Dave Rogers for Florida 17

Fighting for Florida's future

minimum wage

Externalities

An externality is a cost of doing business that is not reflected in the price of a product or service. Nevertheless, the cost remains, and the price is paid by society in some form or another. Usually in the form of taxes or a degraded environment.

For example, all "disposable" products are ultimately, by design, "thrown away." Usually that means they are deposited in our trash, and transported to a landfill somewhere by a county or municipal sanitation service.

We all pay for that in a sanitation tax. Presumably, the cost of disposal could be calculated and added to the price of the product by the manufacturer, and manufacturers of "disposable" products would then pay for the collection and landfill operation and maintenance. Users of those products would bear the cost of their ultimate disposition, not the general public. Manufacturers, would have an economic incentive to make their disposal costs low, in order to increase profits, and we'd have less "waste" to dispose of overall.

Another example is one many of us are familiar with from our recent history. In the 60s and 70s, urban air quality was an enormous problem. One source of those problems was tailpipe emissions from automobiles. Through a series of emissions and fuel economy regulations from the EPA and the state of California, manufacturers developed emissions control mechanisms, the most significant of which was the catalytic converter. Adding a catalytic converter to the manufacture of an automobile added significant cost to the vehicle, but it had the desired effect of reducing tailpipe emissions. The externality of degraded air quality and its adverse health effects was eliminated and the cost of emissions was instead borne by the people using the product.

(As a side note, the introduction of the catalytic converter required the elimination of the use of leaded fuels. This had another significant health benefit. Perhaps I'll return to that one day.)

Another externality is created when states allow the cost of labor to be undervalued by establishing a "minimum wage," that isn't a living wage. Workers who work for minimum wage are often unable to earn enough money to meet all the necessities of life, like health insurance, adequate housing, nutritional food, etc. Many of these shortfalls are borne by the workers in a degraded quality of life; but many of them are also borne by taxpayers in the form of subsidies of one form or another. Yet these are often insufficient to meet the intended need; and are always degrading to the dignity of the worker.

Nevertheless, this externality permits the sale of "cheap" services to consumers at the expense of the workers in those industries, and taxpayers as a whole.

I support a "minimum wage" that is also a living wage. I recognize that market economics will increase the cost of goods and services, and also accelerate the elimination of jobs through automation. Those are problems we can address as well, but the current state of affairs is unfair and unconscionable.

While we profess to value a "free market economy," we have studiously ignored externalities everywhere in the marketplace, that place unfair burdens on society as a whole, workers in particular and which damage and degrade our environment. To make a fairer market economy, regulation is necessary to eliminate externalities.

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