• Ron Finke: Supply and demand still in force

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  • There is a story about modern technology (capital) and labor: the new factory has smart machines and robotics galore such that it runs itself.
    But it has also a man and a guard dog. The man is there to feed the dog each day. The dog is there to bite the man if he tries to touch anything else!
    Labor and capital have been the primary creative inputs of our remarkable advance in living standards during the past 200 years. Conventional wisdom would say that capital has won the race between the two. Perhaps human labor will never again be as necessary and valuable as we think it should be.
    Employment or lack thereof is important because we spend billions for worker training, unemployment and welfare assistance programs and have for decades. The president proposes a raise of the minimum wage to $10.10 an hour. Nineteen states including Missouri already have their own minimums higher than the current federal $7.25.
    Whatever the economic case about minimum wage, it amounts to the government preventing people working for less than that price. Walter Williams and Thomas Sowell, the two most notable black U.S. economists, declare it to be an effective tool of racists around the world.
    Regarding unemployment, many believe that good stock market health must be tied to higher levels of employment in our country. In general, that is just not true. Company health in a truly global economy is independent of it. So long as the firm can find its workers with the skills it needs already or can develop in them in a way to be competitive, it can thrive by growing revenues and profits.
    I wish everyone could much more easily find the position for which he is best suited and desires. That will be his highest and best productive use and should generate sufficient pay for a good living.
    In general, we are paid what we are because of the supply and demand for our work. The number of guys weighing 290 who can run 40 years in 4.5 seconds is quite limited. Since we love our football, we will pay big bucks to see him play the line. Qualified truck drivers in North Dakota are in very short supply and great demand now. Unemployment there is less than 2 percent. It supposedly consists of those who cannot pass a drug test with two weeks to study for it.
    And so it is, with an imperfect world of opportunity. We can wish all sorts of things, but that will not make them so. One thing I do know is that a rising tide lifts all boats and provides opportunities for starting new businesses. Those create all substantial growth in new employment.
    Past performance is no guarantee of future results. Intended for general audience and not as specific advice.
    Page 2 of 2 - Ron Finke is president of Stewardship Capital in Independence. Stewardship Capital is a registered investment adviser. Reach Finke at rcfinke@stewcap.com.
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