Showing posts with label Supply and Demand. Show all posts
Showing posts with label Supply and Demand. Show all posts
Saturday, December 6, 2014
Can a Minimum Wage Hike Help the Unemployed?
Chicago will increase its minimum wage to $13 per hour. This is obviously good for those who will see their wages rise to $13. But what about those who are unemployed?
Minimum wage laws are nothing more than attempts to amend “the law of supply and demand.”
There is a reason Giancarlo Stanton was given a 13-year $325 million contract ($25 million a year) to hit a baseball by the Florida Marlins. He does it in a way that only a handful of people on this planet can do it. And a great many people are willing to pay big bucks to see him do it. The Marlins were not compelled by any minimum wage law to offer Stanton this contract. They did it voluntarily because they thought Stanton’s drawing power would produces revenues in excess of the cost.
But what if the Marlins had opted not to pay Stanton his $325 million? Could they have signed an equivalent player for substantially less? What if the Marlin’s had offered to pay Stanton $7.93, the Florida minimum wage? Do you think he would have signed? Would any other equivalent player who hit about .288, with 37 home runs and 105 RBIs sign for $7.93 per hour?
It is not an easy thing to hit major league pitching. Very few people can hit fastballs that come to the plate at 95 mph, sliders that look life fastballs until they break at the last minute, and change-ups that leave the pitcher’s hand looking like a fastball, but come up to the plate about 10 mph slower.
Michael Jordan was one of the greatest athletes America has ever known. He tried baseball for one year in 1994. He managed to hit .202 with 1 home run at Class AA Birmingham! Last year in the majors, out of roughly 750 players, only 29 hit .288 or better; only 11 hit 30 homers or more.
But regardless of what Giancarlo Stanton is paid, that has no effect whatever on teacher salaries.
There is a reason why teachers start at disproportionately smaller salaries. There are far more people who want employment as teachers than there are available teaching positions. All applicants have the required education and licenses.
Presumably, they can all do the job. But nobody is willing to buy a $100 ticket to see them teach.
According to a January 2014 Program Evaluation report, the average starting salary for an Illinois teacher is about $36,636 annually. And according to USA Today (Feb. 19, 2013), “The nation is training twice as many K-5 elementary school teachers as needed each year, while teacher shortages remain in the content specific areas of math, science and special education.
“Illinois trained roughly 10 teachers for every one position available.”
But what would happen to starting teacher salaries if there were 100 positions that needed filling, and only 25 teachers seeking employment? Because demand would exceed supply, there would be a bidding war, and salaries would go up to attract the best and brightest.
There is a reason Walmart and McDonald’s can pay $10 per hour. There are a great many more workers who want jobs than there are jobs. When there are 100 people willing to work at $10 per hour, Walmart can ignore the retired $100K executive who is willing to work at $25 per hour, and hire from the pool of 100.
When the minimum wage is increased, the Walmarts, as well as small businesses, have choices to make. They can
-- Pay the new increased minimum wage, “eat” the increased cost of doing business, and accept a diminution of net profits:
-- Pay the new increased minimum wage to some workers, and hold down costs by discharging other workers, or
-- Pay the new increased minimum wage and pass the cost on to customers.
What happens when a business is operating on a tight margin and doesn’t believe it can pass its increased labor costs on to customers? If it can’t risk increasing its costs, it has two options:
-- Fire enough workers to offset the increased cost of labor for others, or
-- Go out of business.
Of course. it can risk doing business as a loss; but why?
According to Forbes (Feb. 20, 2012), the “unemployment number ... reported at 6.2 percent ... is simply misleading. ... According to the U-6 report, the ‘real; unemployment rate is 12.6 oercent,” which includes those who have not looked for work during the four weeks.
But in the black community, Newsmax stated on Nov. 27, the unemployment rate is worse: 11 percent and for young black men (ages 16-21), 21 percent.
