Fair wages

[casdave]

MC

Lots of industry and lots of cheap paid labour does not a wealthy nation necassarily make.

Why do people not want to work for tiger economy wages, even in that economic powerhouse of the US?

Like many things there has to be a balance between living standards and full employment, but everyone has a differant opinion of what that is.

Some of the tiger economies have generated expectations in the employed so companies have moved to cheaper locations.

Commerce needs consumer confidence and you are not likely to get that in an economy that closes down at the first hint of workers asserting themselves.

Sure GB and Europe has got it wrong at times but for all the problems with the Euro the main reason for Germanys slowdown has been trying to bankroll the non-viable economy of the former E Germany and several iron curtain countries around it.

Even though Japan’s labour costs have risen it is still economically one of the most powerful nations on earth.

You will find that the vast majority of wealth generated in any industrialised nation is from long established companies or the commerce that supplies their needs.

Governments must legislate and interfere in commerce or the result would be low safety and huge legal costs and also monopolism with its attendant difficulties.

If people do not feel their concerns are addressed by governments as regards the behaviour of companies then they soon elect another.

Should companies consult their workers and should they be compelled to hear their representations?
Well hearing representations and doing something about them are two differant things there is no inferance that companies have less right to manage their affairs, just a duty to inform. A good company would do that anyway.

Companies in foreign lands produce cheap goods but the cost to the workforce has been shown in some cases to be immoral.
I would not think that a polluting company locating to say Mexico to avoid environmental legislation is good example of free trade, to me that is naked greed.

Sheer and purest Capitalism is economics by the lowest common denominator, it sure helped the UK get rich in the industrial revolution but the exploitation of the workforce at home and in the colonies was disgusting and I believe played no small part in the gestation of the US.

[sailor]

>>MC–“Germany might do many things well but fostering commerce is not one of them”

>>I can’t believe you said this. German is a leading economic power and has been for a good while now.
In what world do you live? Since it was founded 18 months ago the euro has depreciated by something like 30% The only reason the European economy is doing OK is that the American economy is doing all the pulling. Europe is trying to turn away from the welfare state because they have realized they just cannot afford it.

A fair wage? That is nonsense. If I make widgets, to pay my workers a “fair” price, I have to sell widgets at a “fair” price. That is communism where the state decrees what price is fair. Here we do not have “fair” prices, we have market prices for everything, including labor. IMHO minimum wage laws are pretty stupid, just a feel-good measure. They do not achieve anything other than destroying low paying jobs.

[Geenius]

Just the opposite is true. A minimum wage provides a floor that holds up ALL incomes. Besides, think about who pays minimum wage – fast-food restaurants and retailers, mostly. Since these are also the sectors that pretty much all the disposable income of someone making minimum wage goes into, it’s hard to imagine that increasing that disposable income a little bit could possibly hurt those sectors, or that decreasing it could possibly help.

Libertarians like to imagine that wages would gentle wobble into equilibrium if the minimum wage were repealed. They are operating under two mistaken beliefs: that workers are fully empowered, rationally motivated market participants and that we live in a mercantile economy. Neither is true. Workers cannot easily uproot their lives and zip off to whichever part of the world offers the best hiring prospects, not the way employers can uproot their value-adding operations. Nor do they share equal power with their employers in wage negotiations, at least not unless they’re unionized. Nor do they necessarily have a clear idea of the market value of their skills and time; it is easy to scare them into underpricing themselves. As for the nature of our economy, it is more feudal (workers have no job unless provided by benevolent property-owning overlord) than mercantile (workers are free agents in marketplace, have full ownership of property with which they do their jobs).

The U.S. minimum wage has decreased in real dollars since the ‘60s. So has Americans’ median income, even though the mean income has surged. Coincidence?

[Geenius]

I thought it would go without saying, but maybe it doesn’t: Laissez-faire economics presupposes the existence of a mercantile system. It simply doesn’t apply to anything else. So if the job market is more feudal in nature, then the good ol’ invisible hand won’t do anything but wave to you from the sidelines.

