The buzz word lately is Benghazi...
The cover up that keeps holding the flame in the heart of the demoralized army of Libertarians, petrified Conservatives, and dumbed down Tea Partiers, who still can't believe they actually lost the last election...
The question on everyone's mind is: why does the loyal democratic opposition keep flaming the ashes of the Libyan story, when it was not the first, nor the only attack on a US embassy compound.
Well...the plot thickens when one remembers how the Benghazi story just changed the target, from The Presidents "misconduct", to his Secretary of States "incompetence"...
Little does it matter to GOP that none of their twisted manufactured information has any back up in the real world of foreign affairs, nor does it matter that the investigation concluded nothing but following up a protocol that led to the tragic end...nothing matters to the GOP...
When you can't run on merit, when you have nothing else to offer to the people who's votes you need for election or reelection, the only thing you can do is pander to your most faithful zealots with stories that they want to hear...ergo Benghazi...and wait for the opposition to make a mistake that you can really use against them...
What is then the real story that is underlining Benghazi and all the rest of the culture wars? Why the many divides in our political structure?
Cause each day we talk about Benghazi, IRS, AP...guns, God and abortions, we as people are pulled in their vortex of blame games, and we do not talk about, we actually forget about the truth...
Wealth and Income inequality...
The wage divide, the income stagnation that keeps falling behind productivity, behind inflation, behind the growth and pile up so much wealth on one side that becomes something this country has never seen before and not many are even aware of it...
Wages...
Taboo theme rarely anyone talking about on TV, and even when one does talk about it their misconception is so great that is unbelievable...
... To the bleeding heart libertarians it's a no brainer...keep the Government out of the labor markets and abolish even the minimum wage and let the market work its wisdom...so simple, right, except when you ask them...
-What markets set the minimum wage?
Instantly that same bleeding heart libertarians refuses to accept the market, the same market they so faithfully adores!
... To the hard core conservatives minimum wage is no brainer either...you get paid what your labor is worth on the market, but ask them the same question and you will see how shallow their faith in market truly is...
... To the slick Republican wages are also no brainer...they are more educated and they know their economics 101...till you apply mathematics to verify their claim, mathematics that does not add up...then you will instantly see how their faces changes and the ugly, selfish, primitive business owner pop up as Mister Hyde...
I do not blame them...
What undoubtedly unite them is the notion that they all agree to disagree with the market witch all of a sudden they all refuse to even acknowledge...
Wages...the old question of capitalism...the only question of capitalism that unites the wealthy across the borders of religious, national, or cultural spectrums...
I do not blame them...
I understand them...
Every dime they pay their workers less in wages, is a dime that will boost their bottom line, will keep cost low, augment the profit cashing on productivity and enrich their portfolio...
I do not understand the rest of us...we who work for a living, who can't make our ends meet, who work second or third jobs, we who may not work for minimum wage, but still work for paychecks, we who comply to work paycheck to paycheck and never bother why is that...
I do not understand why we do not bother to learn the truth!
Some of us, poor souls will be even fast to answer:
- Labor market set the minimum wage...the competition between workers set the minimum wage...more workers, less their value...
Others will run to correct them...
- No, no, no...Federal Government! set the minimum wage!...
Both answer show maximum indoctrination of the workers into market economics...Reverse economics I shall say...
How easily we are eager to accept and not question the obvious...
- Does the Government really set the minimum wage, or is it just trying to adjust the minimum wage with the cost of living?
The real question is not what set the minimum wage, the real question is what set the minimum price of labor? If the labor market set the price of labor what is the starting cost of that specific merchandize the worker sales?
The Distinction between minimum wage and the minimum price of labor is deliberately erased from everyday talk, because if the minimum wage is defined as the natural cost of labor then it will be easily understandable to every single worker in every possible trade, across all geographic lines too...
Then why do we not know it...after all, it is our livelihood?
"Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.
The power of the labourer to support himself, and the family which may be necessary to keep up the number of labourers, does not depend on the quantity of money which he may receive for wages, but on the quantity of food, necessaries, and conveniences become essential to him from habit, which that money will purchase. The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family. With a rise in the price of food and necessaries, the natural price of labour will rise; with the fall in their price. the natural price of labour will fall."
David Ricardo, The Principles of political economy, published first 1817, Chapter V, On wages,
1817 it was clear to the economics mastermind as Ricardo...who was pupil of Adam Smith...1817!
Why did we forgot that simple truth...its not science fiction, after all...its what we all practice every day: we eat...we sleep...we cant go around naked...bare necessities also known as cost of living...
The concept of cost is not unknown to any business owner...its actually their mind trap...
If one asks any business owner how much his business cost of operation are, he will tell you the price to a dime...he knows exactly how much he paid starting with the supplier of the material, how much he paid his workers, utility, transport, taxes...he know how much exactly he invested in every single product that he is selling...good or service, respectively...
One don't need a phd in economics, nor one need to be a business owner to understand the cost theory of value...
If one asks a housewife how much a cake she made cost her, she will also know how to calculate the price of her cake, cause she knows what she paid for the eggs, flower, milk and sugar...frosting or fudge...
