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Wages, productivity are the same thing - The Galveston County Daily News : Guest Columns

November 26, 2014

Wages, productivity are the same thing

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Posted: Wednesday, December 11, 2013 12:10 am

Creative thinkers have pointed to the Gulf of Mexico as the most obvious solution to Galveston’s water problems — build a desalination plant.

Seems reasonable, until you create a business plan and realize that in order for the plant to operate (at near break-even), water rates will have to be higher than they are now, or are likely to be in the near future

The numbers simply do not make such a plant economically feasible.

We have to wait for desalination technology to make advancements to the point that it becomes economically justifiable to allocate tax funds to such a project.

And so it goes with low-wage jobs in fast food restaurants.

Fast food joints have a business plan that requires a certain percentage of revenue be spent on wages.

If the wage level is raised, the money has to come from somewhere else — price increases, cost savings or increased productivity.

Each side in this debate has a point.

Proponents of wage increases claim that current wages are not enough to live on.

They are right.

Opponents of wage increases claim that an increase will result in the lowest skill workers ending up on the unemployment line.

They are also right.

Both sides point to the most obvious source to make their argument — your pocketbook.

Raising prices would result in more revenue that could be used to increase wages; but, opponents think that price increases could force consumers to find lower priced substitute goods, which would harm the existing business’ welfare.

The future will see each side of this logic claim victory because each circumstance will likely come to pass.

But I maintain each side is arguing against their own self-interest.

From the liberal/labor standpoint that wages should be raised: raising wages will make investments in new technology more cost efficient. This will expand the marketplace for machines that can replace low-wage fast food workers.

Such machines will not be built by the low-wage workers that will move from the fry line at Joe’s burgers to a high-tech assembly line. Given trade treaties, these machines will be built at the lowest cost location — likely China.

So, the end result for the liberal/labor establishment will be to rush the outsourcing of low-wage jobs held by Americans to a robot made in China unable to vote or make political contributions.

From the conservative/business viewpoint that wages should be kept low or be left up to the market: keeping wages low mandates the expansion of the federal government in the form of subsidies — food stamps, public housing and Medicaid, to name a few.

Some may want to leave wages up to the marketplace. In theory, that works wonderfully. In practice, that leads to hungry people who participate in revolutions.

And we all know what happens to the rich business owners in a revolution.

My suggestion?

Conservatives/businesses had better figure out how to pay a wage those low-wage workers can live on without government subsidies.

While liberals/labor had better figure out how to make the low-wage workforce more productive. If each side does not do this,  they can look forward to probable extinction.