Economics Tuesday: The Theory of Labor Markets

My family, the long haired, slack jawed, mouth breathing, hippie, liberal, commie, pinko, leftists that they are; are always trying to ply me with their socialist ideas. The ideas usually sound good, and, quite honestly, they make us feel good initially. The problem is this, most do not hold up when the rubber meets the road. (A.k.a. reality)

I am going to talk about one my brother brought up on his blog: the living wage. The living wage (minimum wage) is a bad idea because it creates a price floor for labor. This becomes a bad idea in that there is a loss of Social Surplus when the Demand Supply Curve (that’s right, it is really called the Demand Supply Curve, but it doesn’t roll of the tongue so well, so most refer to it as the supply demand curve) isn’t at an efficient market Equilibrium.

I am going to explain this in an example: There are companies that are willing to pay workers build widgets. The companies have a demand for labor D that is represented by the downward sloping line D in the graphs. The workers are willing to supply labor S represented by the supply line S on the graphs. For the demand curve, there is one company that is so desperate to make a widget, they are willing to pay workers $100 to make widgets; and there is one company that is so cheap, they are only willing to pay workers $1 to make widgets. Conversely; there is a worker who is so hard up for money (must be married) that he is willing to build widgets for $1; and there is some rich kid, entitled worker that will only make widgets if he is paid $100. The efficient market equilibrium for this example is $50 for making widgets.

The concept of Social Surplus is defined as the sum of Consumer’s Surplus and Supplier’s Surplus. The Consumers in this example are the companies, and their surplus is the difference between what the hard up companies were willing to pay ($100, $99, $98, etc) to build widgets and what the market price is ($50); it is represented by the pink shading on the graphs. The Suppliers in this example are the workers, and their surplus is the difference between the hard up workers were willing to build widgets for ($1, $2, $3, etc) and the market price is ($50); it is represented by the blue shading on the graphs.

The second and third graphs are what happen when you screw with the prices. The new horizontal lines represent either a price floor (minimum wage) or a price ceiling (I don’t know of a good example of a legal price ceiling). When you have a price floor, the Supplier’s (Workers) Surplus goes up, but the Consumer’s (Companies) Surplus falls by more than was gained but the Supplier. This loss of Surplus is represented by the black shaded areas on graphs two and three. When there is a price ceiling put in place, the positions flip-flop (Romney, anyone?) and you get graph three.

Why does the loss of Social Surplus happen? Simple, by changing the price of labor to the new mandate, the quantity of work that the companies demand, or that the workers are willing to supply changes. A minimum wage reduces the amount demanded, and a wage ceiling reduces the amount supplied: any move away from the market efficient price lowers the quantity consumed.

So, the next time someone starts talking to you about the benefit of a minimum wage/living wage you can chuckle, shake your head and say, “Brian Reschly is right, and Luke Reschly is wrong, er left, er wrong, hell, he’s both; but he is much taller than Brian, so he wins.”

You Like Me, You Really Like Me

So, I find this deal where I can add Google Analytics to my blog, and I did. This is what you guys, my loyal following, have been doing. (I've often thought of logging on from work and just leave my page pulled up all day long)

Sadly, these statistics appear move positive than they really are. While it looks like I was REALLY popular Thursday, 01-24-08, and that I had a massive 5 page views; this is not the case. I looked and I have three unique visitors Thursday. I had to think: who the hell are these people? Well, I'm one, and I checked the country; and, yup, one from is from South Korea (that'd be Luke).

So, who is this third person? My friend Liz L, my obnoxious cousin Liz D? My sister Sara, perhaps my niece Justine (Erica, I wouldn't her read my posts)? Maybe one of Luke's students in SK, or one of Jimmy's in Michigan? (Sorry, Jim, I just always use 'Jimmy' instead of 'Jim'') Could it be cousin Tom spying on me for the FBI? Perhaps it might some random person that googled me, or something. But I do doubt it is my dad, he has trouble turning a computer on. (Which is quite bizarre considering how smart he can be about some subject)

Well, I'm off to watch a an episode of VH1's Storytellers featuring Jay-Z; in HD none the less.

