when the economy learns to share

The sharing economy is the concept in which people pool their unused capital to maximize profit and minimize waste. Resources are shared so that they are utilized to their full potential, and money is saved because each individual doesn’t have to purchase the capital for himself. However, some disagree with the premise of many of the new sharing companies such as Airbnb, Lyft, Postmates, and Uber, whose primary, sole goal is to maximize profits. Ideally, the goal of the sharing economy is to minimize consumption and waste for the good of the whole, but such models are difficult because they require donations/volunteers and have no incentives to offer.

This is an interesting and brilliant idea- the sharing economy- but it seems that it faces the challenge of sustainability. An economy based on morals over money seems exactly the opposite of the traditional business world. Although waste is decreased and profits are increased, there are risks and downsides involved. The primary risk is that you depend on the honesty of all participants- it would be easy for someone to take advantage in a sharing situation. The downfall is that in some cases one has to turn down opportunities for additional profit in order to share with someone else.

This is a relevant issue, and it is what sets apart the two types of “sharing” companies. Both have a commodity that is not being used to its full capacity. One would assume that this means that there is no opportunity cost in donating it to someone else- the thing is not being used, so they might as well let it benefit someone else. The companies like Uber, however, don’t seek to benefit others by sharing with them, but seek to make the profit that would normally be lost by the unused item. It can benefit others- but at a cost. Technically, these companies still minimize waste and consumption as a secondary goal, but the primary goal of profit overshadows this endeavor because it completely changes the choices made by the business.

If sharing is used correctly, the factors of production- labor, human capital, natural resources/land, capital- can all be considered sharable commodities, meaning that the limited ability to produce based on capital is not quite as limited. This is especially beneficial because more people can produce for the same cost as one if all have similar goals. The sharing economy has obstacles to overcome, but if it is optimized, it could make the economy more efficient.

urban farming gives the economy a boost

The St. Louis area has experienced economic decline, mostly because the manufacturing industry, which previously dominated the city’s economy, has declined and the rate of settlement in the area has decreased. However, the city is a destination for refugees, especially those from Bosnia. The International Institute of St. Louis is a nonprofit organization that has boosted the local economy by giving these people (refugees/immigrants) the opportunity to farm exotic crops in plots of land set aside for urban farming. The farmers receive good money for their crops, and the system helps the immigrants, which increases settlement, which helps the economy.

It seems that agriculture has become obsolete in the US, and I know that this is a misconception, but it is obviously not the leading economic activity now like it was in the past. This is probably largely due to competition from foreign imports. In addition, many Americans would be unwilling to farm, especially considering that we have shifted away from agriculture both economically and culturally. However, the article I read quoted a Bosnian refugee who said that farming was all he knew; many immigrants are used to labor, and provide a unique service to the economy as a result.

The manufacturing industry in St. Louis has declined, resulting in a decline for the whole city. The International Institute’s effort to bring in a new exotic crop to the local economy generates a whole new market, especially since the immigrants are able to satisfy every aspect of the market’s factors of production. These immigrants have the ability to be entrepreneurs because they offer a unique good and a unique resource- their labor. They also have no opportunity cost to do so because they have free time outside of their 8 hour work day. In addition, the urban farming is successful because it provides the unique opportunity of benefitting from both agriculture and urban life at the same time. The workers can both obtain city jobs with regular wages and get additional income from the farm produce, which has generated demand in the city. The people of St. Louis have developed a taste for the exotic crops, and local restaurants pay good money for them.

By opening up this new market, a domino effect of good for the economy has resulted. Employment increases, supply/demand is generated, and the city’s income has increased 4-7%. It just goes to show the good that can come from an innovative nonprofit initiative.

minimum}{wage

A recent poll asked small business owners their opinion on raising minimum wage. Although only 1 out of 4 of the polled even employed minimum wage workers, opinions on the issue were split down the middle. The current federal minimum wage is $7.25. About forty-nine percent of business owners said the minimum wages should be raised, while another forty-nine percent said it should stay the same. Despite these statistics, most business owners said they planned to raise their wages at least a dollar an hour within the next year because they face competition from other businesses for employees.

I had never considered the fact that employees are considered a commodity; it seems these days that the employer/employee relationship favors the employer, considering unemployment rates. Labor is a factor of production, but it is also subject to the forces of supply and demand that the goods produced are subject to. Companies are not only competing for consumers, they are also competing for employees. In this struggle, the business’s goal is to ideally keep the price of the good as high as possible and the employee’s wages as low as possible so that they make a profit. It’s also interesting to note that small businesses not only face competition from their direct competitors (the article I read reported 1 in 3 small firms had lost workers due to higher wage offers from competitors), but they also face competition from large corporations who have the advantage in more weight than one.

I didn’t realize before reading about minimum wage that there is both a federal minimum wage and state minimum wage. I know that it is varied by state based on the cost of living in that place. The topic has actually come up a lot in conversation lately; I’ve been told that New York’s minimum wage is $15 an hour, and my dad told me the other day that Texas’s minimum wage is the same as the federal rate, he said likely due to the fact that the state of Texas tends to stay out of employee/employer relations.

Minimum wage is a hot topic right now, and my reading shows that employers are willing to meet the wage raises being discussed by politicians, which is a good sign for the labor force. I am curious to know, however, why the opinion is split in half if so few use the minimum wage anyway. I guess employers would rather have freedom of choice to make their wages whatever is necessary rather than being regulated; perhaps business owners want the option to go down to minimum wage if times get tough.