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HUBNER: What's with the wage gap?
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HUBNER: What's with the wage gap?

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Jamin Hubner

Since my essay “Why Black Hills Employers are Short-Staffed” in this column (April 21, 2021), the subject of worker shortages and poor wages has gone viral. Nearly every media outlet has some recent reflection on it (including contributions in the Argus Leader). The tone of the discourse is noticeably strong.

The suppression of worker wages has always been a strange contradiction of capitalism since it got off the ground about 400 years ago. On the one hand, employers are doing everything they can to work their employees as hard as possible and pay them as cheap as possible to make and hold on to as much profit as possible. On the other hand, this might result in worker shortages and, perhaps more importantly, a mass of consumers that lack the cash to buy all those products produced by employers. Similar to slave rebellions against planters, or tax revolts against the king, employees can organize and strike against employers. Slave-owners, kings, and powerful capitalists have therefore spent considerable effort and money over the centuries at controlling the government so it can prevent (by law, police, and military force) any of these challenges from succeeding.

For example, on May 5th 2020, garbage collectors in New Orleans went on strike and demanded a wage increase from $10.25/hr to $15/hr, trucks to be fixed because they were dangerously broken, and protective masks to avoid highly COVID contaminated materials. Not an unreasonable thing to ask, if you ask me. But instead, the temporary agency that hires workers on behalf of the city fired the workers and got prisoners who worked for $1.33/hour.

This is a chilling story, because it shows (1) how easily our capitalist economy both favors and slips into forced labor, and (2) the exploitative nature of contemporary economic classes (capitalist/worker, etc.). I’m an anarcho-syndicalist similar to Noam Chomsky, so I don’t even believe in the legitimacy of nation-states, especially those created by colonization (and the two-party system can go up in smoke for all I care). But, as embarrassing as it is, if it wasn’t for public policies and the often-destructive “government,” I highly doubt the slave trade would have been abolished, and pregnant women would still be laboring in factories, mines, or otherwise 18 hours/day with their children and dying before the age of 40, only to be quickly replaced by another wage-slave. That would be, after all, the most profitable system.

So that’s the first problem: the age-old “class warfare” between employers and employees. Sole proprietors (“self-employed”), private contractors, and associates of worker-owned firms can thankfully dodge these problems (to some degree). Otherwise, we’re witnessing the tension of this issue every day.

The second problem is inflation, or more accurately, the “Cantillon Effect.” You’re probably thinking: “What’s inflation got to do with it? If the prices of everything goes up, workers wages goes up too, so no problem. Everyone is fine.” If only this was true.

Economists understand that prices do not go up instantly and uniformly across the economy. Inflation occurs in waves, in phases. Because the currency is created in the central bank, that’s where the currency has the most purchasing power. The new cash then goes into the commercial banking sector and the rest of the financial sector and political sector. Worker wages, unfortunately, is the last segment of the economy where prices go up, so by that time, the purchasing power of the currency is significantly diminished. Teachers and manufacturing jobs are notorious for lagging wages. It’s like a drop of red ink in a pool: it’s most red where it was dropped, but the ink fades in color the further and further it goes out.

In short, wages do not increase in proportion to price increases of consumer goods and other assets. At a given moment, for example, the cost of food may go up 5% from the last year, but your wages only went up 2%.

This problem gets worse as time goes on, so that the gap between price changes grows larger. This is especially true if the central bank creates trillions of dollars out of thin air. The central bank in the US (the Federal Reserve) injected an insane amount of cash last spring (more than any other event in economic history) to prop up debt-based capitalism and the financial system. (I should note that this did nothing to fix any underling problems). This money is currently creating a severe asset bubble that will go on for the next couple years (we’re already seeing it with real estate, home prices, and the stock market)—but won’t trickle down to wages for probably another 3-6 years, and even that increase in wages won’t be as much as the price increase of those other sectors of the economy.

So, yeah, I’m hardly surprised newspapers and media is now drowning in buzz about how restaurants and hotels can’t find anyone to work. In the big picture, it has nothing to do with willingness or the supply of labor. It’s currency depreciation at different ratios.

In this case, both employers and employees should be pointing the finger at this central banking system—which dominates the global economy and is accountable to no one. As more money is created, the wage gap grows larger and larger, forcing both employers and employees to make greater financial sacrifices just to keep going. If central banks aren’t democratically-controlled or disciplined, their efforts may terminate in hyperinflation, and people may start using alternatives that can’t be centrally controlled (i.e., cryptocurrency).

Dr. Jamin Andreas Hübner has taught economics at the University of the People and Western Dakota Tech and serves as a Research Fellow for LCC International University and private business/nonprofit consultant. The views expressed by the author are his own and do not represent those of any school, organization, or business affiliation; no commentary constitutes financial or investing advice. Trade/follow at your own risk. For comments, questions, or corrections, write to jaminhubner@gmail.com

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