The physical world
is
governed by many laws of nature. We ignore those laws at our
peril. some laws of nature are difficult to ignore. The penalty
for
ignoring the law of gravity is usually immediate and often
severe.
An individual may
be
exposed to lethal radiation for months, or even years, and not
notice
any consequences. That doesn't mean there won't be consequences.
Consuming small amounts of arsenic may for a while seem to
improve
health. Then it kills.
Many laws of
economics are
as ridged and demanding as the laws of the physical world. Some
of
the laws of economics are merely extensions of the laws of the
physical world. One of these basic laws of economic laws is, we
can't consume that which hasn't been produced.
The first law of
wages is a
corollary of not being able to consume that which isn't
produced. Total wages can never exceed total production. The use
of money
obscures this law.
Consider a barter
economy
where people trade things for other things. Employees are paid
with
some of what they produce. Part of what the employee produces is
used to pay those who produce tools, supplies, etc. for the
employee
to use. It should be obvious that the total wages paid to the
people
producing axes can't exceed the total axes produced.
Using money to pay
the
employees doesn't change reality. Money is only a medium of
exchange. The money will buy no more axes than were produced.
Printing new money and doubling the employee's wages doesn't
make any
more axes. If the employee uses his increased wages to buy more
axes, or anything else, someone somewhere must settle for less.
Printing new money to pay the ax maker is the same as taking
some of
the axes used to pay other suppliers and giving them to the ax
makers.
A frustrated bowler
threw
his ball out the window of the car onto the road. The ball
bounced,
hit the windshield of another car, and killed a passenger. As
far as
gravity was concerned the bowler suffered no consequences from
his
ignoring the laws of physics. The victim paid the price.
Like the law of
gravity,
the first law of wages can be ignored, but not violated. Someone
will suffer the consequences.
Still, for ages
politicians, often at the urging of voters, have ignored the
first
law of wages. The politicians are rewarded by getting reelected.
Some of the voters temporarily benefit from higher pay.
The first law of
wages
dictates that someone must pay. Often that someone doesn't even
realize he paid the bill for someone else's higher wages. Some
pay
through lower wages or higher prices. Others pay by being
unemployed. Some pay through higher taxes. However the payment
is
disguised, someone always pays the full cost of all artificial
wage
increases engineered by politicians. The first law of wages
forces
someone to pay.
Any subsidy to get
a
business to produce in a way other than the most efficient one
hurts
someone through either lower pay, higher prices, or higher
taxes. This includes all subsidies paid to lure businesses to a
particular
location, or to induce then to make a product they couldn't
otherwise
afford to make. The list includes subsidies to makers of movies,
windmills, ethanol, electric cars and biofuels. The subsidies
result
in some workers being paid more than the value of what thy
produce. The only question is, Who is paid less?
Union wage
increases and
minimum wage laws along with restrictions on imports and other
government interference with free trade all prompt the first law
of
wages to force someone to pay. Pursuant to the law of supply and
demand artificially high wages always increase unemployment. One
of
the dumbest things politicians do is increase minimum wages
during a
recession. Inevitably when anyone gets higher pay without
increased
production, someone, somewhere gets lower pay, or no pay.
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Copyright
2013
Albert
D.
McCallum
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