Unintended Consequences and Failing To See The Big Picture

The unintended consequences that arise when people make decisions is fascinating and often saddening.

• Some people believe that minimum wage laws help those at the low end of the economic spectrum by increasing their income. What they don’t realize is that employers do everything they can to maintain the same costs, by cutting hours or cutting employment. And who do you think is the first to have their hours or jobs cut? You guessed it, those with the least skills, those with the least value to the employer, the very people the law was meant to help in the first place.
• Many people believe that mandatory health care coverage by employers will benefit employees. Again, employers do everything to maintain they same costs. They do this by cutting salary, hours, jobs, or benefits in other areas. Take home compensation per employee mostly stays the same.
• Governor Granholm of Michigan just passed legislation forcing chicken raisers to build larger cages so that the chickens can spread their wings. Since these farmers now have increased costs, the prices of chicken will go up. So will the prices of substitutes like beef.

Failing To See The Big Picture

• People love to sensationalize the poor treatment of employees by Wal-Mart and the use of sweatshop labor in the production of their products. They fail to recognize the vast amounts of cheap goods provided by Wal-Mart, relied heavily upon by those on the lower rungs of the economic spectrum. They also fail to recognize the thousands of jobs created by Wal-Mart. Ask these people. Would they rather work at Wal-Mart, working long hours, with poor benefits, or be unemployed? If they had a better employment option, they would take it. Wal-Mart forces no one to work for them. Employment is voluntary.
• Free trade does not simply move around pieces of a fixed pie. It GROWS the pie. When free trade agreements are passed and tariffs are lifted, total wealth is increased. The market economy is not a zero-sum game.
• Companies don’t pay their CEO’s and other top executives tens of millions of dollars because they like to or have to. They do it because it’s worth it to them. Companies live by the bottom line. Simple accounting shows that if you pay less in salary, your profit increases, which has many ancillary, beneficial effects. So why are these companies willingly decreasing their profit? Because they’ve done careful analysis, and looked at years and years of empirical evidence, and decided that it’s worth it to pay certain people very large amounts of money. People cannot wrap their heads around the fact that some people’s skills are worth 10 million, while their own are only worth 40,000. I’m currently dealing with the reality that no one thinks I’m worth more than 20,000 a year. I dealt with that by taking Level 1 of the Chartered Financial Analyst exam, a test with $1,200 dollars, 2600 pages, and a minimum of 250 hours of studying as barriers to entry. I poured myself into studying, soaking up all the details I could, and learning instead of memorizing the material. I work every day to improve my book knowledge, current events knowledge, critical thinking skills, writing skills, communication skills, etiquette skills, people skills, and health. I’ve dealt with the fact that some people are worth 500 times me not by whining about how preposterous that sounds, but by striving to improve myself. I’m not entitled to anything. I’m going to work to make it painfully obvious just how valuable I am to a company.