23 January 2019

Do You Want Inflation?

From the Gods of the Copybook Headings file...

A Florida Constitutional Amendment to increase minimum wage to $15 an hour.

Presently the minimum wage in Florida is $8.46 an hour.

Shall we talk about those copybook headings and the concept of supply and demand?

Changing the price changes the demand.

When you make something more expensive, but not more valuable, demand falls.

This is the real core of why minimum wage laws are wrong.  They break important price signals from the market.

The "product" being purchased by the minimum wage is literally the least valuable labor available.

But, let's (incorrectly) assume that the demand for zero skill labor is inelastic and that zero jobs will be eliminated by this wage increase.

This makes the price of anything sold by a place that employs such labor more expensive.  Prices must increase to account for the extra expense. 

Now, what if the good being sold has an elastic demand?  That means, "what if the customer can skip buying it?"  It will mean that if the price goes up, demand goes down and fewer sales are made.

While $8.46 an hour for 20 hours ($169.20) doesn't seem like a lot; it's a lot more than $15 an hour for zero hours.

Zero hours is what a lot of places are offering in places that have $15 an hour minimum wages.

Disney is already paying $15 an hour.  A one day ticket for an adult is $109 to $129.  In 2010, when the minimum wage was $7.25 an hour, that same ticket was $79 to $82.  In 2000, when the minimum wage was $5.15 an hour that ticket was $46.  In 1990 the minimum wage was $3.80 an hour and it cost $29 to $31 to spend a day in Magic Kingdom.

Notice a trend?

In 1990 it cost 7.63 to 8.16 minimum wage hours for a ticket.
In 2000 it's 8.93 hours.
In 2010 it's 10.9 to 11.31 hours.
Today it's 12.88 to 15.24 hours at minimum wage or 7.27 to 8.6 hours for the base Disney pay...

It's the same product, it just costs more.

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