Yet we as workers we do not know what make our natural price of labor, what are our cost of living that represent the minimum wage...the base cost of our labor...
If you ask one owner he will know that if he does not recoup all his expenses in the course of the business cycle, his business will cease to exist...He knows...and he will fight tooth and nail to prevent its bankruptcy or closure...
We on the other hand...We the workers, did we forget that poverty is just the end of the equation when wages do not cover the base expenses that are necessary for labor to replenish its own cost of living...
It is utterly sad to listen, to witness a rich man being comfortable talking about how important it is for businesses to recoup every cost in the process and hope the market will grant more than the cost of operation, namely profit, the more, the merrier, but will deny his own workers the same philosophy...
Government does not meddle in setting the price of rent in one city, nor does the Government set the price of food in one grocery store, nor does the Government tell a retail store what the price of clothing will be...
The market sets those prices...
Rent is set by the housing market...
Utility are set by the energy market...
Food is set by the agricultural market...
Clothing is set by the manufacturing market...
No worker is able to lower the price of any of these goods and services he desperately needs in order to sustain himself...
If one tells the business owner the cold reality of his own market creed, he will turn and readily twist those bare cost of living from necessity into a choice, like its an indulgence, not the minimum...
The minimum is not a choice...the minimum is the lowest price of those goods and services...period!
If one person works and he makes less than the cost of those bare necessities for survival, the person will suffer malnutrition, stress and eventually get some chronic disease and face death in the long run...in other words, just as the business that cant recoup its cost of operation ceases to exist, so does a worker who cant recoup the cost of living...
"When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its natural price, and that the labourer will have the moderate comforts which the natural rate of wages will afford. "
David Ricardo, The Principles of political economy, published first 1817, Chapter V, On wages
Ricardo was blunt...he knew what is happening in his time when labor was being paid less then the natural price...the number of laborers reduced...One do not need a gross imagination what reducing numbers of laborer meant...life expectancy was not the 19 century highlight...
Some will say...we come a long way from 19 Century...people don't starve to death anymore, they do not sleep under the bridges and they don't get sick exposed on cold weather...and even if they get sick, we have health care program that take care of them...After all, we learn from our past!
Did we? Did we really learn, or we just sooth our conscience turning our blind eye with few Social program and patchwork of same old remedies?
The tragedy of the workers today is that we as Human, we always group together and help each other, Our Society compliment ancient charitable soup lines with food stamps...shelters get additional space by low income assisted living...the Church and Government Welfare...but those programs just prolong the inevitable end result...they create the illusion of help and manufactured a burden of shame and guilt...
None of that should happen...none of the blame is true...
Poverty is nothing but mathematics...simple if I may say...
You wanna see the formula of poverty?
P= NW- m{f, CL}
where P stands for poverty; NW stands for net wages; m stand for minimum and CL stands for cost of living...In any civilized society minimum cost of living is represented as poverty line for family of four...
Mention to a business owner why a wage can not be set for individual but it has to supply living necessities for a family of four and you will see the naked face of ignorance and rude selfishness...
"A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more; otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation. Mr. Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that one with another they may be enabled to bring up two children...The labour of an able-bodied slave, the same author adds, is computed to be worth double his maintenance; and that of the meanest labourer, he thinks, cannot be worth less than that of an ablebodied slave. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what is precisely necessary for their own maintenance.. "
Adam Smith, Wealth of the Nation, 1776, Chapter VIII, Of the wages of labor
As we see...a slave owner knew how much are his labor maintenance cost, like any machine maintenance, slave owners knew why they have to provide their labor with bare necessity fit for family, or they will lost the replacement of their human machine...of cource they knew the value of their labor, cause well, they paid for them...they purchase them... but our business owners seams lost in the momentum...
Excuses after excuses is all that will drip from their side...why?
Cause they do not feel responsible for workers living expenses...much less workers natural reproduction...
Poverty is simple equation...its not some virus one catches getting exposed on cold weather...its the amount of money one get paid below the minimum cost of living one depend on to survive...
We as Society step in and cover our underpaid workers the difference...and the only reason why the rich, the business owners and their management representatives are able to get away with paying below those bare minimal cost of living is because they manage to blind and bedazzled all of us who receive paychecks and contribute in taxes,,,
We as taxpayers are supplementing our business owners while they piling up more and more wealth during the last few decade...
We as workers let the owners get away with keeping million of us working and get in return so little that they are not able to support their own families...
Its sad, but it seams we as workers forget our own workers history that "gave" us all the benefits and lifted millions from poverty into the middle class, the same benefits that are shifting away from beneath our feet...middle class wages who were way above minimum wages due to Union contracts and Government Laws...
I do not know exactly how did that happen, cause I was not here in America, but I do know it started with Reagan...
The morning in America that introduced to the American people an economic doctrine that created the chart below...
They say it is the American way...the poor and the wealthy are the American pastime...its the way it is...as long as we have middle class in between them...
Well if you are Republican, I doubt you read past my few sentences, much less will you open the video...but ignorance is a bliss America can not afford anymore...