So what happens, when the president issues an executive order granting work permits to 5 million illegal immigrants? How many of those will be competing for the minimum wage jobs that are out there?
How does flooding the labor market with 5 million illegal immigrants help the 12.6 percent of Americans and the 21 percent of young black American males who can’t find employment? Increasing the supply of unemployed workers by 5 million only guarantees employers a larger pool to pick from, and it removes pressure for them to pay better wages.
A far better plan, would be for the government to work to create a job market where there are more jobs than applicants. If Walmart and McDonald’s need 1,000 workers, and there are only 100 available, wages will increase and no minimum wage law will be needed. The law of supply and demand will do the job better than any minimum wage law ever could.
Flooding our job market by providing illegal immigrants with work permits only increases the worker supply while at the same time driving down wages.
President Obama’s executive order will only exacerbate America’s unemployment situation!
Posted Online: Dec, 6, 2014 12:00 am - Quad-Cities Online
by John Donald O'Shea
Copyright 2014
John Donald O'Shea
Saturday, April 21, 2012
President Obama Looks at World Through Green-colored Glasses
President Obama has been telling Americans that an increase in the supply of oil will not affect the price of oil.
Compare that to what the Associated press recently reported about the supply of natural gas affecting the price of natural gas. Then draw your own conclusions. Is somebody an economic nit-wit? Obfuscating?
Over the course of the past few months, we have seen President Obama say the following concerning oil prices.
-- "There are no quick fixes to this problem."
-- "The U.S. can't drill its way out of high prices."
-- "The Republican mantra is that we need to 'drill baby drill.' This slogan may sound good, but it's based on complete fiction."
-- "No matter how much we drill, our gasoline prices are going to rise if there's a crisis in the Middle East, labor unrest in Nigeria."
-- "The only solution to the challenge (is that) we start using less. That lowers the demand, prices come down."
When President Obama's quotes are taken together in context, this is what we get. "The U.S. can't drill its way out of high prices. The Republicans' simplistic solution is 'drill, baby, drill.' If there is unrest anywhere in the world, no matter how much we drill, gasoline prices are still going to rise. We can't lower prices by increasing supply -- by drilling. The only solution is to reduce demand -- to start using less."
On April 9, The Dispatch/Argus ran excerpts from a New York datelined AP piece headlined, "Too much natural gas?":
"So much natural gas is being produced that soon there may be nowhere left to put the country's swelling surplus..
"U.S. natural gas production has boomed in recent years as a result of new drilling techniques that allow companies to unlock fuel trapped in shale formations. Last year, the U.S. produced an average of 63 billion cubic feet of natural gas per day, a 24 percent increase from 2006. But over that period consumption has grown half as fast.
"The glut has benefited businesses and homeowners that use natural gas.
"But with natural gas prices at a 10-year low -- and falling -- companies that produce the fuel are becoming victims of their drilling successes. Their stock prices are falling in anticipation of declining profits and scaled-back growth plans.
'There hasn't been enough demand to use up all the supply being pushed into the market.'
"So far, efforts to limit production have barely made a dent. Unless the pace of production declines sharply or demand picks up significantly this summer, analysts say the nation's storage facilities could reach their limits by fall.
"That would cause the price of natural gas, which has been halved over the past year, to nosedive. Citigroup ... says the price of natural gas -- now $2.08 per 1,000 cubic feet -- could briefly fall below $1."
Compare what the president has said on oil to what the AP says on natural gas.
While the president tells the American public that only a reduction of demand -- and not an increase in supply -- can reduce the price of oil, the AP story says that the "new drilling technologies" have produced an over supply of natural gas and have driven the price to a 10-year low -- to $2.08 per 1,000 cubic feet, and that the price may well fall below $1.
Why does the law of supply and demand govern the price of natural gas, but not the price of oil?
What has happened with natural gas is economic fact. What the president tells us will happen with oil, is the product of a man looking at the world through green-colored glasses.
