 |
 |
 |
|
| Economics Web |  |
Lulubelle worked in a factory owned by Mr. Weaselhead. She made widgets and was paid $20 per widget in salary and benefits. Mr. Weaselhead had additional overhead expenses of $10 per widget so when he sold the widgets for $40 each, he made $10 in profit. But one day, Mr. Weaselhead found out if he outsourced the widget-making to another country, he would only have to pay the workers $1 per widget. His additional overhead would only be another $1 per widget, even with shipping. If he sold the widgets for $40, he calculated, he could profit $38. What a deal! So, Mr. Weaselhead fired Lulubelle and the rest of the workers and closed down the factory. At first, it worked. Mr. Weaselhead was very happy. But then, he began having trouble selling his widgets. No one was buying. So, he lowered the price. Still, sales were down. What had happened? Economics. When Lulubelle was paid a living wage, her husband, Thaddeus, was able to stay home with the kids. But after she was laid off, she was unable to find a job that paid $20 per widget. She had to get two jobs that paid $5 per widget. That still wasn’t enough to support the family. Thaddeus also got a job that paid $5 per widget. But they couldn’t keep up with the house payments. They moved to an apartment. Because none of their jobs paid benefits, they lost their health care. So many people were laid off, the free clinics were overwhelmed. Many could not be served and they were forced to go to the emergency rooms at hospitals. Because no one was home with the kids, they found other ways to entertain themselves. So many homeowners were foreclosed on, property tax collections fell. The after-school programs were cancelled. Because more kids were unsupervised and got into trouble, the city had to hire additional law enforcement officers. That drained money away from paying teachers so class sizes grew and some schools were closed altogether. More students dropped out. The banks foreclosed on a lot of homes. No one was making payments. The bank ran out of money to loan and no one could start a business, buy a car or borrow money to go to college. Soon, the bank laid off employees, too, and some banks had to close. Eventually, no one in the area had any extra money. Mr. Weaselhead could not sell any widgets locally. He tried to sell online but since no one paid the local sales tax, the community did not benefit. After a while, even the online sales stopped. One day, Mr. Weaselhead was mugged. He was rushed to the emergency room but it was packed. He had to wait. Ms. Toodleloo moved into the area. She had studied economics and understood how nothing happened in a vacuum. Ms. Toodleloo knew each factory job generated another 15 jobs in the community. Her new factory needed supplies and equipment. That made some jobs. The workers needed uniforms and cars to get to work. There were a few more. Because the workers were off food stamps and WIC programs, they could buy more expensive food. The supermarket needed to hire more employees to keep up with demand. Personal purchases that had been put off, such as appliances and winter coats, could now be made. That was a couple more jobs. Eventually, the workers were able to save enough to buy homes. Property tax collections increased and more teachers could be hired. Schools could be expanded and some new schools were built. That was even more jobs. Because so many people in the community were employed, they now had the money to buy widgets. Even widgets at $40 each. Sales soared. Ms. Toodleloo took some of her profit to expand the factory and the rest she deposited in the local banks. The banks were now able to loan to other new businesses and to other new homeowners. More jobs were created. Thaddeus was able to quit his job and stayed home with the kids. He helped them with their homework. When they were in school, he was able to return to the volunteering he used to do at the free clinic. All three graduated from high school and went on to college. One majored in economics, one in biological science and one went on to med school. They all earned salaries that allowed them to buy lots of $40 widgets.
|
2011 All Rights Reserved