Tuesday, June 10, 2014

Economics 101...

A report from the Bakken oil fields, where the jobless rate is 0.9% and Walmart is paying 2.4 times the minimum wage

Mark J. Perry

I took this photo today at the Walmart in Williston, North Dakota, where the economy is booming thanks to the gusher of shale oil being pumped from the prolific Bakken oil fields. Daily oil production in the Bakken is approaching one million barrels per day, placing it in an elite group of only ten super-giant oil fields in the world that have ever produced that much oil at peak production. In total, nearly one billion barrels of oil have now been produced in the Bakken oil fields, and all of that oil production and related activities have brought the unemployment rate in the Williston area down to below 1% in most months over the last three years. For the most recent month – April – the jobless rate here was 0.9%.

The photo above of wages at the Williston Walmart highlights some important economic concepts:

1. Walmart pays wages that reflect the economic conditions in a local market based on the supply and demand realities of the local labor market. In other words, Walmart can’t really set wages independent of market forces and it’s really at the mercy of the market in every local community. If Walmart offered the minimum wage of $7.25 per hour in the Bakken area, it wouldn’t be able to staff its stores.

2. The fact that Walmart is paying almost 2.5 times the minimum wage in Williston, ND is evidence that a single, national minimum wage for every city, county, labor market in the country can’t possibly make sense. Even proponents of the minimum wage have to agree that a single national minimum can’t be optimal for every labor market in the country. In that case, they would logically have to support thousands of minimum wages tailored to thousands of local communities, or maybe even more logically agree that minimum wages are unworkable.

3. You probably won’t be hearing anybody calling for a $15 per hour “living wage” in North Dakota, since the entry level wages at Walmarts there are already above that.

4. The energy sector is the strongest sector of the US economy, and is bringing wealth, prosperity, and high-paying jobs to places like western North Dakota and south-central and western Texas.

5 (New). From Jon Murphy in the comments:

Of course, what we also have here is a huge hole blown in the “we need minimum wage because businesses won’t pay good wages” argument.

Unfortunately, you’ll likely hear nothing about the fossil fuel milestones in America’s Economic Miracle State or $17.20 per hour jobs at the Walmart Williston when President Obama visits here this week. Instead of visiting the most prosperous part of the most prosperous state in the nation to recognize one of the most powerful engines of the US economy – the Bakken oil fields of western North Dakota – President Obama decided to visit the Standing Rock Sioux Indian Reservation about 250 miles from here in the southern part of the state, where the jobless rate is 86%. Go figure. When Obama lectures the Native Americans this Friday about jobs and economic development in their part of North Dakota, perhaps he should mention that there’s a labor shortage only a few hundred miles away, with hundreds, if not thousands of immediate openings for high-paying jobs in the oil patch.


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