The world of business and working are the foundation of the microcosm of workers' compensation. At its root, workers' comp is one of many adjuncts of the complex relationship between production and labor in what used to be a free market society. The errosion of market forces over decades has rendered the American market increasingly regulated, socialistic, and constrained.
The economy nonetheless remains one of the critical elements in the employee/employer relationship. In various eras, the government and the people have stepped into that relationship to attempt equity through standards. The Fair Labor Standards Act was passed in 1938 (85 years ago) and attempted to force minimums and maximums on the relationship. The idea included concepts such as minimum wages, workweek definition, child labor, and overtime.
According to the Economic Policy Institute, the minimum wage has since ranged between $4.74 and $12.50 in inflation-adjusted value. The $12.50 "adjusted" value was when the stated minimum wage was $1.60 in 1968. Some will struggle with that. How can $1.60 be $12.50? The concept is in measuring the inflation rate and thus appreciating the purchasing value of any particular figure within the market, comparatively, at a fixed moment in time.
In recent years, we have witnessed an amazing confluence of questionable government action. First, there was a raft of "fair" advocates in both legislative and constitutional propositions that brought us further government intervention in the work relationship. Pay.com documents that minimum wages are increasing across the continent. Such actions force wages upward, beyond what the market forces would support (if the market supported them, there would be no need for legislation). Florida's is currently $11.00 and that is creeping to a constitutionally mandated $15.00 by 2026, see Axios. That was implemented by the people in 2020.
The law will be annually adjusted starting in 2027 to account for the impacts of inflation. You see, when there are dollars in a marketplace, those dollars will compete for goods. The supply of goods is limited to what can be produced, or at least to what manufacturers will produce. Those who produce goods are predicting what value their goods bring to market, calculating the cost of their supplies and inputs, and setting a price on their goods or services.
Those goods or services are put into commerce and we consumers judge whether the sticker price is worth our dollars. We decide whether to consume or not. That will always be true. We will each make consumption choices. If our schools were focused on the success of students in the real world, fewer would take calculus and more would take economics.
If a product becomes too expensive for our taste or budget, we will seek alternative products. There will be inherent competition in the marketplace of both goods and services. One alternative might be to not consume at all. Yes, abstinence is a viable economic choice for some products or services. Read on.
The goods are easier to envision. If the price of Beefsteak tomatoes rises, we may switch to Roma as a substitute. Or, we may simply eat our sandwich or salad without tomato. We will make consumption choices that are both individual and influenced by those around us. If we are financially able, and simply enamored with Beefsteak, then we may also just pay the sticker and buy those goods. Ask anyone who is driving a Mercedes, BMW, or Ferrari.
Services work the same. We might respond to the lure of having someone do our income taxes for us in April. If the price of that service increases, we might decide that we will use an internet service and do our own. The tradeoff is that this decision may cost us a Saturday afternoon. We lose free time at the beach or napping or watching television, but we save the monetary cost of the tax preparer. We are making consumption choices.
Throughout our existence, we make economic choices and decisions. They are complex. We might avoid paying the tax preparer so that we can afford the Beefsteak tomatoes. There is a persistent and unavoidable friction between our wants and our needs. The Robin Hood solution is for the government to alleviate the perceived unfairness of the market by forcing wages upward. The last decade has seen that solution repeatedly.
The impact that workers expect is more money in the paycheck, greater flexibility in consumption, and general well-being. The same expectations can be seen in a variety of government interventions in money supply. The government borrows money (more every day) and distributes that money into the market. This is a redistribution of wealth and is intended (perhaps) to benefit those at the lower margin of the income spectrum.
When the government forgives people's debts, the loans do not disappear. The student loan that someone incurred is not erased. Forgiveness merely makes all of us responsible. We (government) borrow money collectively to pay the ill-advised debt someone agreed to. Various charlatan education institutions talked people into a bad deal.
They borrowed money to consume it. We get stuck holding the bag for the bad institution's behavior and the poor decision-maker who borrowed the money. In the process, we create debt that the government must service (pay interest) and thus limit the availability of those funds for other government purposes. And, more important as regards inflation, the government injects money into the market.
With no further loan payments to make, the recipient of this government relief now has greater resources. The former debtor can now make decisions between Beefsteak and Roma tomatoes, perhaps different decisions than were possible when debt payments affected total personal resources available. The forgiveness, or any government spending, gifting, or support, increases the supply of money in the market, increases the demand for goods and services, and will inevitably increase prices.
Inflation. From whence comes inflation? When money supply increases, more money pursues goods and services, demand shifts, and prices rise. Similarly, when the supply of goods and services diminishes, an unchanged and constant supply of money will pursue those goods, demand shifts, and prices rise. We have come to expect it, to anticipate it. and to forgive it. It has become as inevitable as Thanos.
