Wow my longest title! Today we will explore one of the most basic economic terms, supply and demand.
The more there is of something, the less it is valued. That is why gold, silver, diamonds, and other things maintain their value. They are hard to get to, therefore they cost more than say salt, which is easy and extremely plentiful. As an example, in the former Soviet Union, bread was sometimes scarce. We saw pictures of empty supermarkets. A black market would grow up around these times selling bread at above what it is worth at the official store. We see supply and demand all over. The price of your house, gasoline, even electricity prices are priced through supply and demand.
When electricity is produced, it has a short shelf life. There are various means to generate it. Oil, gas, coal, water, solar, wind and nuclear are ways to generate it. When supplies are plentiful, prices stabilize, or go down. Many of the generating companies try to make sure that supply is balanced to demand, so that they can make a profit. The same with OPEC, they balance their production to maintain profit, something that didn't happen before their founding. Today, electricity is joining that group of artificially high products, even though it has never been cheaper. As the environmentalists try to kill coal plants, producers are not building newer plants. This will push prices up. Some of this is because of the cost of new plants, which have to be paid for by profits. Also, new coal plants are much cheaper than nuclear, much more reliable than wind or solar or water, and fuel is cheaper than oil. Some plants could last longer, they are being artificially closed because of government regulation.
Supply and demand also affect labor. The more people there are looking for work, the lower the pay that needs to be offered to find workers. That is one reason, in the "global" economy, that jobs are leaving the first world countries like the US or Europe, and relocating to countries with bigger populations and lower standards of living like India or China. Immigration also plays a role here at home. The more immigrants, the lower the wages. Even if immigrants take the least paying jobs, it trickles up to the very highest paying jobs. Governments should try to manage immigration in a way that the economy keeps up with the influx. People vote with their feet, they always have, whether it is to head west, or to cross borders, people will go where they believe they can prosper. Some thought that by helping the Mexicans grow their economy through free trade, then they would not cross the border illegally, and that is true to a point. The jobs that went there through NAFTA were lost to the US and that is the rub. Wages in Mexico are substantially less than the US. The average Mexican worker in Mexico earns a little better $6,000. At US minimum wage that more than doubles to over $15,000. That is reason enough to risk crossing the border.
Minimum wage has not increased in a long time. the reason is there are enough people willing to work for minimum wage, than there are people demanding it go up. So politically, there is no advantage to fighting for an increase. Of course, some pay lip service to it, especially when there is a fast food protest, but it quickly goes away. So illegal immigration increases the supply of labor, which brings down the prices companies pay for employees. Maybe that is why the US Chamber of Commerce wants amnesty? And lower income people are more dependent on government programs, is that why Democrats like it?
We must manage immigration, while it is nice to say all can come, it needs to be managed so as not to destroy our middle class. The economy will grow to meet the needs of all. However, if too many come in too quickly, the imbalance will cause economic hardship on all. Only through legal immigration can we manage the influx, and make sure our middle class are not destroyed. After all, is it not better to earn our minimum wage, or Mexico's median wage?
Spend Wisely
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