When a president continues to try to tell the American public that there is no law of supply and demand at work in the realm of oil, while ignoring the incontrovertible evidence that the same law is clearly at work in the realm of natural gas, one can only wonder whether Mr. Obama is economically challenged or oblivious to the truth!
If we can become as oil self-sufficient as we are natural gas self-sufficient, then all the unrest in Nigeria, or Iran will have far less effect, if any, on our prices.
Perhaps the president should have studied economics instead of constitutional law.
That's where you learn about the law of supply and demand.
Posted Online: April 20, 2012, 1:25 pm - Quad-Cities Online
by John Donald O'Shea
Copyright 2012, John Donald O'Shea
Compare that to what the Associated press recently reported about the supply of natural gas affecting the price of natural gas. Then draw your own conclusions. Is somebody an economic nit-wit? Obfuscating?
Over the course of the past few months, we have seen President Obama say the following concerning oil prices.
-- "There are no quick fixes to this problem."
-- "The U.S. can't drill its way out of high prices."
-- "The Republican mantra is that we need to 'drill baby drill.' This slogan may sound good, but it's based on complete fiction."
-- "No matter how much we drill, our gasoline prices are going to rise if there's a crisis in the Middle East, labor unrest in Nigeria."
-- "The only solution to the challenge (is that) we start using less. That lowers the demand, prices come down."
When President Obama's quotes are taken together in context, this is what we get. "The U.S. can't drill its way out of high prices. The Republicans' simplistic solution is 'drill, baby, drill.' If there is unrest anywhere in the world, no matter how much we drill, gasoline prices are still going to rise. We can't lower prices by increasing supply -- by drilling. The only solution is to reduce demand -- to start using less."
On April 9, The Dispatch/Argus ran excerpts from a New York datelined AP piece headlined, "Too much natural gas?":
"So much natural gas is being produced that soon there may be nowhere left to put the country's swelling surplus..
"U.S. natural gas production has boomed in recent years as a result of new drilling techniques that allow companies to unlock fuel trapped in shale formations. Last year, the U.S. produced an average of 63 billion cubic feet of natural gas per day, a 24 percent increase from 2006. But over that period consumption has grown half as fast.
"The glut has benefited businesses and homeowners that use natural gas.
"But with natural gas prices at a 10-year low -- and falling -- companies that produce the fuel are becoming victims of their drilling successes. Their stock prices are falling in anticipation of declining profits and scaled-back growth plans.
'There hasn't been enough demand to use up all the supply being pushed into the market.'
"So far, efforts to limit production have barely made a dent. Unless the pace of production declines sharply or demand picks up significantly this summer, analysts say the nation's storage facilities could reach their limits by fall.
"That would cause the price of natural gas, which has been halved over the past year, to nosedive. Citigroup ... says the price of natural gas -- now $2.08 per 1,000 cubic feet -- could briefly fall below $1."
Compare what the president has said on oil to what the AP says on natural gas.
While the president tells the American public that only a reduction of demand -- and not an increase in supply -- can reduce the price of oil, the AP story says that the "new drilling technologies" have produced an over supply of natural gas and have driven the price to a 10-year low -- to $2.08 per 1,000 cubic feet, and that the price may well fall below $1.
Why does the law of supply and demand govern the price of natural gas, but not the price of oil?
What has happened with natural gas is economic fact. What the president tells us will happen with oil, is the product of a man looking at the world through green-colored glasses.
When a president continues to try to tell the American public that there is no law of supply and demand at work in the realm of oil, while ignoring the incontrovertible evidence that the same law is clearly at work in the realm of natural gas, one can only wonder whether Mr. Obama is economically challenged or oblivious to the truth!
If we can become as oil self-sufficient as we are natural gas self-sufficient, then all the unrest in Nigeria, or Iran will have far less effect, if any, on our prices.
Perhaps the president should have studied economics instead of constitutional law.
