Discussion of wage setting for a particular scenario

In My Humble Opinion
1

In a Great Debates thread, Scylla makes the following statement:

https://boards.straightdope.com/sdmb/showpost.php?p=21771881&postcount=119

I don’t want to hijack the other thread, but find Scylla’s post interesting. Thus I’ve opened a new thread.

My thoughts:

  1. Your lawn mowing company owner friend is encountering market inefficiencies. Markets are not efficient. In aggregate, over the long term, markets appear to be efficient. However, this is not applicable to any single example. The specific inefficiency here is that it’s difficult to assess the quality and corresponding value of the resource being purchased - in this case the labour of the prospective employees.

  2. Your lawn mowing company owner friend is attempting to purchase reliable employees. However, he’s not paying fair market value for reliable employees. Over the long term, with sufficient pay, he should be able to find reliable employees. However, by paying below fair market value wages, he’s accepting unreliable employees as a substitute for reliable employees.

  3. If the fair market value for a reliable lawn mower is below the living wage in your local market, that is indeed a problem for your lawn mowing company owner friend if he’s required to pay a minimum wage that equates to a living wage. His only response is to raise prices, and if there’s insufficient demand for lawn mowing at the higher prices, he’ll go out of business. That’s a negative, but it’s not dissimilar to the negative that occurs when business with high production costs unrelated to labour costs end up being unsustainable.

  4. Farming is a different societal/economic category than standard retail products such that it deserves special economic considerations and some relief from pure supply/demand pricing. Every country must maintain its food supply chain, or face destruction. Additionally, prices need to be set not based on market forces, but on what societies lowest wage earners can afford. For rich countries, that means providing subsidies to agricultural produces in order to maintain the food supply chain. A living wage for agricultural workers increases the amounts of those subsidies. However, it’s a very bad idea to risk the food supply chain collapsing due to market forces.

2

The sliding pay scale Scylla describes seems a reasonably clever way of addressing those inefficiencies: The quality & value of employees is assessed by tracking how they show up and work, and paying them accordingly. “Your pay will correspond to the actual value of your work” actually seems rather efficient.

Reliable employees can make “around $1,000 week” (which I assume means per week). How is that unfair?

3

From the OP: “he has two of four trucks going, because he can’t find anyone responsible to run the others”. The lawn mowing company owner has a level of demand, but there’s insufficient supply in that market of local responsible lawn mowing employees willing to work at the owner’s price point. Presuming that such employees are not a scarce resource, they’re either working for other companies willing to pay more, or they’re working in other areas which pay more or are more enjoyable.

4

The dissent in West Coast Hotel v. Parrish contains the best argument against a minimum wage I have seen:

In short, if a person needs $12/hr to live, but only has the market ability to earn $7/hr, then the worker has a $5/hr shortfall. That is certainly an issue that society needs to address as there is no reason that the employee should be starving.

However, a minimum wage simply forces the employer to make up the shortfall, even though the employer did not cause the shortfall in the worker’s market power, nor does it take into account that the employer may be going bankrupt himself. It places the burden, which belongs to society to charitably give, entirely on the employer. That amounts to a regressive tax on an employer who may be rich or actually worse off than the worker.

5

There’s nothing wrong with that, as long as the sliding scale doesn’t go down below the legal minimums. I hire people at a relatively low wage, and when I evaluate them for raises, reliability is one of the biggest factors I consider.

I wouldn’t, and I don’t know if it is legal to, actually dynamically change their wage through the course of a payroll based on their attendance.

As far as “value of the work”, that is actually unrelated to reliability. I have had employees who put out excellent work, the value of which is far greater than I pay them, because I also consider their reliability, and what it costs me to have unreliable employees.

If you told someone that their pay would be based on the value of their work, then they would expect to get paid based on how much work they did, and how much work that was billed for, during the hours that they were working, as that would be what the value of the work is. The value of the employee, OTOH, needs to consider how much they can be depended on to accomplish the work that has been scheduled.

He did not say reliable employees, but rather, someone who could run the other truck, meaning that they would be in more of a manager, and 50k is not unreasonable for a management position.

Having worked in landscaping, and still know a number of people in it, the actual answer is that such employees are actually a scarce resource. There just are not all that many native born citizens that are willing to do that kind of work for any wage, much less what is generally offered. There is a developer I know that is willing to pay over $20 an hour for entry level construction workers, and yet, he cannot get enough labor to get his houses built on schedule.

6

3 is too dismissive.
4 is not true. Outside of an extended naval war there is no chance that any country with access to international trade will be starved out. Since the US is currently the only country able to wage an extended naval war, there is no danger of that happening.

7

Farming is in a separate category because it’s necessary to plan, every year, to produce more food than can be eaten that year. If overall farmers plan to grow just exactly the amount wanted, then in a bad year people will indeed starve to death; so it’s necessary for the society as a whole to produce in excess.

The problem, from the farmers’ point of view, is that when there’s a good crop, others also often have a good crop, and there’s an overall excess; so prices are low. When there’s a bad crop, having less crop to sell might be expected to be offset by higher prices – but to the extent that food is indeed shipped around the world, the prices may stay low even when the yield in a particular area is low. So the farmers often can’t get a good price in either good years or bad.

The problem, from the consumers’ point of view (and of course farmers are also consumers), is that if an excess isn’t produced overall nearly every year, then in some years there will be famine.

Some food – grains in particular – can be stored for several years, and most other things can be processed into a storable form, and that helps some – both with keeping the food supply steady, and with stabilizing prices because one year’s excess can sometimes be sold for processing or storage; though such sales are often for less money. The ability to transport food from places that have extra to those that don’t have enough also helps, from the point of view of those eating, which is everybody; though it can harm the farmers as farmers, as above. But neither of those entirely removes the problem. Bad weather some places on the planet doesn’t guarantee good weather someplace else – in fact if it’s flooding in a number of areas there’s very likely to be drought simultaneously in other places, the same amount of rainfall may be moving around in different patterns.

