Supply and Demand in Relation to SSOL

The idea that the market will naturally correct itself—balancing supply and demand—only works when dealing with elastic products. However, this principle breaks down when applied to inelastic markets, where demand remains constant regardless of price. In such cases, price control must come from an external force.

Understanding Market Forces

Consider a hardware store’s fastener section. Often, all the nails and screws come from the same manufacturer, yet the prices remain low. This isn’t due to active competition but rather the threat of competition—if the manufacturer raised prices too high, another company could easily step in and undercut them. Since fasteners are not critical to immediate survival, customers can wait for a lower-priced alternative.

Now compare this to the pharmaceutical industry. When a company acquires a drug patent and drastically increases its price—or pays a generic manufacturer to stay out of the market—consumers have no choice but to pay. This is exactly what Martin Shkreli did, and similar practices occur with insulin, rescue inhalers, and many other essential medications. Unlike fasteners, people cannot afford to wait for a lower-cost alternative. If they don’t get the product, they suffer severe health consequences or die.

The Issue with Market-Based Pricing

For inelastic goods—such as medicine, food, and housing—purely market-driven pricing does not work. To illustrate this, imagine a world where corn is the only available vegetable. Currently, thousands of farms across the country compete, keeping prices low. But over time, a corporation gradually bought up farmland until it controlled over 80%. Now, the corporation decides to double the price of corn. Since people must eat, demand won’t drop, and prices remain high.

In Inelastic Markets, price pressure must come from an external force. Since demand remains constant, the only way to lower prices is to promote competition and increase supply. This is where SSOL comes in.

SSOL’s Role in Price Regulation

SSOL works by adjusting the minimum wage based on the actual cost of living. The process follows a simple logic:

• Minimum wage is tied to the base cost of survival in a given location.
• Each SSOL component is based on publicly available pricing (see FAQ).
• Employers have a vested interest in keeping wages low; the more man-hours they require annually, the greater their incentive to keep costs in check.
• To reduce SSOL, employers can work to lower the costs of its components.

For example:

• To lower housing costs, increase the number of rental units available.
• To reduce transportation expenses, lower the price of a basic vehicle or expand public transit.
• To cut communication costs, introduce a low-cost cell phone plan.
• To decrease healthcare costs, implement systemic reforms, alternative pricing structures, ... well there are a lot of things that could be done here.

Shifting the Market’s Incentives

SSOL remains a market-based solution but shifts the focus. Instead of relying on unchecked market forces, it encourages those who can control supplies to actively reduce costs in order to maintain a sustainable minimum wage. This creates a self-correcting mechanism that aligns market incentives with affordability, benefiting both workers and businesses.