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Wage Rates, QE3 and SEPTA

September 14, 2012

If you are reading this article then you are probably one of the few but growing number of people who realize that our economy is run by an out of control central bank known as the Federal Reserve who utilizes a Keynesian approach to solving economic problems that they themselves created thereby not really solving anything. Many of you may already know that QE3, the printing of more dollars is wrong, but may not know exactly why this pig headed Bernanke does not realize this. Well, Bernanke seems to be going by the Keynesian theory of wage rates and unemployment. Now please bare with me as I attempt to explain it because no matter how many times I look at it, I cant make any sense of it. Nevermind, I will just keep it simple. Keynesianism says that governmental inflation is supposed to eliminate unemployment by bringing about a fall in real wage rates.

Now I dont know how falling wage rates can be good for the economy because I personally dont get paid as much as I believe I am worth right now and I am not willing to accept any less at this time either. I do believe that artificially high wage rates maintain mass unemployment, but unless you are working at a union shop that has a good lobbyist in Washington or your local government, this does not apply to you and I dont think this applies across the board, but I dont know. I do know that we need to allow the free markets to work itself out in such a way that wage rates will tend to adjust themselves so that there is no involuntary unemployment, i.e., so that all those desiring to work can find jobs.

I can cite the example of the Southeastern Pennsylvania Transportation Authority (SEPTA) who go on strikes every couple of years for an increase in their wage rates and yet their services to customers has not changed or improved. So for about a month Philadelphians are on their own to figure out how to get to work and when the SEPTA union workers get what they want, they resume services and nothing has changed for the customer. Its still the same smelly, crappy bus ride to work in a congested bus with a bus driver that has no manners.

So here is an idea of how we can lower the unemployment rate. Allow free market competition in cities like Philadelphia where private citizens like myself can start their own transportation service for people who want an alternative to SEPTA. Until that happens I believe that such dynamics such as SEPTA being allowed to have a monopoly over public transport in the Philadelphia area actually contributes to our problems of unemployment. We dont need to sue SEPTA for better services or for accessibility for people in wheelchairs, we just need to create alternative public transportation for those people who want those services that SEPTA does not provide appropriately and may the best company win.

We also need to get rid of minimum wage laws because they basically say that if you dont pay this worker this government determined amount of money, you cant legally employ them. So now as a company you are out of a potential employee and that potential employee has now had his job prospects restricted and he probably needs the money at any rate.

So braniacs like Bernanke with the Keynesian school as a tool believe that the solution is to increase the money supply to permit employers to continue to pay minimum wage and then some and to permit SEPTA workers to demand higher pay without having to upgrade their services to the customer such as bigger buses, more buses per route and explaining to their bus drivers that they need to stop at a bus stop when they see people on or near it, regardless of whether they look like they are waiting for the bus or not. Yes ladies and gentleman, in Philadelphia SEPTA bus drivers will not stop for you at the bus stop unless you look like you are waiting for the bus, regardless of the fact that you are sitting or standing at the bus stop. These are the same union shop drivers who will leave you stranded for a month in the dead of winter because they have to have higher pay.

The point is that the free market is supposed to determine wage rates, costs and incomes to the full-employment position. Any other solution such as quantitative easing, unions going on strike demanding higher pay without higher service will only serve to distort the economic situation.

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