My wife and I recently returned to New Orleans after being displaced by Hurricane Katrina. Though our visit lasted barely three days, I was able to get a glimpse into what has been happening since the storm hit over a month ago. The pace is slow but not entirely discouraging. That said, however, the long-term impact is hard to predict. There have been major changes in infrastructure as well as population and demographics. To add insult to injury, one has to also consider the presence of the National Guard, socialist central planners, fascist regulators and other blood-sucking parasitic critters.
Let me start by saying that, yes, every street is covered in trash. There are claims that it will take months and even perhaps more than a year to pick up all the junk. The amount is staggering. From rotting fridges to wet carpets to moldy plywood, the contents of homes have been placed on street corners. Those looking for new visual and olfactory experiences, it’s prime time in the crescent city.
One could also believe it’s election time judging from the amount of signs. A closer examination reveals that they’re anything but campaign propaganda. From what I could see, pretty much every business that is already open or planning to open is hiring. Jobs are available left and right and the competition for jobs is staggering yet healthy. Such is the demand for labor that, for example, Burger King is offering a $6000 bonus for those who sign a contract to work for a year. Similarly, several other fast food chains have increased their hourly wages to attract employees.
Then there are also signs for house reconstruction and tree removal. I have an anecdote to share on the latter. I had the radio set to a local talk station. The host and caller were talking about how much people had paid to cut and remove trees from their roofs. As expected, price gouging was mentioned. The caller seemed very upset to hear that people had paid too much and were "ripped off" by companies who had charged, he claimed, too much for something that should cost less. (I wish I had a "record" button on my car radio so I can share this and re-live this pleasurable listening experience). The host of the show had also invited a local government agent who was reassuring people that he would investigate and even prosecute companies who were not being fair and were *gasp* tinkering with the free market. There was even a phone number where the public could call to report companies who were behaving unethically. The government agent also said that they would check every complaint to make sure companies were properly licensed and complying with laws.
Let me go back to the example of the fast food chains. They have increased their wages because there is a greater demand for workers. The higher the demand, the more people are willing to pay. Burger King is going to spend $6000 more per employee because the demand for employees is higher now than what it was before Katrina. Similarly, there is a higher demand for tree removal and prices rise accordingly. In both cases, however, prices are checked by competition. Since there is more than one company that is offering tree removal, those who offer the best service at the best prices will be rewarded with customers. The same happens with the labor market. People looking for work will go to whoever pays best. So, naturally, the price of labor increases. Thus, in times of need, it is not only necessary but normal for prices of both good and services and labor to increase.
"But wait. The company that increases prices hurts the customer!" would say the statist. As a free marketer, the reply is simple and obvious. "But wait." I would say, "the employee who accepts a $6000 bonus from Burger King is hurting the company; the employee is gouging too!" Indeed, if one accepts the government claim that an "unfair" price increase constitutes gouging, then why is this not the case for the employee who has also increased the price of his labor? Thus, the government’s silly war on gouging is illogical, illicit and counter-productive. Just as a homeowner is free to accept or deny temporarily higher prices for goods and services, the same freedom exists for employees to accept or deny higher wages for their labor.
To the caller who was concerned about being "ripped off," I say "don’t pay." If you feel that the price to remove a tree is too high, then simply do not offer your money to that company and look for another one. In a free market environment, there will be other options. Those who cannot compete will be eliminated. Right now, there are hundreds of businesses offering their services. No one is forcing you to open your wallet and pay what you consider to be an excessive amount. When you go to your local grocery store, if the price for a pound of apples is too high, you don’t call city hall and cry your eyes out. Why do so now? Also, ever heard of haggling? Many companies will very often particularly when they are hurting for customers, such as in New Orleans today accept a lower bid. They do so because they are very aware that if they are not flexible, there are many other companies willing to do the job for less.
It is often both amusing and exasperating to watch local officials dealing with non-issues. Mayor Nagin has asked employers to pay an extra 50% in wages to attract workers. Why would it be just fine and dandy for employers to increase the price of labor (paying employees more), but not for companies to increase the price to remove a fallen tree? The conclusion is unmistakable: Mayor Nagin is aiding and abetting gouging. He is in effect calling for potential employees to gouge companies by requesting too high of a wage. Shocking. Is this a criminal offense in Louisiana?
The most dangerous of politician, other than that who calls for warfare, is that whose level of economic illiteracy is so great that it would cause me to start needing Pepto Bismol by the gallon.
October 14, 2005