Friday, April 18, 2008

Minimum wage and ethanol cause inflation

Prices of grocery items are going up at an alarming rate. Prices of everything, except homes, are going up. The easy thing to blame is the price of oil. I think that it has only really been during the last year that we have seen these prices really get out of control. I certainly think oil is a big contributor. I think government subsidized ethanol is an even bigger factor. So much of our grocery budget, from items sweetened with high fructose corn syrup (just about everything) to beef fed on corn, is affected by the decrease in the supply of corn that is used for such staples. When you decrease supply and maintain demand, prices go up. Then there are the other factors. Farmers switch their crops over from soybean, wheat, and other produce to government subsidized corn, thus decreasing their supply. What you see is an across the board increase in prices for all food items. This very real fact is swept under the rug because the media's belief in global warming overrides the importance of having affordable food world-wide.
In addition to ethanol, there is another factor, how be it corollary, that I believe is affecting rising prices. Minimum Wage. If you have read any of my other blogs, you will see that I believe Minimum Wage is the cause of many ills in this country, such as illegal immigration and homelessness. I would now like to add our current economic crisis and rising food costs. Minimum wage is such an easy concept. If you set a value to be the minimum, then every value higher than that value will change relative to the minimum value. If I make $10 an hour and the minimum wage is $5.00 at the time I start, but then increases to $7.50, I either accept my current rate as a pay cut or ask for my wage to increase in proportion to the increase in minimum wage. Unions do this, which is why they are the biggest proponents of minimum wage increases. Employers react the same as employees. They can either take the pay increase as a loss in margin or raise their prices across the board. This whole process causes inflation. Minimum wage causing inflation is not as sexy as saying big oil causes inflation. Everybody wants Big Oil to suffer. There isn't a politician alive that would say, lets eliminate minimum wage and get rid of ethanol, but that is your solution.

1 comment:

zackzilla said...

There is this giant tool bag named Morgan Spurlock (Super Size Me) who has a series called "30 days." And in one of the episodes, in Super Size Me fashion, he and his loser wife live off minimum wage for 30 days. It was ridiculous. All these people they came in contact with who were also on minum wage, couldn't understand how they couldn't make ends meet. Meanwhile you would see all of the superficial items they had in their homes. Xboxes, playstations, cars, yada, yada, yada.