Tag Archive for 'profits'

The Easy Way to Fix Unemployment

Written by Colin. Published on June 18, 2009 ago in Current Events and Politics. 37 Comments

I wasn’t surprised to see that Oregon’s unemployment numbers have steadily risen over the past five years. I’m even less surprised that it has reached a whopping 12.4% and is second in the country.

A lot of people will point to the recession as the chief culprit for high unemployment – not merely in Oregon, but around the world. And while it is true that businesses closing puts immediate pressure on unemployment figures, it doesn’t tell the whole story.

The state of Oregon, for example, decided to tie the minimum wage to rising prices in 2004. This was put to the voters as a way to “lift all boats” in a rising tide of wage-increase and general prosperity. It was argued that the poorest would benefit as employers were forced to pay them more and that the increased wages would stimulate the economy.

Oregon now has the second highest minimum wage and the second highest unemployment rate (behind Michigan). These two statistics are directly correlated. The minimum wage is not a rising tide that lifts all boats – rather it is a barrier over which one has to jump to get a job. Raising the minimum wage does not force employers to pay their employees more – rather, it forces them to fire anyone who is not productive enough to earn for them at least their worth in the new minimum wage. Any employer who continues to employ a worker who earns them less than the minimum wage will eventually go out of business (or at least he will have to subsidise this worker by taking from other employees, investments or profits).

If the federal and state governments want to see employment numbers go back up, they should abolish the minimum wage.

Of course the first fear is that existing workers would suddenly have their wages dropped drastically. But this is fundamentally false – as these employees are currently demonstrating that they can produce at greater than the minimum wage (otherwise they would not be employed). What would happen is that companies, even individuals, would suddenly be able to afford more help. This would increase their efficiency, their profits and money moving into the least productive members of society.

But governments have an interest as well – they would see their revenues rise as more employment and more income means more revenue.

At the very least, it would put downward pressure on unemployment – working against the increase that are being facilitated by the recession.

Please feel free to read my full analysis of the minimum wage:
The Minimum Wage I: Economic Analysis
The Minimum Wage II: Social Analysis

Microsoft’s Trouble with the EU Reveals Public Ignorance

Written by Colin. Published on March 3, 2008 ago in Current Events. 20 Comments

As was mentioned Friday in the Weekly Links, Microsoft has been fined over 1.35 billion dollars by the EU – the largest such fine ever – for several issues of non-compliance with the law. But before we get to some of the details of the story, let’s look at a short historical overview.

Microsoft started out as quite a small player back in the mid 1970′s. But like all (yes all) successful businesses operating on the free market, they offered goods and services that people wanted and were willing to pay for. Microsoft made excellent profits, provided more and more jobs and gave consumers and other businesses new and existing goods and services that were better, cheaper, faster and more reliable then their competitors.

Obviously Microsoft has been pretty big for a while now. They faced trouble in 2000, being called an “abusive monopoly” in 2000 in a court case, but managed to beat back a forced split in an appeal and settlement.

The EU Takes Its Shot
So now we have the European Union regulators fining Microsoft for non-compliance with certain laws. They most likely did indeed break these “laws,” (hard to tell though with arbitrary language such as “reasonable royalties”) however, are these laws and their reasoning just?

The intro to the Bloomberg story declares:

European Union regulators fined Microsoft Corp. a record 899 million euros ($1.35 billion) for failing to comply with a 2004 antitrust order to stop overcharging for using its patents to connect to Windows.

Somehow, Microsoft has managed to “overcharge” for patent use. So then what is the right price? In reality, there is no moral or legal “correct price” – a price is merely a scientific measurement of where supply meets available demand. Microsoft can charge $4.5 million dollars a second for patent use, or it can give them away for two peanuts and some lint – either is morally neutral. This is because Microsoft owns these patents (intellectual property argument aside). Owning property means you can do whatever you want with it – sell it, burn it, hoard it or shoot it into space among other things. The EU’s justification implies that, regardless of the science, that certain people are entitled by political rights, to the fruits of the labor, time, effort and risk that Microsoft has borne over the years.

The story reveals more:

In a statement, the Redmond, Washington-based software maker said it would review the decision, which found Microsoft overcharged for patent licenses that rivals needed to connect products to the Windows operating system.

The justification of course was that the “rivals” of Microsoft “needed” these licenses to use Microsoft products. First of all, everyone has a right to compete with Microsoft to make a better operating system and improve technology. And even if Microsoft has taken full legal advantage of patent law (in which case, don’t fault Microsoft – fault the law) – rivals still have every right to create substitutes. The fact that these substitutes have been unable to compete with Windows shows that Microsoft is overwhelmingly satisfying customer’s needs in this area. It’s not their fault that their rivals can’t do a good enough job.

Moreover, simple “need” is not a valid justification for stealing Microsoft’s property (a forced lower-than-market price is still stealing). Just because I need bread (even if I am going to die from hunger) I have no right to steal a loaf from Safeway, nor to have a right to buy it for less than Safeway is willing to sell it to me. I suspect that the rivals “needs” are the same kind of “needs” that have American’s in a frenzy over gas prices right now – as though it is written in the constitution that “gas shall be less than $1.50.”

Consider this last bit in light of this:

Microsoft had to provide data to rivals to allow servers to connect to the Windows platform. When patent licenses were necessary for that network data, Microsoft was required to charge “reasonable” royalties.

Brent Williams, a New York-based analyst with Benchmark Co. said, “Over time, every competitor is going to look at that and say `is there an opportunity for me to take advantage of the fact that Microsoft can’t do X without further legal problems, and can I exploit that?”

We have to remember that these laws are not about serving some public good, but benefiting greedy special interests who have failed to compete legitimately on the open market. Microsoft’s creators, employees and users have every right to pursue their own happiness. They have no obligation to the public whatsoever – either to provide their service at a lower price or to help their competition use their products.