This week I have been inspired by those protesting the Anti-union legislation in Wisconsin. It seems clear that the debate has quickly transcended the idea of budgeting and has become an outright attack on unions and the bargaining laws that protect them. So in a show of support I would like to do a quick rundown of basic economics and why it is important for Unions to have the right to bargain for wage increases.
Let's cut to the chase. The economy does not function on "trickle down effect economics." Giving the rich more money does not mean our economy will magically prosper, and the average non-luxury business does not rely on the rich to buy all of their products because we live in a consumer-driven economy. Think about it this way: I go to the hammer store because I just broke my hammer. I have $20 and the price of my new hammer is $15. I buy my hammer and walk out.
NOW
If I had $120 would I have bought 8 hammers? Of course not. I only need one hammer for the job I am doing and buying any more would be a waste of money. I would buy one hammer and save the other $105. This same idea applies to the "trickle down effect" economic theory. The rich in our country have the same basic needs as everyone else. Sure they consume many high quality products but they can still only eat so much, buy so many couches, computers etc. They do not purchase enough goods for our entire economy to live on. The real spending power in our economy comes from the middle and lower classes. Without the main populace's consumption, overproduction would be rampant and our economic system would collapse. The more money the middle and working classes have, the more the working class will spend on disposable goods and as a result the more goods businesses will see fly off their shelves.
But hang on there what about businesses? Surely putting more money in the pocket of businesses would create a prosperous economy!
Not so fast, we have to understand that without anyone to buy those goods or services that businesses offer it doesn't matter how many tax breaks you give them, businesses will not make a profit.
The way that we make sure that people are able to buy the goods that businesses sell is through the creation of wages. We give the people who are working in businesses a living wage so that they can then go out and buy groceries, housing, and a hammer of their very own. But wages can't be too high because businesses have to make a profit and wages are a huge expense that any smart business model would minimize.
Because companies and businesses want to minimize the amount of money they spend on wages the workers often have to make sure that the other end of the spectrum isn't forgotten and they do this by forming Unions. In a Union, workers can make sure they are getting enough money to keep their lives afloat and ultimately the rest of the economy. Taking away the Union's right to bargain for wages means the delicate balance of wages and profit gets tipped in the favor of profit. Not only does this cause problems for individuals trying to pay their bills but it limits the amount of money that goes into the market economy and decreases the likelihood of spending by those who are experiencing wage stagnation. The longterm effects of which can be devastating.
So to those who are fighting for Union rights I salute you!
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