This is a Pickle: Worker 'Price-Gouging' Vs. Heavy Demand in Hurricane Regions
It's an interesting question that Carpe Diem blogger and economist Mark Perry received from an economics professor, and of course, the answer lies in good old supply-and-demand economics.
Florida Power and Light, our power company, is employing thousands of line workers from as far away as Illinois to fix the power lines in the wake of Irma. These line workers are being paid double or triple their normal hourly wages, which provides them with the financial incentive to drive to Florida and work 12-16 hour shifts in sweltering heat. The economics is clear, but why do the press and public not accuse them of price-gouging for charging higher wages and exploiting the suffering masses of hurricane victims?
Perry offers this answer.
If the average hourly wage nationally for a carpenter or electrician or roofer is $25, how much will those workers be allowed to charge by government officials in those states without violating anti-price-gouging laws? And like the case for electrical workers in Florida, there will be no financial incentive for construction workers from around the country to temporarily (and at great personal cost and inconvenience) travel to Texas or Florida unless they can charge a premium wage for their services that might be double or triple the normal rate. But if anti-price-gouging laws prevent the higher wages that are necessary to attract workers for rebuilding, the choice for many Texans and Floridians won’t be between construction workers at $25 an hour vs. $50 an hour, but between construction workers who would have been available at $50 an hour and construction workers at $25 an hour who are now NOT available.
Perry points out that people in Florida and Texas complained about hotels charging three times the normal rate for a room, but they are OK with a worker charging three times the rate for his service. He asks, "How do you precisely define when a price goes from being fair and legal to being unfair and legal"?
What are your thoughts?