June 30, 2006

Econ 101

I should preface this entry by saying that I'm not an economist. I entered college thinking, for some strange reason, that I might want to major in econ. I took one semester of Microecon, and during my semester of Macroecon, I figured out that economics is just math with pictures. Don't get me wrong -- I like the idea of math. But I'm terrible at executing it. I feel like P.J. O'Rourke (and this has to be the first time I've felt like a Republican) when he said something along these lines in his book Eat the Rich (I don't have the book in front of me, so I'm paraphrasing): "I'm not great at math. I can barely take a bar tab that totals less than $10, add up the drinks in it and come up with the same total twice. Of course, I rarely have bar tabs that total less than $10. And that may be part of the problem."

Caveats aside, I was intrigued by this exchange on Slate.com about whether Wal-Mart's low wages are bad for workers. I really don't profess to know enough about profit margins, supply chains and the like to get to the bottom of this, but the New Orleans economy post-Katrina has been instructive. One of the big arguments that always seems to fly around during these debates is whether large companies can afford to increase workers' wages. Our economy would indicate that they can. Fast food places like Burger King are offering starting salaries of $10/hour, often in addition to bonuses, just to lure workers. Not only does it seem to be working, but I note that none of these businesses have gone bankrupt in the process. Granted, the companies aren't offering these salaries nationwide, and were they to do so, that would certainly affect their profit margins differently. However, if offering these higher wages in one community resulted in the type of losses which would bankrupt the company if felt on a national scale, I would expect most of these companies to close their New Orleans stores altogether. So far, I don't see any who have done so.

Posted by Kitty at June 30, 2006 12:09 PM

Comments

I have never bought the argument that raising wages across the board harms the economy nor have I bought the argument that it does much good for those it intends to help. No economist here. I also find it interesting that even with all of the Help Wanted signs hanging and higher wages offered, businesses still are not getting a lot of takers. Everyone is understaffed and everyone has a sign hanging out. What's going on?

Posted by: Rob at July 3, 2006 11:24 AM

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