The chart show how big is the misconception of wealth in America...
I believe in numbers...I am macroeconomist after all...
Wealth inequality starts with income... The income that every one of us gets paid is our source of wealth, and the minimum wage is the starting point...if the minimum wage is below the cost of living, then the whole pyramid of more expensive skilled labor is also depressed and has no space for growth...
If the minimum wage is set below the cost of living, the cost of bare necessities such as food, housing and clothing, then people on minimum wage will end up on Government Welfare programs, while every other wage labor will just fill the gap on its own and have no leftover income to accumulate wealth...multiply that for few decades, and it is so obvious how the wealth inequality came to be reality of the American middle class...its just the perception of being better off, cause one makes way above the minimum wage that blur peoples vision...
The mirage of modern day capitalism...
Worker who generate $15 in hourly wage it seams to be paid double then the minimum wage when in reality one can barely keep up with the bill...
It does not matter where a person live...in Los Angeles California, or in Horatio Arkansas...if one live paycheck to paycheck losing the race with the bills trimming every dime on leisure and scraping by on every expense...one live on minimum wage no matter if one make $20 or $8 hourly rate...
Talking about mass delusion...
When I first saw these table statistics, it took me a while to come to my senses as an economist...
Not every day an economist is able to see a perfect example of David Ricardo's "Iron Law of wages" that has befallen America, and set the middle class on the road of extinction...
"The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful. However much the market price of labour may deviate from its natural price, it has, like commodities, a tendency to conform to it. "
David Ricardo, The Iron Laws of wages. The Principles of political economy, published first 1817, Chapter V, On wages...
Ladies and Gentlemans...I present you Ricardo Law of wages in America...
Table 643. Annual Total Compensation and Wages and Salary Accruals Per Full-Time Equivalent Employee by Industry: 2000 to 2009
[In dollars. Wage and salary accruals include executives’ compensation, bonuses, tips, and payments-in-kind; total compensation includes in addition to wages and salaries, employer contributions for social insurance, employer contributions to private and welfare funds, director’s fees, jury and witness fees, etc. Based on the 2002 North American Industry Classification System (NAICS); see text, section 15]
Industry Annual salary and wages
2000 2005 2008 2009
Domestic industries. . . . . . 39,157 45,537 51,059 51,615
Private industries. . . . . . . .38,862 44,717 50,144 50,462
Agriculture,
forestry, fishing,
and hunting. . . . . . . . . . . .22,154 28,600 33,129 34,159
Mining. . . . . . . . . . . . . . . 57,983 73,161 88,615 87,214
Utilities. . . . . . . . . . . . . . 64,742 77,409 86,667 87,578
Construction. . . . . . . . . . 38,563 43,948 51,226 52,321
Manufacturing. . . . . . . . .43,933 50,909 56,373 57,374
Wholesale trade. . . . . . . .50,853 57,922 65,089 64,896
Retail trade. . . . . . . . . . . 26,585 29,230 30,861 31,195
Transportation
and warehousing. . . . . . . 39,057 43,865 48,286 48,453
Information. . . . . . . . . . . .62,582 68,330 76,747 77,231
Finance and insurance. . . 64,561 77,981 88,034 84,555
Real estate
and rental and leasing. . . .37,146 43,708 47,849 47,290
Professional, scientific,
and technical services. . . .62,568 69,767 79,266 80,077
Management of companies
and enterprises 1. . . . . . . .74,201 87,971 101,450 96,586
Administrative and waste
management services. . 25,035 31,370 35,961 36,761
Educational services. . . . .29,243 34,844 39,221 40,785
Health care
and social assistance. . . . .35,269 42,286 47,071 48,354
Arts, entertainment,
and recreation. . . . . . . . . .32,479 37,149 43,746 43,219
Accommodation
and food services. . . . . . . 18,047 21,018 23,121 23,405
Other services,
except government. . . . . . 25,989 30,465 34,217 34,885
Government. . . . . . . . . . . 40,767 49,894 55,891 57,320
Federal. . . . . . . . . . . . . . .46,470 64,184 70,785 73,765
State and local. . . . . . . . . 39,164 46,174 52,058 53,056
Source: U.S. Bureau of Economic Analysis, Survey of Current Business, April 2011.
- Houston we have a problem....Houston, this is not anemia, but a case of advanced economic leukemia...
It is said long ago...
"We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate..."
Adam Smith, Wealth of the Nation, 1776, Chapter VIII, Of the wages of labor
It is obvious to me that in present day America, the business owners find a way to organize entering into contract with a whole political Party and they are successfully holding the minimum aka natural wages low as humanly possible...
No wonder we have explosion of obesity, of chronic deceases and of poverty stricken neighborhoods who's only activity is the food stamp economy...
We can indulge in debate about Benghazi, AP, IRS, Verizon...we can debate till the end of time the topic of God and guns...we can debate Obama Care, Medicare, Social Security, Iraq, drones and vouchers...but if we do not address the income inequality in America, we will get nowhere...
Marie