[DougC]

Governments must legislate and interfere in commerce or the result would be low safety and huge legal costs and also monopolism with its attendant difficulties.

• • • So, you’re saying, India has a good system of commerce? - MC

[DougC]

• • • Mmmm . . young and succulent . . . . .

Libertarians like to imagine that wages would gentle wobble into equilibrium if the minimum wage were repealed.

• • • There are some places where it has been, for all practical purposes, repealed: places with shortages of workers willing to take jobs for minimum wage (Aspen and Nashville are two examples I’ve heard in the last six months or so). Places with bottom-end jobs have to raise wages and prices, but the local population can afford it and would rather pay higher prices than do without: you can still get a hamburger in Aspen; the kid who made it is just getting paid more than minimum.

They are operating under two mistaken beliefs: that workers are fully empowered, rationally motivated market participants and that we live in a mercantile economy. Neither is true.

• • • What is a fully empowered worker?

Workers cannot easily uproot their lives and zip off to whichever part of the world offers the best hiring prospects, not the way employers can uproot their value-adding operations.

• • • Workers can pick up their family and move much easier than GM can pick up their entire operations and go to Vietnam.

Nor do they share equal power with their employers in wage negotiations, at least not unless they’re unionized.

• • • In a non-unionized economy, workers and employers can’t have equal rights; but they can have reciprocal rights, as the situation they are in makes them different in principal: As a worker, you have the right to quit anytime you want, for any reason. As your employer, they have the right to fire you anytime they want, for whatever reason. That sounds pretty fair to me. Why would you call it “fair” if they had to give up their right, but you didn’t have to give up yours?

Nor do they necessarily have a clear idea of the market value of their skills and time; it is easy to scare them into underpricing themselves.

• • • The employer also does not have a clear idea of the market value of what the employees can manufacture or what service they can perform. You ever heard of Pan Am?

As for the nature of our economy, it is more feudal (workers have no job unless provided by benevolent property-owning overlord) than mercantile (workers are free agents in marketplace, have full ownership of property with which they do their jobs).

• • • I don’t quite understand; are you saying businesses don’t really need employees? If so, then what do they pay them to hang around for?

The U.S. minimum wage has decreased in real dollars since the ‘60s. So has Americans’ median income, even though the mean income has surged. Coincidence?

• • • I heard it had something to do with inflation (minimum wage increases) and higher taxes (expanding social welfare programs), two issues unions have supported every step of the way. - MC

[Little_Nemo]

In a non-unionized economy, workers and employers can’t have equal rights; but they can have reciprocal rights, as the situation they are in makes them different in principal: As a worker, you have the right to quit anytime you want, for any reason. As your employer, they have the right to fire you anytime they want, for whatever reason. That sounds pretty fair to me. Why would you call it “fair” if they had to give up their right, but you didn’t have to give up yours?

Do I have this right? You feel the employer’s right to fire the worker is balanced by the worker’s right to quit? Other than the fact you apparently are willing to ban outright slavery, how do you feel this is “reciprocal”? I’m not saying it’s necessarily wrong, mind you, but it’s hardly reciprocal.

[GaWd]

Handy SeZ…

**
Let’s see. If a home is $400,000, your basic USA mortgage payment would be about $4,000 per month. You’d need to make at least $24 an hour to pay just that, add more for taxes, etc, so you’d need to make around $50 an hour I suppose. Whoa.
**

Umm, no that’s not your average USA home price. that’s your average SILICON VALLEY, Bay area home price. There are only a few communities in the US that have prices as high as here.

[DougC]

Do I have this right? You feel the employer’s right to fire the worker is balanced by the worker’s right to quit? Other than the fact you apparently are willing to ban outright slavery, how do you feel this is “reciprocal”? I’m not saying it’s necessarily wrong, mind you, but it’s hardly reciprocal. - Little Nemo

• • • It is reciprocal, in that either party can terminate the arrangement at any time. That’s about as close to “fair” as you’re going to get. - MC

[Olentzero]

Wow, plenty of debate. Let me add my $.02 by saying that there can never be any such thing as a fair wage. When the means of production are privately owned, the owners need to make profits from their investments. In general, this means keeping outlay down and intake up. Specifically as far as wages are concerned, this means paying workers far less than the value of the goods they produce and/or the services they perform. No matter what you’re paid, you’re producing a lot more value than the value of your wages.