That's where you learn about the law of supply and demand.
Posted Online: April 20, 2012, 1:25 pm - Quad-Cities Online
by John Donald O'Shea
Copyright 2012, John Donald O'Shea
Wednesday, April 4, 2012
Why Send Our Oil Money to the Saudis? Hugo Chavez?
The Associated Press reports that President Obama has said, "Rising gas prices are not my fault."
Harry Truman said, "The buck stops here!"
But assuming arguendo that President Obama is correct when he says he can't do anything about gasoline prices, why not "buy American"?
According to Der Spiegel, Saudi Arabia pumps about 9 million barrels (378 gallons) of crude oil per day. When oil is priced at $114 per barrel, the Saudi Royal Kingdom earns just over $1 billion a day -- roughly $365B per year! I provide these figures by way of illustration. I realize America gets oil from many countries other than Saudi Arabia. And I realize that others report the Saudis export more.
So how much crude oil did the U.S. import in 2010? According to the U.S. Energy Information Administration (EIA), the U.S. imported (a net figure of) about 9.4 million barrels per day of petroleum in 2010.
My point is simple. The United States in 2010 imported a net of 9.4 million barrels of oil per day. Saudi Arabia pumps 9 million barrels a day. If the U.S. imported oil only from Saudi Arabia, and took Saudi Arabia's entire 9 million barrel output (which isn't the case), the U.S. would still need to import additional crude. And that is 9.4 million barrels a day is on top of the crude that the U.S. produces.
The EIA cannot determine exactly the amount of crude oil produced in the U.S. that is consumed, as refined products, in the U.S. However, the majority of the crude oil produced in the U.S. is refined in U.S. refineries.
The U.S. also produces other liquids that are used in the refining process that are added or blended with the refined products. The bottom line in 2010 was this: The U.S. produced about 5.5 million barrels of crude oil per day, and imported about 9.4 million barrels per day.
President Obama says the U.S. can effect gasoline prices only by decreasing demand and usage. He denies, I believe disingenuously, that prices can be decreased by increasing supply. Yet when presidents have tapped the Strategic Reserve -- which increased supply -- prices have dropped. Why? (No, I am not advocating tapping the Strategic Reserve.)
But assuming, for the sake of discussion, the truth of the inane claim that oil prices are somehow unaffected by the "law of supply and demand," why can't the president see that it is bad for the U.S. when $365 billion leave America each year and find their way into the pockets of foreigners-- many of whom hate our guts?
When Saudi oil sells for $114 per barrel, even if part of that goes to the oil companies and the refineries and not the Saudis, it still costs the U.S. $114 per barrel to import each of the 9 million barrels we import per day.
That money goes to the Saudis, Venezuelans, the Mexican or some other foreign country, and to the foreign oil companies and their refineries, etc., That $365 billion per year is sucked out of the American economy and sent overseas.
Why? To help the Arab tyrants who hate our guts? To ensure that a Marxist ally of Iran retains power in Venezuela? To provide employment for foreign workers, and profits for foreign oil companies and refiners? That's nuts!
Why not keep that $365 billion here?
How many high-paying drilling jobs would $365 billion create?
How much money would flow into the pockets of American oil drilling companies?
How many high-paying refining jobs would be created? How much money would flow into the pockets of the refining companies?
How many high paying transportation or pipeline jobs would be created? How much money would flow into the pockets of the trucking companies, or the pipeline companies?
How many billion dollars would the federal and state governments rake in in taxes?
We have a president who says "it's not my fault" if $365 billion U.S. oil dollars leave our country.
When I was a boy, I used to read "Mad Magazine." Their "cover boy" was one Alfred E. Neuman. He was famous for the line, "What, me worry?" I prefer a president who does "worry." One who says, "The Buck Stops Here."
But then, since 1956, Alfred he has periodically offered himself as a candidate for the presidency of the United States with the slogan, "You could do worse... and always have!"
