Free market economic balance and $15 minimum wage of Seattle

As a small business owner, entrepreneur, author and macro-economist, I would like to give my analysis about the $15 minimum wage increase in Seattle.

Human beings have infinite desires and these innate desires to fulfill their needs keeps economy running. There are many attractions in society, and it is the nature of human beings to run after these attractions. Communism exploited this human tendency by promising to give equal wealth to all. But the mundane resources in the world are limited, so is it possible to provide equal wealth to all? No, and the attempt to do so is nothing but a dazzling ostentation. Now communism has met its end. Communism was nothing but a “bogusism” – a mere ostentation of verbose language and nothing else.

Recently, Seattle increased its minimum wage to $15. Increasing the minimum wage for employment is to reduce the income gap in America. Higher wages increase the consumer purchasing capacity of people. With higher wages, people generate more economic demand for consumer products. This economic demand forces the manufacturer to produce more goods and hence wages have to be higher for high economic growth. It should not be forgotten that the real job creators in a free market economy are not just producers of goods but also consumers of goods. Without a healthy consumer demand, lot of produce of producers would remain unsold. In such cases, when lot of things produced remains unsold, the producer has to layoff his/her employees to avoid taking further loses. In any free market economy, any increase in wage for employment should be implemented such that the employee has a stake in success of small business. Only then can a small business hire an employee for a higher wage so that not just the employer but also the employee reaps rewards from the success and growth of that business. Without having an employee have a stake in success of business, just raising the wage (without having an incentive for hard work) could cripple the employer to hire someone which could slowdown the overall job growth in economy.

In case of communism, the bogusism was about equal distribution of wealth. Rather than trying to give equal wealth to all, the proper approach is to ensure that everyone is guaranteed certain minimum requirements of life through guaranteed employment. As the income of people increases, the radius of their minimum requirements should also increase. Just to bridge the gap between the extremely affluent people and the common people, there should be a proper approach to also increase the minimum requirements of all. In addition, the maximum amenities should be provided to meritorious persons in order to act as incentive to render greater economic contribution through their talent. In order to make this feasible, it is a logical approach to have incentives set aside for those with special qualities, but the provision of the maximum amenities should not let the wage gap in economy grow beyond its norms else it leads to other macroeconomic problems like consumer debt, national debt, etc.

To avoid the huge income disparity in economy, Free Market Mass Capitalism has better idea to add something more. Besides increasing the maximum amenities of meritorious people, there should also be an increased access to the maximum amenities for even common people. This way meritorious people will earn more than common people, and this earning will include their maximum amenities. But the common people should not be deprived of achieving these maximum amenities, so free markets should give equal opportunity to them to get access to the maximum amenities. Although there would be a gap between the maximum amenities of the common people and maximum amenities of the meritorious, any efforts to reduce this gap should follow the principles of free markets such that wages of employees are able to catch up with employee productivity. In this way, a free market economy would also ensure that common people also receive more and more amenities thereby keeping the income disparity under control. If maximum amenities are not provided to common people, no doubt there will be progress in society, but there will always remain the scope for imperfection in economic system and it could lead to growing income disparity which is crippling present US and Global economy. Taking these things into consideration, the rise in minimum wage for Seattle to $15 is justified to enable more citizens of Seattle to make an economic contribution to the economy. It should be noted that the stability of a free market economy can only be ensured when both the minimum requirements and the maximum amenities keep increasing.

How to make this feasible? If the maximum amenities of meritorious people become excessively high, then the minimum requirements of common people need to increase for them to have access to maximum amenities. For example, if a person with special qualities has a motor bike and an ordinary person has a bicycle, there is a balanced adjustment. But if the person with special qualities has a car, then unless free markets are able to raise the purchasing power of the rest of economy such that common people are also able to afford motor bikes through their higher purchasing power, the balanced adjustment in economy could be lost. It should be noted that the common people should be able to buy those motor bikes out of their real wages and should not be offered in any form of a gifts. In this way, the incentive for hard work and growth in overall economy could be preserved and disparities could be kept in check.

In India there is a proverb which refers to “Plain Living and High Thinking”. Plain living hundred years ago was not the same as it is today, so plain living changes from age to age. The standard of value also varies from age to age. Thus, both the minimum requirements and the maximum amenities also vary from age to age, and both are ever increasing in a true free market economic system. If this were not so, there would be no economic progress in society.

Hence, the design of free market should be such that certain minimum requirements are met of the age to all, the maximum amenities of the age are offered to those with special qualities according to the degree of their merit, and there is an equal opportunity for access of maximum amenities for the common people. The minimum requirements of the age (as per their money value) plus the maximum amenities of the age (as per their money value) need to progressively keep adjusting. In this way the standard of living for overall economy can be elevated and economic growth be increased forever in a free market economy without resulting in any economic recessions and depressions.

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