So, let’s see what kinda quotes are worth replying to here…

From MC:

Workers can pick up their family and move much easier than GM can pick up their entire operations and go to Vietnam.

Actually, GM can shut down their plants and move production elsewhere with great ease. It’s called outsourcing. They give some smaller manufacturer the contract for whatever parts they want made - don’t even have to outlay for building new plants or buying machinery. And it completely destroys the lives of the people who worked in the GM plants in the first place. Check out a movie called “Roger and Me” or go visit Flint, Michigan.

Again from MC:

In a non-unionized economy, workers and employers can’t have equal rights; but they can have reciprocal rights, as the situation they are in makes them different in principle (spelling corrected - O.)

In a non-union workplace the bosses have a hell of a lot more power over you than just the power of hiring and firing. Any talk of rights, equal or reciprocal, is a sham in such a case.

From sailor:

That is communism where the state decrees what price is fair

State intervention in the market does not communism make. Real communism, which is esseentially control of production by those who actually produce, would be based on a permanent surplus of goods shared according to individual need and would actually obviate the need for prices or wages.

Geenius’ question:

The U.S. minimum wage has decreased in real dollars since the ‘60s. So has Americans’ median income, even though the mean income has surged. Coincidence?

…and MC’s reply:

I heard it had something to do with inflation (minimum wage increases) and higher taxes (expanding social welfare programs), two issues unions have supported every step of the way.

Plenty wrong with that assertion. If minimum wage increases caused inflation, then people should be able to afford at least basic goods as the minimum wage goes up. Inflation should always lag behind increases in the minimum wage. Quite the opposite. Inflation constantly outstrips the minimum wage, so much so that if the minimum wage actually kept up with the rate of increase in inflation, it would now be about $17 an hour.
As for social welfare programs, they’ve been under attack in almost every country they exist. Especially here in the United States, where Clinton’s program of Republican Lite has accomplished more than Reagan and Bush dared dream of fifteen to twenty years ago. And taxes have been pushed downward, as far as the richest people in the country are concerned.

Basically, what I’m seeing from this side is that workers have it pretty easy and shouldn’t bitch about their wages. I have no regard for this kind of thinking because it has nothing but contempt for those who actually produce the wealth in society and instead holds the few who take the profits from that wealth for themselves in absolute reverence. Given my opening statement that you can’t ever really hope for a fair wage for your work, I stand behind the principle that workers ought to fight like hell for whatever they can get from the bosses, be it wages or benefits of whatever sort. Unions, faulty as they may be in this day and age, are vital to these and other, more far-reaching goals.

[hawthorne]

MC said:

It is reciprocal, in that either party can terminate the arrangement at any time.

This can’t be the end of the story. This would be like saying that the US government cannot by definition act unjustly towards it citizens as long as they have a right to emigrate, and saying that since they have not left, they have consented to whatever the government might have done.

picmr

[Geenius]

Responses to MC; forgive me if I don’t clutter them up with block quoting.

Re “effective repeal of the minimum wage”: Aspen is a boom economy where the rapid increase in cost of living makes it even more ludicrously impossible to work for minimum wage, so it’s not surprising that employers are finding workers unwilling to do it. I don’t know about the situation in Nashville. Anyway, for every Aspen, there are a dozen Uticas, where the situation is a little more desperate. Not to mention a hundred Matamoroses.

Re “fully empowered worker”: one who can negotiate an employment arrangement without duress. Examples of duress are not having enough money to pay next month’s rent, not having enough money to buy this week’s groceries, not having enough money to relocate to a better job market, etc. Employers generally have far more reserves to fall back on than workers. This allows them to play hardball. Workers do not have the same power, except in a REALLY tight employment market – which is why the Fed is so horrified by our record-low unemployment.

