Gov’t, liquor stores shouldn’t mix

Gov. Corbett proposes to privatize the wine and spirits stores.

This proposal brought criticism from the labor union officials representing the store employees.

They oppose the privatization on the basis that, “These jobs are not going to be replaced, in terms of wages,” according to the union representative in a Feb. 2 Mirror story.

Assuming that is true, the employees should be grateful to have had a higher paying job than they could get anywhere else for as long as they had them.

Effectively, the excess compensation was a gift from the customers frequenting the wine and spirits stores to the employees who waited on them.

I do not argue that employees of establishments that retail wine and spirits should not receive fair compensation. The problem is that I do not know what that compensation should be. But no one else knows for sure, either.

That determination should be left to the competitive marketplace, where buyers and sellers settle on it. If the compensation is too low, the business will not be able to retain employees.

If it is too high, the business will lose revenue to lower cost competitors.

The right answer will result from an ongoing trial and error process. Note that a competitive market process also benefits all of us as we seek employment and careers.

We are free to prepare ourselves for our careers, and even move about the country, to seek out the highest compensation opportunity with the confidence that competition among potential employers will facilitate our efforts.

Bringing government to the mix introduces a bias.

The wine and spirits stores all charge the same price, so they do not compete with each other in that respect.

Further, by law, there is no competition to the wine and spirits stores within the commonwealth. In fact, you can be arrested for traveling to another state to purchase the products and return with them to the Commonwealth.

The bias occurs because compensation levels cannot be set too low as employees will not be retained.

However, it can be set too high as competition is absent from the process. Therefore, there is a natural bias for the system to set compensation on the high end. As a result, the reader should not be surprised that the jobs pay more than the employees could earn elsewhere.

Who then pays for the excess compensation? Those who patronize the wine and spirits stores do. We are told that the system supports itself and returns some money to the commonwealth – and I believe that.

That means that the prices charged are sufficiently high to cover the cost of goods sold, compensation, facility expenses, taxes, etc. The taxes include my favorite – the Johnstown Flood Tax of 1936 of 18 percent. So patrons of the system not only pay for the excess compensation in the prices they pay, but also the surplus remitted to the commonwealth as well.

But it is not called a tax.

The overlooked party in this discussion is the consumer. There are probably millions of consumers who patronize the wine and spirits stores. There are just thousands of employees who are receiving more compensation, according to their union representative, than they could elsewhere.

To see the question as only one of compensation to a particular group ignores the reality that we are all producers of one thing (our labor) but are consumers of thousands of things (as consumers). Competition is the friend of all consumers as its relentless process delivers the lowest prices for the greatest product selection.

As producers (of our labor) we have nothing to fear as competition incentivizes businesses to pay us what we are worth but no more. But the consumer is, and should be, king – as we consume many things.

Why should millions of consumers be held hostage, financially speaking, by employees who serve them?

Christopher Gable resides in Altoona. He is an occasional contributor to the Mirror’s Opinion page.