Hey Brainstorm readers! This blog site made itself into another blog and newspaper—well sort of newspaper.
A blogger for The Washington Examiner (a give-away paper at the D.C. Metro and in freebie boxes around town) attacks my Brainstorm blog about falling wages for American workers.
Did he dispute the fact that employers are using unemployment as an opportunity to cut wages for their existing workers even when profits are up?
No.
He defended the practice.
He writes that the price of labor is “dynamic and free of moral content.” Wow. That comment would be breathtaking if it weren’t a mainstream view among some neo-classical economists. They will invoke “supply and demand” as a kind of natural law that determines wages.
Most other economists reject the view that the supply and demand of human beings’ time, effort, skill, and loyality determines (or should determine) compensation. The labor market is only among the most notable of markets that is affected by social norms, values, custom, and power.*
Want proof? If supply and demand affected labor markets, real wages for American workers should have increased in the 1980s and 1990s, rather than continue to decline, even when productivity and corporate profits had been soaring and unemployment was minimal. See the Economic Policy Institute for the famous graph that plots productivity against wages (productivty goes up and wages don’t in America) and the puzzling delinking of wages to economic prosperity.
The Examiner sneers, “Meanwhile, the Krugmans, the Ghilarduccis and the Stiglitzes of the world hide behind their credentials.” (The first, and probably only time, I’ll be found with Nobel Prize winners ducking behind credentials.)
What is also interesting, and I welcome others’ views, is why the belief that wages should fall if people are desperate to work is connected to an attack on educational credentials?
* This Labor Day remember the labor movement, “the folks who brought you the weekend”—the title of a great book.
11 Responses to Labor Day and Unemployment
trendisnotdestiny - September 2, 2010 at 1:36 pm
Richard Wolff has a book out too from the far the left titled Capitalism Hits the Fan: it is also a MEF series video…. He makes the exact same point, how come wages and productivity are not more directly connected…. We might look at CEO and executive compensation to tease out why? Great start to my weekend Teresa! I find it interesting that the language and temperament shown labor (hard work or the birthing process of life) is seemingly less important than blind entrepreneurial ambition….
livefreeordie2 - September 3, 2010 at 9:50 am
Unbelievable nonsense! Worse than that, if economics is really your discipline (and it would seem that it is more likely political science than economics), you would know that your “proof” is just so much liberal horse manure. What do corporate profits have to do with demand for labor? Or with the supply? Nothing – except that in your liberal fantasy world, the “worker” should have an equal share with the owners and investors (risk takers). That, of course, is just plain stupid.* The worker invests nothing and risks nothing. He or she is paid for the product they sell – their labor. In fact, increased productivity very well may decrease the need for labor. If a worker can make three widgets an hour manually, but 9 with a machine, it’s possible to get rid of two workers with no real need to increase wages as long as the skill set required to operate the machine is of the same value as making the widget manually. This concept that employers should give people jobs because they are “desperate” is about as stupid as the idea that wages should be based upon what a person needs to “live” rather than for the work being performed. It’s the kind of moronic nonsense that can only be spouted by someone who doesn’t have to take the risks of meeting a payroll. Only a moron in an ivory tower with no real-world experience and no skin in the game would think that wages should rise and fall based upon the desperation of the unemployed. (That’s how their sneering is connected to your credentials, btw.)Oh. . .and labor unions do nothing but serve their bosses. That’s why they represent under 10 percent of the private sector workforce. The only place that unions are growing is within the government. Why? Because the politicians and union bosses are in bed. Unions get great contracts and then provide campaign donations and workers for the politicians. Look at the recent comparisons of comparable jobs in government versus the private sector. It’s incestuous and corrupt and it unions should be barred from representing ANYONE whose income can be sourced to tax dollars. (What? You don’t like your wages or working conditions? Then quit government and get a job in the dreaded private sector!)*Note: It may be that an employer will provide incentives for workers based on profits or engage in other practices that the employer believes are in the best interests of his or her company. That is an individual choice and has nothing to do with the objective value of labor.