It appears, we indeed have.
Posted Online: April 03, 2012, 2:58 pm - Quad-Cities Online
by John Donald O'Shea
Copyright 2012, John Donald O'Shea
Harry Truman said, "The buck stops here!"
But assuming arguendo that President Obama is correct when he says he can't do anything about gasoline prices, why not "buy American"?
According to Der Spiegel, Saudi Arabia pumps about 9 million barrels (378 gallons) of crude oil per day. When oil is priced at $114 per barrel, the Saudi Royal Kingdom earns just over $1 billion a day -- roughly $365B per year! I provide these figures by way of illustration. I realize America gets oil from many countries other than Saudi Arabia. And I realize that others report the Saudis export more.
So how much crude oil did the U.S. import in 2010? According to the U.S. Energy Information Administration (EIA), the U.S. imported (a net figure of) about 9.4 million barrels per day of petroleum in 2010.
My point is simple. The United States in 2010 imported a net of 9.4 million barrels of oil per day. Saudi Arabia pumps 9 million barrels a day. If the U.S. imported oil only from Saudi Arabia, and took Saudi Arabia's entire 9 million barrel output (which isn't the case), the U.S. would still need to import additional crude. And that is 9.4 million barrels a day is on top of the crude that the U.S. produces.
The EIA cannot determine exactly the amount of crude oil produced in the U.S. that is consumed, as refined products, in the U.S. However, the majority of the crude oil produced in the U.S. is refined in U.S. refineries.
The U.S. also produces other liquids that are used in the refining process that are added or blended with the refined products. The bottom line in 2010 was this: The U.S. produced about 5.5 million barrels of crude oil per day, and imported about 9.4 million barrels per day.
President Obama says the U.S. can effect gasoline prices only by decreasing demand and usage. He denies, I believe disingenuously, that prices can be decreased by increasing supply. Yet when presidents have tapped the Strategic Reserve -- which increased supply -- prices have dropped. Why? (No, I am not advocating tapping the Strategic Reserve.)
But assuming, for the sake of discussion, the truth of the inane claim that oil prices are somehow unaffected by the "law of supply and demand," why can't the president see that it is bad for the U.S. when $365 billion leave America each year and find their way into the pockets of foreigners-- many of whom hate our guts?
When Saudi oil sells for $114 per barrel, even if part of that goes to the oil companies and the refineries and not the Saudis, it still costs the U.S. $114 per barrel to import each of the 9 million barrels we import per day.
That money goes to the Saudis, Venezuelans, the Mexican or some other foreign country, and to the foreign oil companies and their refineries, etc., That $365 billion per year is sucked out of the American economy and sent overseas.
Why? To help the Arab tyrants who hate our guts? To ensure that a Marxist ally of Iran retains power in Venezuela? To provide employment for foreign workers, and profits for foreign oil companies and refiners? That's nuts!
Why not keep that $365 billion here?
How many high-paying drilling jobs would $365 billion create?
How much money would flow into the pockets of American oil drilling companies?
How many high-paying refining jobs would be created? How much money would flow into the pockets of the refining companies?
How many high paying transportation or pipeline jobs would be created? How much money would flow into the pockets of the trucking companies, or the pipeline companies?
How many billion dollars would the federal and state governments rake in in taxes?
We have a president who says "it's not my fault" if $365 billion U.S. oil dollars leave our country.
When I was a boy, I used to read "Mad Magazine." Their "cover boy" was one Alfred E. Neuman. He was famous for the line, "What, me worry?" I prefer a president who does "worry." One who says, "The Buck Stops Here."
But then, since 1956, Alfred he has periodically offered himself as a candidate for the presidency of the United States with the slogan, "You could do worse... and always have!"
It appears, we indeed have.
Posted Online: April 03, 2012, 2:58 pm - Quad-Cities Online
by John Donald O'Shea
Copyright 2012, John Donald O'Shea
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