Not a lot of people understand pricing in the market, again you can refer to my blog post on prices to gain a fundamental understanding of the importance of pricing in the economy. Supply and Demand in relation to prices is important to understand as they are indicators that determine the cost. A while back I did a video on the General Election debate of 2015 and Nicola Sturgeon insisted on having 100,000 homes built whilst setting rent controls on private rented homes, not only are rent controls a problem, the 300,000 immigrants that flood into the country alone proves she has very little understanding of basic economics. As Nigel Farage pointed out, none of the other politicians have ever been in business and when speaking about markets, markets are about supply and demand.
I had also done a video debunking Maoist Rebel News (Jason Unruhe) on pricing, although that video I deleted I will be redoing something on that issue. It was from this as well as the debate over the national minimum wage raise that led to debating supply and demand. One of Jason Unruhe’s followers happened to catch onto my channel and made a video response to me, thus I made a response video back which you can watch here:
As I point out in the example in my video using Black Friday, my main point was that due to Black Friday having come around and consumers wanting to buy presents for their loved ones nearing Christmas, as a result of the price drop consumers demand went up; however when Black Friday had ended and the prices went back up, consumers demand fell. This was something this kid who goes by the name ‘Angry Basterds’ could not understand. It comes of no surprise of course as there are certain deluded economists out there who seem to believe that by raising the costs, demand increases, or that by lowering the cost, the demand falls. This is completely backwards and illogical, it’s a bit like walking off a cliff ignoring the laws of gravity and expecting to float or go up the way, instead if you walk off a cliff, you know you’re going down the way. This is why on Black Friday when prices dropped, consumers demand shot up because consumers knew they were getting a bargain for their loved ones.
It is for this reason that despite being our First Minister, Nicola Sturgeon has no understanding of basic economics, because if you only build 100,000 homes per year yet 300,000 immigrants come flooding into the country, you’re left with a shortage of housing
as fewer houses are being built to the number entering into the country. As a result of this, the higher the number per year grows of immigrants without housing and in demand for housing, the higher the cost of housing will be. This burden is laid onto the taxpayer, the very people left paying through their eyeballs to pay for everything. It’s this type of thing that ends up leading towards a housing bubble and crash like we saw in 2008.
Rent controls are just as outrageous, by setting a price ceiling on rent controls with the government artificially lowering the cost below market value (consumers value), this then increases the demand for rented housing by consumers and as a result destroying the incentives to produce more housing leading to a shortage. You would think history would have taught these politicians a lesson but clearly Nicola Sturgeon hasn’t learned this lesson as we saw what rent controls did under Gordon Brown’s Labour government.
The minimum wage is again the same story, only this time referring to a price floor; a price floor is the opposite of a price ceiling, this is where the government artificially raises the cost of something above market value (consumer value) and sets a minimum price, meaning the price cannot fall below what the government fixes. The problem with this is, not all businesses earn the same income, some may afford to pay out the higher minimum wage, others not. You often hear people with the attitude that if smaller businesses cannot afford to pay out then they shouldn’t be in business. The problem with this argument is that if you have that attitude, you’re going to end up wiping out a lot of smaller businesses thus supporting the very thing they proclaim to be against; Cronyism (Corporatism).
Again, in relation to supply and demand, when price goes up, demand goes down; when price goes down, demand goes up. This is the basic laws of supply and demand, you can’t ignore this, it’s a bit like trying to ignore the laws of gravity, you can’t ignore the laws of physics! So when you artificially raise wages by setting a minimum wage (price floor), you are essentially distorting market value, when the price of the lower skilled worker goes up (after all, the wage of a lower skilled worker is the price to the employer), the demand of the employer goes down. Socialists fail to understand that human beings are not robots who you can control at will, when you treat employers as such, you’ll be in for a nasty surprise, again this relates to theory and practice; just because it looks good on paper, doesn’t mean to say it turns out that way in practice.
So by raising the wages of lower skilled workers, which is the price to the employers, the demand from employers more often than not drops. So what employers do to compensate for the higher price of lower skilled workers is they either lay off the lower skilled workers The price being paid for the minimum wage.they have, thus creating higher unemployment, or they simply raise the costs of the goods they produce which in turn was a waste of time raising the wages artificially as costs rise with it. People fall into this false assumption that when you raise workers wages artificially it means more money in their pockets, therefore more to spend and more for the businesses. They don’t think of things from the businesses perspective, their overhead costs, advertising, transport, production, but most importantly what they fail to understand is an employer has to be ensured that the value of the employee is going to be greater than his or her costs.
A perfect example of this could be someone coming to your door offering to paint your wall, theoretically speaking your wall is in bad need of a good paint job, so a boy offers to paint the wall for you and say he offers you £7 an hour to do the job; you are then in the situation of thinking “well okay, sure, this is a reasonable cost, I can do with paying him £7 an hour.” However, what if the boy offered to do that job for £20 an hour, or maybe £50 an hour, or £100 an hour even? You’re then left in the situation as the employer thinking “is it really worth £50 an hour to have my wall painted? Uh I don’t think so, nah I think I’ll pass!” In other words the boy offering to do the job for £50 an hour would be out of a job.
It is for this reason that when you raise wages artificially by setting a price floor (minimum wage) above that of the consumers value, you end up destroying the incentive for employers to employ the lower skilled workers thus not only do you end up with higher unemployment but lower skilled workers finding it harder to find jobs.
To help you understand, we will use McDonald’s or Burger King as a prime example; when we talk about consumer value and the price of produce, prices are determined by what the consumer values the product, not by what some business owner decides to set the price at, after all you could produce a product, set the price to what ‘YOU’ value the product at, that doesn’t mean to say the consumers are going to buy it, you see, it’s what the consumers value the product at that matters. So the value of those burgers in Burger King or Job ladder, finding work becomes more difficult…McDonald’s is valued by what the consumers value the burgers at; if you raised the price of those burgers, consumers demand will fall. So now that you understand the MARKET VALUE, which is the consumers value, it’s then important to realise that employers are not going to employ someone lower skilled to pay $15 an hour for flipping burgers worth $5 each; remember, businesses take the cost of production into consideration and profit into consideration, are you going to produce burgers and sell then at $5 each to then pay out $15 an hour? Of course not. As stated, an employer has to ensure his value of the employee is greater than his or her costs, if the costs are greater than the employees value, they’re not going to employ them.
Idealist Socialists invariably ignore this fact and ignorantly turn a blind eye to it, no matter how rational your argument is, common sense does not prevail with idealist Socialists, yet if they were put in the same situation being offered to cut their grass for £50 an hour, they would refrain from paying it.