Re “Workers can pick up their family and move much easier than GM can pick up their entire operations and go to Vietnam”: But workers cannot pack up and move to Vietnam more easily than GM can, and that is the ultimate reason why the “global economy” is going to screw workers hard. Capital and the production machinery it buys do not have to speak strange languages, learn strange customs, eat strange food, endure the autocratic whims of strange governments, so they can go literally anywhere. Would you move your family to Malaysia because that’s where all the factory jobs are?

Re “In a non-unionized economy, workers and employers can’t have equal rights”: I didn’t say equal rights. I said equal power.

Re feudal vs. mercantile economies, you say: “I don’t quite understand; are you saying businesses don’t really need employees?” No, and how you came to think I was is frankly a bit of a mystery. Medieval feudalism needed serfs. That didn’t mean serfs had it good.

Re the U.S. median income decreasing along with the minimum wage, you say: “I heard it had something to do with inflation (minimum wage increases) and higher taxes (expanding social welfare programs), two issues unions have supported every step of the way.” The median income is figured before taxes, so that can’t be it. The effect of inflation is figured into the measure of real income, so that can’t be it. The statistics are unambiguous. An increasing mean means that there are more goodies to go around, and a decreasing median means that the majority’s share of those goodies is decreasing. The corollary is that the share belonging to the high-end extreme is increasing. Please present a definition of “fair” that explains what American workers have done to deserve a smaller share of the nation’s total wealth.

[manhattan]

I should have moved this one to Great Debates about half a dozen responses ago. I’ll rectify my oversight now.

[Little_Nemo]

M.C., I think you may be confused about the meaning of reciprocal. If the employer could fire the worker and the worker could fire the employer, then the relationship would be reciprocal. Using your definition, it would be “fair” if any worker in a corporation had the right to fire the CEO; afterall the CEO had an equal right to quit.

[DougC]

• • • I cannot understand why anyone would find it “fair” that a situation that both parties must agree on to enter into, only one of those parties is allowed to terminate.

If minimum wage increases caused inflation, then people should be able to afford at least basic goods as the minimum wage goes up. Inflation should always lag behind increases in the minimum wage. Quite the opposite. Inflation constantly outstrips the minimum wage, so much so that if the minimum wage actually kept up with the rate of increase in inflation, it would now be about $17 an hour.

• • • Okay, why just raise the minimum to seventeen dollars? Why not raise it to a hundred dollars an hour? Or a thousand dollars an hour? That would be cool! We’d all be rich!

As for social welfare programs, they’ve been under attack in almost every country they exist. Especially here in the United States, where Clinton’s program of Republican Lite has accomplished more than Reagan and Bush dared dream of fifteen to twenty years ago. And taxes have been pushed downward, as far as the richest people in the country are concerned. - Olent

1 - Social welfare programs are under attack most everywhere they exist, because they presume to provide an endless supply of something that costs money, without actually paying for it. People either pay lots more than they were originally told, or benefits get cut. Usually the latter; nobody wants to hear they have to pay more, but they tend not to mind hearing that a disease they don’t have is no longer covered.
2 - Clinton is a liar (too many instances to cite). All politicians are liars to some extent, some more than others, but Clinton stands out even in that crowd. At this point, he has turned on every cause he has claimed to support at least once. He also hasn’t accomplished much economically; he is coasting on the effect of Reagan’s policies. As did Bush.
3 - It is a Socialist mantra to “screw the rich”, but history shows that screwing the rich is very difficult to do without destroying the entire country. - MC

[Rhythmdvl]

if the minimum wage actually kept up with the rate of increase in inflation, it would now be about $17 an hour.

