A Supply Chain Problem

We live in interesting times. We are constantly getting unfamiliar terms thrown at us as economists and analysts and other prognosticators and prevaricators attempt to shape our opinion of the daily news. Can the rising costs of daily living be attributed to just one catch-all phrase like “a supply chain problem?” Are there other factors that should be shared with the public like record corporate profits? I guess not if you’re one of the news outlets recording record profits.

The dynamic of the pandemic has caused all workers and employers to rethink their goals. If people working from home caused an unprecedented increase in productivity wouldn’t employers take that into account when they’re about to sign the lease on their office space? Do business owners really need to “house” workers if the workers are already providing the workspace? If workers routinely spend an hour to two hours a day in their car just to attend work in person couldn’t that time be spent more productively? Since child care is one of a parent’s highest costs, couldn’t the ability to work from home provide a benefit that the business community/government has been unwilling to provide? This just addresses the office worker, what about the other workers?

This chart has a breakdown by category of the workers in America in 2021. The numbers are “times a thousand”

What we found out in the pandemic was that most workers couldn’t work from home. Suddenly the lowliest workers that were begrudgingly paid minimum wage, like baristas, retail, fast food workers, and meat processors were considered to be vital to the well-being of the economy. Why wouldn’t the workers at Starbucks jump at the chance to serve the public and potentially get a disease that could kill them and their families for $7.50 an hour? How selfish to not have my Apple Crisp Oatmilk Macchiato ready when I drive up to the window?

When the teamsters didn’t show up at the docks, nothing moved, and we suddenly had a “supply chain problem.” Of course, it goes deeper than that. If most of our goods are manufactured in a foreign country and that foreign country enforces stringent pandemic protocols, then goods like computer chips that are necessary to make American cars are not available. There was literally nothing at the docks to be picked up except cruise ships filled with sick passengers. It is a vicious cycle that apparently no one in government or business had ever “gamed” for.

In the midst of extraordinary worldwide death tolls, workers suddenly became valued. The unemployment rate dropped to the lowest levels ever and people stuck at the bottom of the employment chain were able to move up a rung or two on the ladder. Even those still at the bottom rung would be able to negotiate a “new deal” to continue to work in Covid hothouses to provide Americans their familiar creature comforts.

Workers are getting better jobs that pay more and even the workers at the bottom are able to negotiate better deals. What fly could be placed in the soup that would take the positive and turn it into a negative? Inflation. The price of everything for the worker has gone up and some items like gasoline were artificially inflated to prevent the average American family from feeling like they had finally “won”.

There was a good bit of politics involved too as we were in an election year and the captains of industry, who vote Republican, were not interested in absorbing the new costs. It’s said that a “rising tide floats all boats.” It’s just that some of those boats are yachts and require a lot more draft. Five percent salary increases turned into twenty-five percent product increases as industry continued to record profits and ensure that their yacht was sitting higher than all of the dinghies in the bay.

One study on raising the minimum wage to $15 an hour for McDonald’s workers projected the new wages would raise the price of a Big Mac by 17 cents. The good news, everybody would still be able to buy Big Macs, even the people that make them.

Since the 1970s the link between productivity and wages has been broken. There have always been excuses for industry not keeping up with paying their employees what they earn. It’s time to call it what it is, greed. Plain old-fashioned greed.

Greed is not good, no matter what Gordon Gekko and Ronald Reagan thought.

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