Meditations and Learnings

Meditations and Learnings

The Harms of Artificially Inflated Salaries

When municipal transit bus drivers unionise, they demand a higher salary than in a free, competitive market. Each driver is a more expensive asset and must be used to generate more money. A way of doing this is by having a driver responsible for carrying more passengers by increasing bus capacity. A reduction in the number of drivers hired will also likely occur, increasing the wait time between services. This example speaks to a general relationship between labour and capital. With an artificially increased labour cost, capital will experience a concomitant increase, with each labourer using more capital to make up for it.