How the Minimum Wage and Welfare Help the Rich: Competition
So — hypothetically — we’ve got the entire grocery store industry fully automated, and the question is to where the extra profits will flow. With a large displaced workforce supported by unemployment and welfare, the government has alleviated some of the demand-side pressure on prices by handing out the money to keep paying current prices on food.
But pressure on prices can come from the other direction: competition.
A grocery store that simply divvies up its greater profits among a few executives and stakeholders will be at a competitive disadvantage to one that passes much of the savings on to consumers. That displaced workforce still has only limited income, so a store that can save the average family $50 a week will draw shoppers far and wide.
If that doesn’t happen, then something in the system is preventing it. In an industry like health care, it’s easy to see that regulations and mandates make entry and innovation difficult. In an industry like heavy construction, unionization keeps the largest area of cost (labor) fixed. In other areas, licensing and other hoops create the blockage and minimum wages and benefits keep up the cost of labor without unions.
The great bulk of these complications begin with or are exacerbated by government. That makes sense, too.
Established businesses, labor unions, and other special interests are already organized and powerful. Therefore, they are better able to influence the democratic and not-so-democratic processes of government.
Government, which progressives like to see as a counterbalance to private power, simply comes into line with it and amplifies its reach. A managed economy — with both direct decisions of government and public-private efforts to move the economy toward the upper crust’s vision of the future — inevitably favors the powerful and influential.
They limit competition and also ensure that there are mechanisms (including loopholes) that keep them from bearing an equal share of the burden of the income redistribution that keeps their prices up.
(more later)
