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Stadium Worker Economics

Many of my friends here at Maryland Politics have posted/counter-posted in reference to assertions made by Andrew Kujan. The most recent discussion about labor economics has me excited at the opportunity to make a post, as I am somewhat of an economist myself. (When I say somewhat, I mean somewhat–I graduated with a degree (cum laude!) in economics, but was quickly rejected to the PhD economics program at the University of Maryland).

Feeling lonely and left out, I have decided to post on this topic.

Minimum wage, living wage, or any other forced market distortion by the government on wages, necessarily causes something called deadweight loss. Basically, this means that the economy cannot produce the same level of output that it could without the government burden.

If the stadium owners are forced to pay the cleaners more, they will not have as much money and cannot hire the same number of cleaners. Mandated wage increases causes unemployment, it’s as simple as that.

The larger point is a more important one to make. Perhaps government or Mr. Kujan believe that helping these stadium workers does just that, and only that. Not true. The whole point of trickle-down economics is that transactions do not happen in an isolated bubble–they affect the entire economy. Let’s say Peter Angelos has to pay $3 more per hour to clean his stadium. Then let’s say he raises ticket prices to cover that increase. In a bubble, workers would be making more money and the rich game-goers that can afford the tickets aren’t affected that much because they have the money. Even ignoring the fairness argument, this is not good. If the stadium goers used to spend $500 a month on game tickets and $500 on other things, they may now have to spend $550 on tickets and only have $45o left for other things.

The workers–poor, middle class, and rich–in the ‘other thing’ industries become worse off, because demand for their stuff just went down by $50. This is why no amount of central planning will ever be beneficial for an economy–it is impossible to plan an economy because you would have to know the exact preferences of every person in that economy.

When the government tries to help one specific group of people, it hurts other groups of people. Such a horrible equity problem can only be avoided with a free-market.

As for the assertion that Maryland’s liberal policies have made us the wealthiest state, give me a break. First of all, we need to take into account cost of living. If we have the highest median household income, but our real estate prices are the highest in the country, then our real (price-level-adjusted) wealth is significantly lower. Every measure done in every study, ever, shows that the openness of an economy is directly and positively correlated with that economy’s success.

Ok, now I feel included.

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