Determining Value of Labor
Darwin argues in a previous post:
The problem is that if you’re allowed to pay people 1/2 of a living wage for a 40 hour work week, that’s what employers will pay, and poor people will work 2 jobs for 80 hours a week because it’s better than starving to death. Certainly there will be more jobs, but enough of them will be performed by the same person that unemployment won’t go down any (may go up).
I really dislike the use of the term ‘you’re allowed’. It implies that the only force keeping employers from arbitrarily determining the value of labor is state regulation. It belies a woefully ignorant understanding of economics.
By eliminating minimum wage employers will not have the freedom to charge what they please for labor. Employers are still bound to the value of labor which is determined by the market. Employers that attempt to pay less than that will have difficulties finding employees while employers that charge more that the value of labor will have an abundance of applicants. Over time employers that refuse to pay the minimum value of labor will lose out to employers that will pay the value of labor.
There is irony here. You seem to be implying that value of labor is arbitrarily determined when left up to the markets. Yet I would argue that in fact the arbitrary determination of value in labor only occurs when politicians get involved. In a free markets system there is no coercion, therefore labor value reflects the actual value of the labor. However, when you apply the state’s coercive force to implement a minimum wage you distort the value of labor. But on what grounds do you justify distorting the value of labor?
At this point you would justify that distortion on the grounds that poor people should be able to make a ‘living wage’. Here though is the problem. How do you define living wage? Most likely I would object to your definition. That is simply to say that necessarily the definition of ‘living wage’ must be arbitrary, therefore the distortion you elected politicians to implement must also be arbitrary.
In matters of determining the value of labor, it’s not the employer with the freedom to arbitrarily determine the value of labor, it’s the politician. As always this is because the politician can invoke the state’s monopoly of coercion to distort the value of the labor as he sees fit.
I will never understand why you trust the state more than the free market. The state has coercion while the market does not. And yet, you foolishly trust the state over the free market.
June 16th, 2008 at 5:35 pm
To continue with the VERY NEXT SENTENCE of my post:
‘The basic problem is that, given automization and efficient corporate models, we have way way more citizens than the number of employees we actually need to keep things running. ‘
Of course I understand that the labor market is a market, and if left unregulated, will settle on prices following standard free-market principles. As I said, the basic problem is that we have way more labor avaialble than is actually needed- ie, the supply is higher than the demand. If I remember the first day of my economics class, I believe this means that prices will go down. Specifically, as I said, I think it means that many jobs with few qualifications will not pay enough for people in this country to live on. Certainly abolishing the minimum wage isn’t going to hurt computer programmers and biotech researchers; it’s not designed to help them. The minimum wage laws are specifically designed to help people in jobs where an unregulated labor market would have them making less than they need to survive.
Obviously you agree with me on the facts; if you didn’t think that abolishing the minimum wage would lead to lower wages, then you wouldn’t be against it because it’s irrelevant. Our only disagreement is on whether it’s ok for US workers to be making as much money as sweatshop workers in Asia. My position is no, the government should protect our people to make sure they can afford to eat in exchange for their day of work. Your position seems to be that they should get paid what their labor is ‘worth’, as though the realities of a free market are actual moral imperatives rather than empirical facts that we can employ towards moral ends when appropriate.
June 17th, 2008 at 11:25 am
Darwin, you are forgetting this: Eliminating the minimum wage would have a ripple effect throughout the entire economy. As businesses like restaurants, grocery stores, Wal-marts, and other minimum wage paying employers spent less on labor, they could and would charge the customer less to remain competitive in the new market. People who could not make it on less than minimum wage in today’s market would suddenly be able to afford to live on much less.
Sweatshop workers in Asia are able to get by on what we would consider a pittance in part because their economies are not massively distorted by government policy. Asian countries are much more competitive in the global market; low labor costs are why they do most of the manufacturing for the world.
Americans have unions and minimum wage laws to thank for the outsourcing and exportation of jobs to countries where labor is cheaper.