Later,

B

I gots no will power when it comes to toys

I would like to start of this post by defending my self against the title of this post. I have plenty of will power. I do, I can prove it. I think it takes a tremendous amount of will power to travel 5 hours to Chicago every weekend, for three years, to get an MBA. I think going to family functions and keeping my mouth shut when the long-haired, mouth-breathing hippies start waxing liberal takes exceptional will power. These are just two instances in my life where I have demonstrated a powerful will.

This post would not make sense unless I talked about a situation where I have no will power: toys. Now, I don't mean Transformers or G.I. Joe action figures (if they still made them right, I'd probably buy some); no people, I am talking about consumer electronics. If you read my previous post, you will know I was robbed. They took my TV, and all of my other electronic entertainment devices. After talking to the people, who would talk to me, at State Farm; I was told that it would be three more weeks before I got anything replaced.

So I decided to go to Best Buy and look at some TVs, and TVs only. This is where the story turns bad. I know that State Farm is only going to reimburse me so much for my TV, so I have to buy a reasonable one. And I know that State Farm has tie-ins with all those places, so they can get me a good deal; so I SHOULD wait. Well, I walked out of Best Buy with a 40" Samsung TV and a Blu-ray DVD player. I think the only reason I didn't buy a an Xbox 360 is that they didn't have any of the ones with an HDMI port in stock.

How did this happen, will I used the admittedly poor justification that Best Buy offered me 36 months no interest and I should get the money from State Farm in the next 36 months. Also, I should be able to payoff any shortfall in that time.

I should feel bad about my self for falling into temptation; but screw it. I got to see Resident Evil: Extinction on Blu-ray. Mila Jolavich (whatever her name is) in high-def, very nice.

I win,

Brian

P.S. I asked the salesman if I should get a Blu-ray player or an HD-DVD player. He said, "Blu-ray." "Why Blu-ray?" I ask. "Because the Adult Entrainment Industry has chosen this as their format," he replies. "Huh?" I reply. To which he replies, "If you take all of the 'G', 'PG', 'PG-13', 'R', and 'NC-17' dvd sales per year, add them together, and multiply by four, that the adults sales per year." I accepted the logic as sound; but how reasonable that the likes of Jenna Jameson and the rest drive the path of technology seems very absurd to me.

Lightning has struck me twice

They say lightning never strikes the same place twice. This may be true, but it seems to hit some people over and over.

So, here's the story: I was robbed, twice. Now, technically it was theft and residential burglary, but it sounds much cooler to say, "I was robbed." The first incident occurred on October 9th, 2007. My credits cards and license was stolen out of my wallet; and on January 11th, 2008 my apartment was broken into.

I'm willing to say that the first one was/is more or less my fault. I was in the bad habit of leaving my wallet unattended on my desk at work. (The ironic part of the story is that I work at a security solutions firm) Someone took my credit cards, bank card, and driver license (those unconscionable bastards) and went on a $6,000 shopping spree. The great thing is, is that because I didn't make the purchases Best Buy, Staple, Target, et al got stuck foot the bill. No even a smudge on my credit record.

The break in is much worse. I lock my doors, lock my windows (it is winter, after all), and I even keep a light on. The jerks; however, know that most of the people at my apartment complex work during the day. When I got home, after muttering to my self about some bills I got in the mail I think to my self, "Ah, at least I'll be able to watch Friday Night Lights tonight." Imagine my surprise when I look up to my TV and the only thing looking back at me is the mounting place for the wall mount unit for my flat screen (I used 4 big wood screws to sink that bad boy to the studs.) It was almost as if it were mocking me, saying, "The worthless metal plate is all that is left, bucko."

