Tao Economics

Initiative 1183 passed in Washington State. Liquor sales are being passed off from the state to private business, and emotions have been running high. Indeed, a friend of mine over some bourbon told me it shouldn’t have passed, it’s not fair to the workers who are losing their jobs, “they have families to support and they pay taxes”. Yes. I suppose that is true, so of course because I was for the initiative I’m uncaring and unsympathetic, which is more or less what was implied. While I don’t take delight in anyone losing their job, the setup was unsustainable.

I don’t recall my friend ever getting this emotional when there have been massive layoffs in our state from Boeing, or Amazon, or even Starbucks. Maybe it’s because this time it was up to the people to decide. We got to vote on it, although if pressed my guess would be that my friend didn’t vote at all.

There was a different version of this initiative that was tried a year prior but failed. A funny thing happened though because of the first initiative, the state got a bit more nervous that the good times might be coming to an end. The state extended store hours (a common complaint, as they ran on the same time as your average bank), they opened up even on Sunday and when you walked in to the store attitudes seemed to have even changed. The clerks were suddenly more friendly and helpful. I’m sure I’m not the only one who noticed.

So! What was the median hourly wage for a full time state employees working at a liquor store? According to findthedata.org it was $23.17 (http://government-pay.findthedata.org/l/1476/State-Liquor-Stores). If we look at the average retail hourly wage in Washington according to the BLS we find that it’s $13.85 (http://www.bls.gov/oes/current/oes_wa.htm#41-0000).

The state workers have been making a full 67% more in their hourly wage compared to the private sector! This is a huge disconnect! Aw… I can already hear what’s going on in your head. Well, “the private sector should be paid more” you say. Maybe., but these business’ have to make a profit, and if you think they make a profit all the time then do I really need to point out Best Buys recent massive loss? Business is much more difficult than most people realize and if all these companies had to close their doors there wouldn’t be any government employees at all! Remember, I’m not even including other benefits. It just so happens that if you take a peek at the states liquor control board budget you will find that if it were a private business they would have had to close their doors long ago.

And who pays for all this? Folks that have seen their income drop substantially.

“The red line, here, is median real household income, as gleaned from the CPS, indexed to January 2000=100. It’s now at 89.4, which means that real incomes are more than 10% lower today than they were over a decade ago.” http://blogs.reuters.com/felix-salmon/2011/10/10/chart-of-the-day-median-income-edition/

Somehow this state monopoly is considered to be a fair deal for those that defend it. I fail to see how.

Next my friend stated that the price of liquor will increase because of the initiative. He’s right it will. Part of the deal is a 10% tax on distributors, and a 17% sales tax that goes to the state. These are massive taxes that will have a large effect on the price. Any business man would drool over a 17 plus percent profit margin that is guaranteed by law no less! Consumers will get greater selection and convenience when purchasing alcohol. The tax on liquor sales could be good for the citizens of Washington as long as it’s used to help balance the budget; this was one of the major hopes in passing the initiative. In 2013 the state projected to have a $2 billion deficit, the liquor board is a good reflection on other departments in the state. (http://www.cbpp.org/cms/index.cfm?fa=view&id=711).

No, I’m not for firing everyone to balance the budget. Wages and salaries should be negotiated to something similar to what the private industry pays in that field. However the problem with that is public unions prevent any real negotiations from happening. In fact they only will negotiate their salary upwards; any possible cuts (or even a freeze) are deemed unfair then they threaten people with strikes. When our garbage workers were going to go on strike for a pay increase demanded by the union, a few workers were quoted that they just wanted to work and did not want to have anything to do with the strike, and the public was outraged they were demanding such things when everyone else was hurting. Finally the union backed off and the threat of stopping service ended. When you can’t negotiate a realistic wage, your only other option is layoffs, and of course this is meant to (and will) tug on your heart strings. Sadly there are no easy answers.

So now at this point my whole character is up in question, my friend reminded me of silly purchases I’ve made in the past, he told me I was just like Glen Beck and that I’m a conspiracy nut. It was as if he had forgotten who I was after all these years. See how emotional this stuff gets? Ironically character assignation is something Fox News often does to try and make their point. Maybe he should stop watching.

We come from two different planets. I don’t believe the government has our best interest at hand; they seem just as selfish as the next person. I do believe in the law of unintended consequences. And public workers can’t continue on the back of everyone else forever. Just look at Greece and Spain right now. Something eventually gives.

On his planet the government does have the best interest of every one; there should be no limit to the cost of protecting everyone. There is a $24 hour job for all, with no consequences and it all works out somehow.

Maybe, I’m wrong on all this… maybe it is the governments business to sell alcohol. Maybe I am a bad person for saying something. I don't know. There very well could be unforeseen problems with this initiative. His planet does sound nice after all, I’ll try and take my next vacation there next time. Or maybe next time we broach this subject I’ll just have some soda water instead.

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Update! made a few corrections to the above store here: http://taoeconomics.com/content/sober-conversation-wa-state-liquor-going-private