I have an acquaintance who owns several franchises of a national fast food chain.  He refers to increasing wages for his workers as the 49-cent taco problem.  If he raises wages too much, his cashiers just can't sell enough 49-cent tacos in an hour to make a profit.  He can raise wages only as fast as he can raise taco prices – and the market rate of inflation determines the latter.  Likewise, he can't raise wages based on gains in productivity because cashiers already are selling the maximum number of tacos possible per hour.  It's actually a pretty simple principle to grasp that wages should be an amount reflective of the value the wage contributes, or produces.  That is to say, if an hour's labor produces something that can be sold for $10, then the value of that labor should be $10 – after deducting any hard costs for raw materials, capital, etc.  As time goes on, the sale price of that good should increase due to...(Read Full Article)