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Latest News - December 2013

December 4, 2013
In fast food, there's no such thing as a free lunch
Source: Washington Times
By: Al Maurer

Media outlets report that fast food strikes organized by the Service Employees International Union (SEIU) will hit 100 cities Thursday. Stories about the strikes are sympathetic to fast-food workers: A grandmother supporting her unmarried daughter and her child is tired of working for minimum wage and has gone on strike three times before. New York City fast food workers are the lowest paid occupation in the city.

The message is clear: they need more. They deserve more. It’s not fair.

In other words, to each according to their needs.

Mothers used to tell their children, “Life isn’t fair; get over it.” Today some still do. Others go on strike. Which route will produce success in the longer term?

Adam Smith famously explained the operations of the marketplace by writing that he did not rely on the charity of the butcher or the baker for his daily food. Instead, they worked in their own interest and that of their families to produce a good product at a price people will pay. The buyer works in his own interest to get the best deal he can. They meet in a voluntary exchange that satisfies both parties. The market thrives on balancing competing interests to produce mutually agreeable outcomes.

Extend that to a business which requires employees. The butcher wants to increase the volume of his business so he hires someone to help him. Why can he afford to do that? Because he makes a calculation that the employee and help him sell additional product the value of which is equal to or greater than the salary he will pay out. There’s always a risk that it won’t work out. The employer is compensated for that risk by the inducement of profit.

To the socialist, that is somehow “unfair.” They believe that the only value is that produced by the employee’s labor. It’s called the labor theory of value and it ignores the fact that the employer — in this case the butcher — contributes his own skills, tools and equipment to the bargain. Yes, the employee does contribute his labor, but the butcher contributes more than just the salary.

The same dynamic plays in the fast food industry currently under attack by the SEIU.

Fast food jobs are entry-level jobs. People are hired for those jobs with little or no skills. The employer trains the employees. If the employee does well, he or she has learned important job skills that can be transferred to other jobs. Just as the butcher has contributed more than just a salary to his employee, so also the fast food employee has received more than just a salary.

In a free market, salaries are based on the knowledge, skills, and experience of the worker. An entry level job pays the lowest wage because it requires the least amount of all three. The socialist looks at a moment in time and says, “This is unfair.” But the employment relationship wouldn’t last unless both parties were getting something out of it

 

 


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