Relatively wealthy places and people are somewhat insulated from shortage problems, as when supplies are limited (and often when they aren’t) the product tends to go where the money is. But they’re not immune; and we’ve come closer, including quite recently, than most people realize.

Here’s a recent low point, from 2013:

8

It’s possible that the owner could raise wages so that his reliable employees made $62K per year instead of $52K, fire all the unreliable employees, and then attract enough reliable employees to keep all four trucks running. He would then have to raise his prices (or reduce his profit margin, but doing that would make little sense unless he was in business for his health). Thus the question becomes, is there enough demand for lawn mowing services to sustain four trucks with sixteen people all earning $62K per year.

It is entirely possible that there is, and the business owner is missing out on profits. It’s also possible that there isn’t.

The “living wage” argument doesn’t allow for the fact that there might not be untapped demand.

Regards,
Shodan

9

Once more with feeling, the concept of Competitive Wages;

*In times of high unemployment and an excess of workers, companies can hold down wages because workers are competing for jobs.

In times of low unemployment and a shortage of workers, companies are the ones competing for workers. If they refuse to compete by paying ‘competitive wages’, then they find themselves lacking workers.
*
If their business can’t afford to pay prevailing wages, then they’ll be out of luck in hiring people and the people they do get will be unreliable people who have trouble getting higher paying jobs. If that puts their company out of work because they can’t sell their product for the price needed to pay the wages, hey, that’s Market Capitalism. If there truly is a demand for their services or products, then the price will rise to reflect the realities of the market.

And at the very bottom of Capitalism, if there is a market and you are unable to compete in it, you fail and someone else who can do better will step in and service that market. Capitalism is a competition. People who do a better job of servicing a market will prosper. Wages are only one part of that picture.

10

Lawn mowing is seasonal in most places, so even the guy getting $1000/week is still not making a living wage year round. My lawn guy would only work for me if I employed him year round, snow clearance in the winter, lawn mowing in the summer and not much in the early spring or late fall. Take it or leave it.

11

People are responsible for their own economic value.

12

The purpose of my example in the other thread was to show that there is a current labor shortage. There has been since 2018 when for the first time we had more jobs available than people seeking jobs to fill them.

Spammers injections are well taken. Perhaps my friend is pricing below the marker, or he is a bad boss, or there is some other reason why he can’t run all his trucks.

On the other side of the coin, this is a person I actually know as a running buddy, and he has been running a successful business for a long time and appears to know his business.

13

Just a point…
Keep in mind that all these “lawn care specialists” and their overhead of paying for their laborers to mow grass, are competing with the after affects of when resident teen-agers would cut grass for beer money a few years ago.

It’s no wonder they may find it difficult to pay their laborers a decent wage and still make a good profit.

14

Yes to all of that.

The employer in the example is looking for people who are both willing and able to do active physical work, often in unpleasant weather, and who are trained to do the specific physical work in question; who are also able to drive truck; and who are also both willing and able to supervise other people while not being themselves in charge of the business – they’re being handed both the stress of being boss and the stress of being bossed, and they have to have the supervisory skills as well as the skills to do the actual job. And the payment per week’s not the only issue, because the work’s most likely seasonal.

A person who’s willing and able to do all the work involved may well prefer to set up in business for themselves. And a person who’s willing and able to do the supervisory work may prefer work that’s less physical; especially since they’re living in a society that downgrades and disrespects physical work.

So such people are going to be in short supply. Getting them to stay in the job is going to involve paying them enough per year to make it worth their while; and even then they might prefer to move on to run their own businesses.

Another question is the other work conditions of the job. Apparently the business owner would be expecting the reliable truck driver to be in charge of other people who are massively unreliable. What kind of control are the supervising drivers given over that situation? over their work schedule, which can be screwed up by such subordinate co-workers? Do they get yelled at or penalized, by the boss or by the people whose lawns are being worked on, if the job’s not done on time or done poorly because of the behavior of other workers who they can’t control? How much control if any do they have over their own hours of work? over the condition and repairs of the vehicles they drive, and of the lawnmowers and other equipment they use? Do they have the option of buying into the business if they stay long enough? et considerably cetera.

Could you explain what you mean by that?

“Value” in the labor market seems to be set to a great degree by the purchasers thereof.

15

How is his competition doing? If they can find workers, he is doing something wrong.
More likely, the answer would be becoming more efficient. Perhaps he could schedule jobs to reduce travel time, which would let him get an extra job (and extra payment) in during a day, which means he pays less for the crew to travel.
I worked in chip design, and there would be no way in hell to be able to hire enough people if we did it using 1980 technology. But we innovated. That’s why I love capitalism.
Too bad capitalists who are losing because they don’t innovate seem to hate capitalism.

16

Which means that Scylla’s friend should donate money to Democrats who will liberalize immigration policy. Kind of like when Alabama (or was it Mississippi?) cracked down on farm workers and the farmers had crops rotting in the fields.

Before too long a landscaper who can push for robot mowers is going to wipe out all the landscapers using people. Isn’t here yet, but it is coming.

17

There’s a problem that the US is NOT a charitable country to the poor, disadvantaged, or less capable. The answer in the US to “this person’s labor is not worth a living wage” is to imposed punitive conditions on receiving aid at all in order to pressure the person to work or work more or work harder… even if that person is not capable for whatever reason. US society does not take responsibility for its own vulnerable and less capable citizens.

One argument I’ve heard is that the person’s family should care for such a person, but I guess that just means folks who don’t have family are SOL.