Most people don’t handle scale well. And, unfortunately, how one thinks about any problem depends a great deal on scale. To demonstrate this I used to ask my college freshman students what percent of atmospheric gases did carbon dioxide (“C-O-two”) represent. At that time, climate change was the hottest scientific topic in the country and the so-called “greenhouse effect” and “C-O-two” were being discussed ad nauseum. So, what kinds of responses did my bright, college freshmen (all entertaining an education in science or technology, mind you) come up with? I got answers like 10% 15%, 35%, 40%, even 80%. The real value is 0.03-0.04%. The tiny amount of CO2 in the atmosphere tells you that it would not be hard to change it’s current value and if any atmospheric conditions are linked to this little value they must be quite sensitive. This is very different from the amounts of nitrogen and oxygen in the atmosphere (79% and 19% respectively) which would be almost impossible to change because of the huge amounts already existing in the atmosphere. Consider O2 : each of us consumes it in every breath we take as do all of the other animals of the earth. Anything that burns consumes large quantities of it (all fires, cars (anything with an internal combustion engine), all power plants that burn stuff, etc.) and . . . it’s concentration in the atmosphere basically doesn’t change. For one it is hard to change something so large and there are processes which replace what get used.
Now let’s consider the minimum wage. I keep seeing articles including statements like this: “. . . Oregon’s wage went up Jan. 1 by 15 cents under an automatic system linked to the cost of living . . . After raising the pay for his 24 employees, he raised the prices for coffee, smoothies and beer to compensate. ‘It feels like a wash,’ he said. ‘It is not the consumer that wins, because most businesses will pass their increase on to the consumer through higher prices. The business doesn’t win, because they are forced to increase their prices to maintain proper margins to keep their doors open, thus affecting current customers and the potential of loss of new business. The employee doesn’t win, because they are the consumer.’” (from the NY Times, “Crossing Borders and Changing Lives, Lured by Higher State Minimum Wages” February 15, 2014)
See, that 15 cent per hour wage increase just comes out of the consumer’s pocket, and my workers are consumers, so it is a wash. This is a major problem with modern journalism. Journalists provide one example of a benefit, one example of a loss, and say “see they balance” or “A outweighs B,” or whatever. Let’s step back a little and see what actually happens. During that one hour in which the example employee (a waitress) receives an extra 15 cents, how many customers does she serve, do you think? Let’s just say it is a bustling café and she serves fifteen customers in that hour (three booths of four people and three individuals at the counter). Now how much does each of those customers have to get charged to make up for the extra 15 cents the waitress gets paid? (Do the math, I’ll wait. Zippity doo dah, zippity . . .) Yep, it is one cent . . . one thin penny, of so little value that they no longer make them out of copper.
The reporting makes it sound as if the waitress gets an extra 15 cents during that hour and a customer, uh . . . that one, pays the 15 cents. No! There are more customers than waitresses, many more if the business is structured correctly, so each customer pays a fraction, possibly a small fraction of the increase in wages.
Granted, the waitress is a customer elsewhere and she might have to pay a little more for this or a little more for that but she will have more money to apply to those choices, they do not consume her entire raise.
Seriously folks. If you would buy the argument that the minimum wage should not be increased because of the “effects,” then you would also have to buy the argument that a decrease in the waitress’s salary would be a good thing.
Sometimes, like for example, well, actually every time, it is important to get the scale of the problem right. People wring their hands about what would happen if WalMart were to have to pay a decent wage to its “associates,” for example. WalMart could double their wages paid today and not have to raise a single price. The cost? Well, the Walton family would have their profits cut a bit and instead of them making billions of dollars per year they would make fewer billions of dollars per year. I mean, how much money does one need? Can they feed, clothe, and house their families? Gosh, when you already have many billions of dollars in the bank, I don’t think that would be a problem. But no matter how much you have you could lose it all, right? Well to run through a billion dollars in a single year, let’s say, you would have to spend over $500,000 per hour. I suggest they protect themselves by avoiding big purchases for a while. They should be okay.