Thursday, November 30, 2006
Economics 101
I witnessed an impromptu economics lesson by a liberal talking head, whose name escapes me, on C-Span early this afternoon. The talking head in question (LTH) said three things that really crawled all over me: He stated rather equivocally that Henry Ford just decided one day, by dismissing the market's "invisible hand," that he would raise the hourly wage paid to Ford Motor Co. employees; he said that "America's economy is bleeding out important jobs"; and he said that no harm can come from arbitrarily mandating a higher minimum wage.
Henry Ford's decision to raise the wages paid to his employees was not an arbitrary act. As we all know, the assembly line method revolutionized the automobile industry. Ford Motor Company was in a position, financially, to raise wages above the prevailing market rate and still remain profitable. Henry Ford was in no way dismissing the "invisible hand" of the free market.
The LTH's assertion that "America's economy is bleeding out" is a tad hyperbolic. Manufacturing employment in America has indeed decreased during the past decade, but productivity has steadily increased - to record levels in some sectors. Producing more while using fewer resources is precisely how our free-market system should operate.
LTH also fails to correctly identify the reason why American jobs are being lost to foreign workers. Unrealistic union bosses, overzealous regulators, and the taxman have all played a part in ensuring that manufacturing wages in America are no longer competitive in the global marketplace. This explains why certain products can now be produced cheaper elsewhere.
Finally, arbitrarily mandating higher wages will not build a strong economy. European workers enjoy high wages, a 35-hour workweek, and generous health benefits. However, the unemployment rate in most European nations is firmly stuck in double-digits, and worker productivity has been plummeting for years. Is this what we want in America?
Henry Ford's decision to raise the wages paid to his employees was not an arbitrary act. As we all know, the assembly line method revolutionized the automobile industry. Ford Motor Company was in a position, financially, to raise wages above the prevailing market rate and still remain profitable. Henry Ford was in no way dismissing the "invisible hand" of the free market.
The LTH's assertion that "America's economy is bleeding out" is a tad hyperbolic. Manufacturing employment in America has indeed decreased during the past decade, but productivity has steadily increased - to record levels in some sectors. Producing more while using fewer resources is precisely how our free-market system should operate.
LTH also fails to correctly identify the reason why American jobs are being lost to foreign workers. Unrealistic union bosses, overzealous regulators, and the taxman have all played a part in ensuring that manufacturing wages in America are no longer competitive in the global marketplace. This explains why certain products can now be produced cheaper elsewhere.
Finally, arbitrarily mandating higher wages will not build a strong economy. European workers enjoy high wages, a 35-hour workweek, and generous health benefits. However, the unemployment rate in most European nations is firmly stuck in double-digits, and worker productivity has been plummeting for years. Is this what we want in America?
# posted by Joltin' Django @ Thursday, November 30, 2006 
