If wages were determined by bargaining power then unions could potentially elevate wages. Let me repeat my self: if there was a total fixed amount of “surplus,” which had to be distributed amongst varying classes (typically land, labor and capital), and the remuneration to each class was determined by bargaining power, then unions would be capable of increasing the remuneration to labor. But this theory of wages, namely the “wage-fund theory of wages” has been entirely refuted. Wages are determined solely by the marginal product of labor which is a function of capital per worker and the sophistication of capital.
Unions do elevate wages, for thier members. There is also a case for their strengthening worker demands for wages across the board. Standard of living is a relative thing.
These terms like “function of capital per worker” have real meanings in people’s lives. They determine how much productivity will be potentially gained by the introduction of more labor, and how it effects costs/gains.
Organize your capital in increasingly efficient combinations.
I feel like that could include stock options, and/or lower wages for management. There may not be some fixed “surplus” that determines wages. But there are real profits, and their is real compeition between various parts of the company over those profits as compensation (it happens evertime someone asks their boss for a raise or promotion). Ownership has the highest bargaining power, and recieves by far the largest dividends.
Prices are not determined by decree. The entrepreneur, at least in the long run, does not get to choose how much he will sell his products for. For example, the market clearing price of commodity “y” is “p.” The entrepreneur may decide to increase his revenues by selling commodity “y” for “4p.” But this entrepreneur is mistaken, because this will not increase his revenues at all; in fact, it may very well cause his revenue to collapse entirely (consumers prefer lower prices, all other things equal). The entrepreneur now has a choice: (a) he can continue to charge “4p” for his product (4x higher than his competitors and the market clearing position) and go out of business, or (b) he can lower his price and make a profit.
How does this translate to busineses wanting to pay the least amount of wages possible to their workers, while still mainting efficiency?
The same is true for wages. For example: I just graduated college, and if a potential employer, during a job interview, offers me $200 a year as a salary, I will turn him down and look for employment elsewhere.
Let’s assume $200 is an appropriate wage for a second. So now he offers you 200, you say 250. He really values your potential, he wants you at the job, but he needs to profit. So he offers you 235. His intent is always going to be to pay the best workers he can find the least amount possible, it’s called maximizing profits.
Assume that the equilibrium wage rate (when it’s equal to the marginal product of labor) is “x,” and that all entrepreneurs collude and decide to pay their workers “x/4” in order to increase their profit margins. Now the first thing that’s going to happen is that workers that value their leisure above this arbitrarily suppressed wage rate simply won’t work. They will leech off others or demand welfare.
That’s a pretty broad jump. Why won’t they start their own businesses, or go on strike? Why won’t they just go home and grow their own crops and live “off the grid?” This is the conservative culture I’m talking about; the natural assumption that everyone is just trying to leech off the capitalist class. It’s like the marxist view of capitalists trying to leech off the productive class. It’s simply a biased definition of human nature that tries to say noone actually wants to be productive, they just have to.
*which is why unions would never exist, for any extended period of time*
Nobody said they had to. I have repeatedly said I don’t accept any plutocracy deciding people’s lives for them as beneficial.
Some businesses, though, know that offering a wage above the equilibrium level (efficiency wages) elevates morale and, in turn, will increase productivity and profitability (elevates agency problems). But this also causes macroeconomic problems in labor market.
Or you could streamline management, and use the extra proceeds to go to worker stock-options, or pension plans, or something. But alas, any extra proceeds go to ownership first, maybe labor after depending on market conditions.
Nope. A single murder does not prove that society is characterized solely by conflict and aggression. Again, for every one horrific example you can regurgitate, I can respond with 1000 examples that prove otherwise.
Hey guys, we shouldn’t worry about the holocaust because for every Jew that was killed, there were 50 people born. We actually came out ahead if you think about it… /sardonism
Good things happening do not mean the bad things are ok.
No one says that free markets will eliminate stupidity.
I’ll agree with you there