Lessee…. $17.00 per hour X 40 Hours per Week X 52 weeks per year = $35,360. Not bad for minimum wage!
A fair wage? Doesn’t that depend on what housing and food prices are? Might want to think about regulating them. Of course, transportation is a necessity to move food from farm to market, and to move laborers to the employment market in rural areas. Maybe we should regulate that, too. Well geeze, soap, shampoo, toilet paper… those are pretty much necessities of modern society, no? What is a fair amount of toilet paper?

How do you, in a market economy, decide what a fair wage is across an entire economy? For an individual job? Sure, that could be done. If there are externalities (i.e. high costs to leaving / relocating) then gov’t could reasonably intercede in the market to rectify the situation. But the people who ultimately decide if it is a ‘fair’ wage are the people who are willing to accept it.

This is all covered in remedial Econ 101. Maybe we should start an ‘ask the economist’ thread.

[sailor]

yep. this is getting too wide to respond to every point but I am pretty much with MC.

Screwing the rich is what Cuba did and just look at them. The rich (Americans) are no worse off and just look at Cuba…

The thought that workers are not bright enough to mind their interests and need the government to protect them is repugnant to me as it is the basis for the repudiation of democracy. NOBODY is better qualified to mind my own business than myself, thank you very much. Joining a union should be a free option and never an obligation. And I want to have the freedom to work even if some union has another idea.

Theories aside, just look at what happened in the UK after WWII: The unions pretty much ran the country and yet the economy was crippled and workers did not benefit (although union bosses did). With Margaret Thatcher the economy boomed and salaries increased.

In Spain it is very difficult to fire anyone. Do you think workers live better there? It is the most inefficient system you can devise and productivity is so low that wages have to also be low.

I have seen unions strike and ruin a company and drive it out of business. The company cannot fire anyone. This is ridiculous. In the end the workers are out of a job and the union has made its point and goes on to terrorize some other company. believe me, you do not want this in the US.

Look what happened with the UPS strike. It was entirely political. UPS was crippled and never recovered. Did the workers benefit from this? NO! (Well, probably the workers at FedEx did)

Someone said a strike is like trying to increase egg production by strangling the hen.

If unions are so good just look at the US. The unions there have much less power than in Europe and yet workers get higher salaries and higher standard of living.

If Unions are so good can you please explain this: In the USA the teacher’s union is very strong and yet they always complain of low wages. Not to mention their performance is dismal…

Generally workers who understand that they are selling their work in a labor market get the best deal. They try to provide the best product they can at the best price they can get. If the labor they can do is not well paid by the market, they try to start a new line of work. People who have no skills, or unneeded skills, and want a union or a government to protect them are just losers, and no government can change that. A government that protects unproductive people is a ruin for the country.

What makes the US economy so productive is that it has so many small companies where the owner understands the risk and the rewards… In Europe everybody wants to be a government employee with all the right to complain but nobody will take any risk…

I have worked as a consultant and have seen too many cases where the workers are exploiting the owner. When the company is not doing well, the owner may be losing money but the workers do not care. They leave at 5 o’clock and want their paycheck on saturday. I have told more than one owner that they would be better off if they shut down.

In any case, experience shows that the more “protected” workers are (or any group for that matter) the worse off they are. It is just not possible to invent a better system than open competition.

Trying to regulate the market just distorts it with unfavorable effects. You have to be very naive to think a minimum wage law does anything good.

Those jobs that would otherwise pay marginally less may increase to meet the minimum (the cost being reflected in the end product)but those that cannot pay it just disappear.

If a $5/hr minimum wage law is good why not $10/hr? $15? maybe $50/hr would be better so we could all be better off? What makes $5 good and not $20? I’ll tell you: the fact that $5 is close enough to what the market is paying anyway that it does not destroy too many jobs. It is a feel good measure.

There is so much evidence that market intervention is bad that I cannot see how anyone can defend it against so much evidence. Take any country and any sector. Now compare it with another country and sector where other conditions are similar. The one where the market is distorted by regulation is always less productive and the people who are supposed to benefit from the protection are worse off.

Protectionism has never made the protected group stronger or better off.

And remember: when legislation controls buying and selling, the first thing to be bought and sold are legislators.