Saturday, January 4, 2014


So someone brought to me a story about a guy shuttering his business in Ventura County, California (see: A Milestone to Celebrate: I Have Closed All My Businesses in Ventura County, California)
What caught my eye is this complaint of his:
In most states we pay a percent or two of wages for unemployment insurance.  In California we pay almost 7%.  Our summer seasonal employees often take the winter off, working only in the summer, but claim unemployment insurance anyway.  They are supposed to be looking for work, but they seldom are and California refuses to police the matter.  Several couples spend the whole winter in Mexico, collecting unemployment all the while.  So I have to pay a fortune to support these folks' winter vacations.

While anyone can be sympathetic to this guy's sob story about suffering at the hands of Agent Smiths of the government matrix, some of which is true, the man himself fails to see reality.

The Coyote has been gaining unearned profits for all the years he operated his business, beggaring other businessmen as well as workers. In the absence of UI, the Coyote would have faced a lower profit margin on much higher expenses.

It is an unassailable fact of trade, that absent UI, wages would rise. No one would work at a loss (wages - living expenses). Market forces would force employers to pay more.

A wage is a price and conforms to the one, true, infrangible and only law of trade, the Law of Prices. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer set the price.

All producers get constrained by the great Axiom of Profit. The Axiom of Profit holds the sum of sales must at least equal the cost of production or the producer goes to ruin.

All laborers also are capitalists as labor is the poor man's capital. Labor is the sale of work through time.

As the Coyote, his laborers must get a price (wage) so the sum of the sales (work) must at least equal their living expenses (cost of production) otherwise, there is no incentive to work.

The unemployment insurance program in California as in any state, lets any business operator engage in beggar-thy-neighbor action both upon all employees who have taxes levied against them for this program but never who collect benefits at least equal to taxes they have paid as well as all other business operators who have paid more in UI taxes than have accrued net terminated employees.

Absent unemployment insurance, even if hands would remain idle, employers would need to pay for idle hands in the form of higher wages to induce workers to at least break-even (wages equaling cost of living). It would matter not that higher paychecks would come during the work season with none coming off-season or if paychecks would be spread out over a 12-month period.

With the presence of UI, business operators pay less than full, free-market wages into a fund, as UI is a percentage levied against active payroll. UI compensation lets a seasonal, laid-off worker break-even because UI as welfare subsidizes the laborer revenue (wages) against living expenses to achieve break even.
Absent UI, it would have been the decision of the Coyote to deploy his efforts and capital elsewhere if not wanting to earn less.

So, too, then without the subsidy to the Coyote and his workers, perhaps his product never would have come to market, which is what should happen in a system where people's profits (excess earnings) let them hold referendums on what everyone else should make and thus inhibition of anything not brought to market owing to efficiency under the constraint of the Axiom of Profit in the face of the Law of Prices.
The true meaning of greed is wanting to get something without honest exchange. So wanting to gain property (right of ownership) in something (excess profits) without paying for it (higher wages absent external subsidy) is the picture perfect definition of greed.

The right move is the end UI and all political interference in commerce. That idea frightens more businessmen to a greater degree than it does the people as too many businessmen fear authentic, manly competition.

This is why Americans suffer from crony politics, crony governance and crony regulatory capture. UI is expression of that cronyism.

Beggaring-thy-neighbors is the same whether done by politicians on behalf of government bureaucrats as the means to maintain power or by self-deceived capitalist-entrepreneurs shafting everyone else for their inefficiency and greedy quest for unearned profits.

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