#96: Basic Economics

This is an extension of my previous blog entries, “Dodger Logic #90: Minimum Skills Required” and “Dodger Logic #53: The Reality of Poverty.” So in these blog entries, I expressed my concern with the typical perspective of the working poor in America, as well as the unfortunate typical perspective on poverty vs. reality. In these entries, I explained that I think we need a change in our economy, so that the dollar goes farther, and we can bring more people out of poverty.

Well, I explained in “Minimum Skills Required” that I do have a concern that, if we raise the minimum wage to a proper wage that people can actually live off of, then that will cause companies to raise their prices. Now, the big companies don’t have to do this, as they could just take a slight pay cut at the top, so that the billionaire CEOs get a slight pay cut that they probably wouldn’t even notice, and then they could pay their workers at the bottom a proper wage. However, we all know this won’t happen, so the prices on products in stores will rise. A lot of people think that this will make things so expensive that this will negate the new-found money minimum-wagers make, because it will cost more money for them to feed and house themselves anyway. However, I do want to throw out there that, years past, the minimum wage has always risen when inflation occurs, and that is supposed to happen. As things get more expensive, the wage that workers make has always risen, in order to offset inflation, and the way our economy is set up, it allows for this. Now, I don’t have any specific source to cite here, so take this for what you will, but I have heard that studies have shown that big corporations, such as Walmart, could afford to pay all of their workers $15 per hour, and all they would have to do is raise the price of every single item in their stores by a single penny each, and that would be sufficient to off-set the pay increases.

Now, of course I think our workers are worth more than $7.25/hour (the federal minimum wage,) especially since wages should go up when prices go up, which is something we have always done to offset inflation, up until recently. But if we were to raise the minimum wage, particularly if we raised it dramatically, the big corporations would barely be affected, no matter which route they choose to take (taking a pay cut at the top vs. raising prices on products.) But what about small businesses and franchises, which don’t make much money and can’t afford to pay their workers more? They will raise their prices astronomically, or they will go out of business. A lot of these businesses will have to jump straight to closing their doors, because raising their prices would knock them out of the game, because of competitors’ prices. Either one of these – raising prices or closing doors – would be bad for the economy. If we raise the minimum wage, and these small businesses can’t keep up with that, then they have to close their doors. If they decide to raise their prices, people won’t want to shop there more than ever, and eventually they’ll have to close, so either way, this is a problem for small business owners. And keep in mind that franchises are the same as small businesses. McDonald’s, for instance, is a franchise. So each McDonald’s has a different owner, so this owner likely doesn’t make a lot of money. He’s not like a CEO of a huge corporation. He’s going to need to keep prices low in order to stay afloat. So if this economic problem worsens, don’t be surprised if you see your nearest McDonald’s, among other stores/restaurants, close. I'm one who thinks that, if you can't afford to pay your workers a livable wage, then you need to go home and forget owning a business. However, I also don't like watching big corporations rule the world, so if all small businesses shut down, the big corporations would be all that's left. So how do we make it work out, so that we can have our cake and eat it too?

Here’s the best advice I can give to everyone. I know that everyone is poor these days. I know we want to make sure that our money goes as far as it possibly can. But there’s one thing that every single person can do in order to make the American dollar worth more, thus raising the economy, and we wouldn’t even necessarily have to raise the minimum wage (at least not immediately.) Focus all of your energy and money on buying from local, small businesses. Stop giving your money to big companies like Walmart. Then the small businesses will have enough money to compete with big companies, if we do decide to raise the minimum wage, and everyone will have a fighting chance in this economy. I know small businesses have to charge more money for their products, but if we do this for awhile, it will be beneficial in the long-run, as it will cause an overall lowering of product prices everywhere, thus making the American dollar worth more, thus building the economy back up. Then prices will be lowered everywhere, and people will be able to afford more. But not only that will happen! If we invest our money in small businesses, then they will be able to afford to pay their workers more too. And if they decide to do this, or if the government forces them to, then bigger businesses will start losing their employees to small businesses, so they’ll have to raise their working wages to compete with smaller businesses who now stand a chance up against them. Then there will be a constant battle in competition between the two. Prices will be lowered, people will be able to afford more, AND workers will make more money. That, my friends, is how you build up the economy. Don’t let huge, multi-billion dollar corporations control the world!

Now, don’t get me wrong. I’m not at all saying that we should all abandon Walmart and never shop there again. I’m not going to lie… I love good ol’ Wally World. They have great products at excellent prices, and they truly do have everything imaginable, all in one convenient location. That’s great, and I understand if people want to continue shopping there, and at other big corporations, for that matter. But try to keep it as minimal as possible. When possible, buy from small businesses. It might cost a little more money in the short-run, but we will all reap huge benefits from it in the long-run.