After the brief second of confusion (Where is the TV) the most terrible thought hit me: I've been robbed. Panicking, I looked down, yup, Xbox 360, Xbox, PlayStation 3, PlayStation 2, and assorted controllers gone. Shit! AHHHHHHHHHHHHHH, my laptops gone. Why is the receiver still there? I step over to the "sun room" in my apartment: why didn't they take the desktop and the printer? Why are the non-hooked up surround speakers gone, but the hooked up one still there? My old Blackberries are gone, but my XM radio is there. A HP iPAQ PDA is gone, who uses those anymore, anyway? My Blu-ray movies are gone? ASSHOLES! The Dyson Vacuum cleaners is still there? You know what, being robbed is bad enough, being robbed by lazy burglars is just salt in the wound.

I would like to say that is where the story ends, but there is still the insurance bit. Well, I had to turn in a list of all the things that were taken. Fair enough. I have to put the approximate age of the items. Interesting, but okay. The items are going to be depreciated: okay, that seems fair, I got 2 years worth of service out of my flat screen so I can complain. The cost basis for the deprecation is not going to be the price I purchased the items for, but the current replacement cost. Gahhh, leave to State Farm to kick me while I'm down.

Well, in closing, I'm taking anything that might be of even the slightest value out of my truck; cause knowing my luck, I'm going to get hit a third time.

Later,

B

OSU let me down again

Well folks, so much for the power of the Big Ten. The Ohio State University dropped the ball yesterday. The jumped all over LSU, led the game 10-0 and looked dominant. Then they imploded, they folded like a cheap shirt, watching them play was like watching ..... a, a, ... one of those nature shows where the cute, furry, infant mammal is about ready to be hawk. You just hope it is over quick.

What is really sad about the situation is that is seems that OSU beat itself mostly. After the VERY ticky-tack out-of-bounds personal foul on OSU, during LSU's first scoring drive, the OSU coaching staff should have talked to their players about officiating. There were two more drives that were sustained by personal fouls, both resulting touchdowns.

What really stings is that the critics now have more ammo about the Big Ten. Only Purdue, Penn State, and Michigan won their bowl games. Really, Michigan was the only quality win, Purdue's barely getting by Central Michigan was a joke, and Penn State beating the head coach less Aggies didn't do much for me either. Of the losses, really, only Wisconsin's seems respectable - they battled for 60 minutes and lost on an interception in the end zone.

Well, there's always next year, and with Rich Rodriquez at Michigan starting next year, things ought to be interesting for the Big Ten. Plus, rumors have it that Purdue is starting to search for the heir apparent for Coach Tiller, so we could be getting new blood at Purdue.

Later,

B

SAP Must DIE DIE DIE!!!!

The heading seems a bit bold, but it is truth. Not only should SAP die, but those damn Germans who made it should be made to suffer.

"Why?", you might ask. I tell you why: SAP is insufferable with its damn T-codes, its document numbers, reference numbers, conversion systems, and it painfully simple graphics. Y_D10_5100027 is the T-Code to get the income statement - that's right, you have to remember that entire sting to pull the income-fucking-statement. Gah!

What's worse is the Accounts Payable system. A Purchase Req is need to create a PO, cool. A PO is needed to order parts, fine. Here's where it gets weird, if said company sends an invoice before it sends the parts/service/whatever, and an A/P clerk receives the invoice into the system; it'll pay the invoice. WTF? Pay before receipt of the parts? Regardless of the terms? Christ Almighty. It gets better, a P-Req can be created, PO cut at a new price per part, and parts received; if the invoice matches the PO price, but doesn't match the price SAP has set up for the part, it will kick it our for Purchase Price Variance.

"Brian", you say, "settle down. Why does this matter to you?"

Yup, you've guessed it, I'm going to tell you. Because I have spent 4 working days a week, since late November, trying to clean up the account where the Goods Received/Invoice Received screw ups go. No one has worked on this account since the system was onlined in Q4 2006. I get to spend my time talking to project managers, vendors, collectors, and A/P clerks about issues people have stopped caring about 9 to 10 months ago.

Screw it, I'm gonna go play Xbox.