Interpretation of Hazlitt's theory of labor wages in respect to salaried positions.

Economics Political Theory
1

According to Hazlitt:

"The best way to raise wages, therefore, is to raise labor productivity.

This can be done by many methods: by an increase in capital accumulation–i.e., by an increase in the machines with which the workers are aided; by new inventions and improvements; by more efficient management on the part of employers; by more industriousness and efficiency on the part of workers; by better education and training.

The more the individual worker produces, the more he increases the wealth of the whole community. The more he produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid.

Real wages come out of production, not out of government decrees."

However, today’s perception of someone’s duties in a salaried position is to: “work whatever it takes to get the job done” and employees do NOT get paid for their time above their contractually obliged work week, (in most cases 80 hours a work week).

It is true that extended work week policies are based on the contract you signed with your employer so this work environment is technically voluntary. However, I have tried to make that case that if a worker is “expected” to work more than 40 hours a week (as the indicated minimum work week specified by contract) then it shouldn’t be unreasonable to ask for a higher salary because the worker is will be more productive working more hours per week (knowing this before signing the contract).

I have recieved much criticism for this viewpoint. My argument is “selfish” and that I should be willing to work the extra hours because I love my job and company and want to succeed in my job. So, is my interpretation of Hazlitt’s ideas on wages not accurate or is this how salaried positions are supposed to be?

By Hazlitt’s logic if an employer hires me to work 40 hours a week but on average workers in this position work (and are expected to work) 50 hours a week then I am on solid ground to argue for a higher salary based on a 50 hour work week.

However, when I make this argument I am being “greedy” and not being a team player and I should be willing to work the extra hours to get the job done.

In conclusion, is my interpretation of Hazlitt false or what?

2

If you are working more hours you are not necessarily more productive. If you are more productive than your peers because you work at the same rate but an extra ten hours, then there are still tons of reasons why you might not get a raise. Your manager may be operating under corporate or governmental rules that restrict or regulate your salary. Your manager may be unaware of your increased productivity or, may not think that it is actually worth a pay raise (especially if people in your position at similar companies do the same amount of work for less).

In other words, just because you are more productive, it doesn’t mean that you’re worth more to your employer in their mind.

3

Right, I agree, however I’m talking about the case where productivity is high whether it’s 40 or 50 hours, however, unless your manager sees you working 50 hours instead of 40 hours he assumes that your productivity isn’t higher and doesn’t pay you more, you are in the right to ask for more.

I also agree that what you are worth and what your employer thinks you are worth may not match up, which is why it’s important to negotiate better terms so both parties are happy. It shouldn’t be out of the question for a potential employee to ask for a higher wage if real productivity is ignored and the manager just wants to work you longer hours (since you really are being more productive working the longer hours).

Hazlitt mentions that turning down a job or quitting a job is harder on the employee than the employer but it seems like modern society’s norms is to play the victim role because the employee wasn’t assertive enough and negotiated better terms before agreeing to an employment contract. I can see how this can lead to people believing that employers are “evil” and “exploit” the employee.

In a freer economy I believe labor would be on better grounds to negotiate employment terms because there will be a lot of opportunities instead of a limited set due to a stifled job market because of government interventionism in the economy. I wish the labor movement understood this better.

4

I’d like to add to the other posters’ excellent input:

I have recieved much criticism for this viewpoint. My argument is “selfish” and that I should be willing to work the extra hours because I love my job and company and want to succeed in my job.

So you are expected to work for love, and if not you are selfish. The employer is of course not being selfish at all, expecting you to work for love.

The whole thing is patently ridiculous. The argument could equally be turned back on the employer. He is being selfish for not loving his employee enough to give him more money. He should be willing to do that out of sheer love, and if not, why that’s so selfish of him.

The only thing that makes any sense at all is if you love your job you will do it, but only if it is code for “do it or you will get fired”. Now that is a legitimate argument. because either he is bluffing [a legitimate tactic], or is saying you are not worth the extra money and there are plenty of people waiting in line to get your job who will happily work 80 hours a week for 40 hours pay.

The underlying economic reality that has to be understood is that there is a recession out there, meaning unemployment and poorer people. Meaning that the employer has a larger pool of labor to choose from, which by the law of supply and demand will reduce wages. If they won’t go down in total pay received by the worker, they will go down by having the worker work more hours for the same pay. In addition, the employer may well be making less money from each employee’s work, because people are buying less. This will also reduce wages, and it looks like that is manifesting itself in longer hours for the same money.

Hazlitt is 100% right. What he is saying is a basic economic truth. No Austrian will disagree, [though who knows what the witch doctor economists think].

He meant if everything else stays the same [= ceteris parebis] then if a worker is more productive the employer will pay him more for two reasons. First of all, the worker is worth it. it would be foolish not to pay him more, if he can get more profit out of him. Otherwise someone else will grab him. Second of all, the employer can afford it. People are buying the product, so the higher wages will be covered by the sales, with added profit as well for the employer.

Of course, there is a human factor here as well. If he can shame you into working for less, why not do that? But in a good economy, not a recession, the worker will be able to choose among other offers, and someone out there will be willing and able to pay him what he is “really worth”. In a recession, he is “really worth” less, by the law of supply and demand, as above.

5

Values are subjective, and there’s nothing “selfish” and “greedy” about voluntary exchange. Your employer will strive to pay you as little as possible for as much productivity as possible. You will strive to get paid as much as possible for as little effort as possible. No one (or everyone) is greedy in this incentives scheme. You can demand any pay you want but it’s in your best interest to avoid being delusional and have a good perception of your dynamically changing “street value”. The same goes for your employer. Either side loses if their estimate is way off. 40, 50, or 90 hours a week is a non-issue.