fair wage is for their trade. I spend the better part of a day, a whole day, reviewing and researching the minimum wages our installers MUST make per hour on this job. I can tell you that the amount of money spent on creating this davis bacon wage act was one of the most ill funded government projects out there. What business is it of the governments to tell me how much my subcontractors, who BID on this work by the piece, not hour, should be paid to complete the work?
I'm not bitter though.  |
Well this is the dichotomy between economic theory and it's practical application in the market. If the market could only bear pennies an hour in compensation of course no one would waste their time working that job and they would resort to being part of black market economy or just not working.
In Economics there is a form of the Heisenberg principle which states any effort to try to influence one sector of the economy will inevitably shift the values and behavior of all other parts of that economy, so unless you are looking at things in a vacuum (which is impossible) all you can do is predict the most plausible trends based on previous data and history.
Your story of the bid is certainly influenced by political pressures which the Economist in his pure form would not consider, but there it is..influencing and changing all other values.
I think the practice of not going below a floor when bidding in the same industry is a form of self preservation and in a crude sense, price fixing (albeit legally) driven again by what the market will bear. You would not install a floor for X dollars below a certain threshold. Now what happens when a new comer out bids everyone by consistently going below that threshold. Well that becomes a situation that either the market will tolerate (in which case many businesses would cease to be able to do business and would cease to exist) OR the gov't steps in to level the playing field.
Capitalism in its true form would eradicate a middle class and you really would end up with a society comprised of have and have nots.
Funny I have performed many A-133 audits, front and center is the Davis Bacon Act. It really has changed how contractors and sub-contractors calculate their direct labor costs, and more importantly, what they can bury in overhead and pass back as costs to their clients.