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Yesterday’s front-page headline in the local liberal rag, and the ensuing article, is about the economic legacy of Florida Governor Rick Scott, and whether he is to blame for Florida’s so-so level of wages. Scott has engineered a legitimate economic near-miracle over the last few years, as his policies have produced over a million new jobs. This job growth came after Scott promised in his 2010 campaign for Governor that he would create 700,000 jobs in seven years. He did it, in fact Scott claims Florida has gained 1.4 million jobs. Florida’s job growth has beat every state in the union, except Colorado, Utah and North Dakota. The state’s unemployment rate has dropped 65 percent to a 10-year low, lower than the national average. At the same time, Florida’s employment numbers are up impressively, well above the nation’s average number.
Here’s the amusing part: Scott is being blamed by some ignorant leftist state and national legislators for Florida’s more moderate “wage growth”. One can only wonder where the detractors get their “evidence,” because Florida has done an outstanding job in raising growth in low-wage sectors. In the past decade, overall employment rose five percent, but it gushed impressively in low-wage sectors: 22 percent in the hospitality and leisure sectors and nine percent in retail trade.
And yet, all of that is beside the point. While it may be that wage growth overall has slowed, remember the bright spot: low wage costs are what entice company owners to relocate to Florida, and such relocations boost the economy and number of jobs in the state.
But what does slow wage growth have to do with Rick Scott? The answer is not much. The Governor can affect employment and unemployment levels, but he cannot affect the rise or fall of wage growth very much. Other factors have a far more important influence, and that’s what clueless Democratic legislators don’t understand. In their haste to vilify a Republican governor over wage levels, they are entering a realm where their ignorance is embarrassing.
Wages in Florida are not set by the government or moved up or down by the Governor. They are set by the irrefutable Law of Supply & Demand, the bedrock of economics. Employers pay workers on the basis of what’s required to hire them. Employees want to be paid as much as they can get, and employers don’t want to pay any more than they need to. The actual amount of payment is nearly always set by the forces of Supply and Demand. If there are not many people who apply for particular jobs (a lack of Supply), the employer must raise his/her wage offer until he can find the needed workers. If there are lots of people available to fill the jobs that are needed (an abundance of Supply), it causes competition for the jobs, and the employer can lower his/her wage offer and get all the people he needs.
So, it is the dynamics of the labor force, dominated by the Law of Supply & Demand, which sets wage levels. When there are a lot of people willing and able to fill certain jobs, such as teachers, the economic Law pushes wage levels down; when the number of willing and able workers without jobs is scarce, such as in a period of full employment, the Law causes Demand (by employers) to dominate Supply and pushes wage levels up. If unemployed workers are scarce, employers must bid up their wage offers to find people to hire.
Raising the Florida minimum wage won’t work either, since all it does is price too many younger or unskilled workers out of a job altogether. Unfortunately, as Thomas Sowell said, “The real minimum wage is always zero.”
What this means is that Democratic lawmakers are wrong-headed when they blame the governor of Florida for slow wage growth across the state. Wage levels are almost always set by supply and demand in the workplace, not by actions of the governor. Hard to say whether these leftist lawmakers, none of whom are economists, are simply economically stupid or whether they’re just showing off, trying to make political juice out of nothing.
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