When a business decides what to charge for goods and services, they take into account their expenses. These include things like the rent or mortgage on their offices, factories, or stores, the cost of utilities, and the materials they use in order to do what they do. This amount is totalled up, and divided by the number of units they expect to sell. That’s the minimum amount that they need to charge, and from there they mark up the price to create a profit margin based on what people are willing to pay.
I’m simplifying a lot of things, of course, but this is basically how a business decides what the base price of goods and services need to be. If people are willing to pay more, and they can keep their expenses down, they make more profit. If their costs are closer to what people are willing to pay, they don’t earn much profit. When the costs exceed what people are willing to pay, they either lose money, stop making that product, or discontinue offering that service.
What does that have to do with you? A lot, actually, even if you’re not a freelancer, an entrepreneur, or a self-employed person. Because, you see, your labor has value, but you’re probably not calculating your worth based on your expenses. If you add up the amount you spend on housing, utilities, groceries, and other necessary things like transportation and health care, that’s how much you need to earn. If you’re a salaries employee, multiply it by 12 and that’s your annual costs. You can’t take a job that pays less than that. If you’re paid hourly, take your monthly costs and divide it by 128 (4 weeks times 32 hours per week, the minimum number of hours to be considered full-time and in some cases the most hours an employer will give you). That’s the lowest hourly wage needed to cover your costs.
In the United States, we’ve been sold on the idea that it’s a buyer’s market. Employers make an offer, and we have to take it or leave it. Often, we do have to take jobs that don’t cover our costs because something is better than nothing. Yet if you asked a business to do that, to sell their goods and services at a price that didn’t cover their costs, they’d tell you that you’re crazy. Why is it okay for them to do things in a way that makes financial sense, but we’re expected to suck it up?
This isn’t socialism. This is capitalism. It’s not whining and demanding something for nothing. It’s letting the market sort things out. This is nothing more than playing by the same rules that businesses use. This isn’t a matter of unions trying to ruin business. This is paying a fair price for a necessary resource. If the rent or utilities go up, a business will pay it, try to cut expenses elsewhere to compensate, and raise their prices. When the price of meat and produce increases, grocery stores and restaurants charge more. Yet everyone balks at increasing the cost of labor, and expects employees to operate at a loss so that the employer doesn’t have to.
We all need to start thinking like capitalists, even though they’ll try to spin this thinking as Marxist.