aricia2010 - September 3, 2010 at 9:41 pm
orDIE2′s hysterics rely on a variety of false assumptions. First, he (she? is this Sharron Angle?) implies that managers and other corporate goons’ livelihoods will be absolutely destroyed if they do not exploit their workers to the maximum extent possible. Ridiculous! Living wages may prevent the top 1% from hoarding all economic output, but cry me a river. They’re doing just fine. Sentences like, “…about as stupid as the idea that wages should be based upon what a person needs to ‘live’” are breathtakingly callous. The wealtheist nation on Earth, a democracy, does not have a divine mandate to adhere to an economic ideology that creates enormous inequality. Or maybe livefree has dug up some holy scripture recently that says otherwise.This rant about labor unions is completely spurious. Maybe organized labor’s power in the private workforce has declined because the corporate goons have more money to buy political influence than the hardworking middle/lower class.We live in a democracy and our economy should serve the common good, not the good of the few that (in general) start out advantaged. Before you scream “communist!” please realize that this is actually not a radical idea. orDIE2 is the extremist.
livefreeordie2 - September 4, 2010 at 9:40 am
aricia2010 #3 – I neither said nor implied what you claim. Managers and corporate leaders are (gasp!) workers just like someone on the line or working as a janitor. They are selling their skills, their labor, and are being paid what they are worth – maybe not in your opinion, but in the opinion of those who are doing the paying. If your favorite local market was suffering from the economy and in danger of going out of business, would you go there and pay double what the various products are worth? If the owner was desperate, would you pay $10 a gallon for milk rather than the $4 it is worth? I doubt it. You are right about one thing, however. This is a democracy. You are free to overpay for whatever you like. But when it comes to hiring employees, no company that intends to stay in business can survive very long by overpaying its workers. Just look at the auto industry or the steel industry. Giving in to union demands nearly destroyed the steel industry in this country and was the prime cause of GM and Chrysler needing “bailouts.”But you are wrong when you suggest that in a democracy, everything (and the economy is at the root of everything) should serve the collective. There is no individual liberty in that type of setup – and I don’t have to scream communism because what you suggest defines the term. And your use of the phrase “corporate goons” suggests that you, not I, are the one who is hysterical. . . you are bound up in what seems to be Marxist ideology – thinking from the mid 19th century. I’d suggest you wake up and enjoy the 21st century.
trendisnotdestiny - September 5, 2010 at 9:38 am
livefreeordie2,You are really not in a position (knowledgeable) to suggest to anyone to wake up to the 21st century since your education, breadth of reading and selective memory consists one hour a week watching Glenn Beck. Have you read Marx? Or are you talking out of the undifferentiated part of you that clings to one thought, one ideology and one conversation? In your writings, it is as if you are not even understanding what it is he wrote (instead just spewing reactionary nonesense). This “night school mentality” makes you a pretty limited voice playing the same tune no what the event…
livefreeordie2 - September 5, 2010 at 10:55 am
trendisnotdestiny #5 – Ah. . . let’s see. I think your entire post falls into the category of Ad Hominem Fallacy. All you do is attack me – you make no comment whatsoever regarding the topic. That brings to mind two thoughts. First, since you have no factual counter argument – since all you can do is claim that I’m somehow uneducated, you obviously realize that I’m right and feel pretty helpless. The second thought is that, while I may indeed have a “pretty limited voice,” there are an awful lot of folks in this country who agree with me – more every day. So, I’ll see you here on November 3rd to discuss how many folks are singing my tune and how few are singing yours. . .
macheath - September 5, 2010 at 12:02 pm
livefree accuses trendisnot of commiting an “Ad Hominem Fallacy.”And in the same post, livefree then says the following:”you obviously realize that I’m right and feel pretty helpless.”Priceless and really funny. Unfortunately, one thing livefree says seems to be true:”…there are an awful lot of folks in this country who agree with me – more every day.”Don’t know about the “more every day” but there are a lot of people who “think” like this.
trendisnotdestiny - September 5, 2010 at 7:45 pm
livefreeordie2,Ok sweetie? Are you feeling well enought to answer the questions posed to you? Since you are SO much more informed than the rest of us (monolithic)lefties (which includes everyone left of the John Birch Society), could you come out and play? Gosh, we sure would be honored to have your input!Livefree, have you actually read Marx? Or do you just enjoy sounding like you know things without really backing it up? And in response to your most recent post, do you really expect civility from people while you ask them to wake up to the 21st century (as if your views are so superior and well thought out in comparison to people who think critically about the subject they are engaged in)?If you want the social sugar here in this community, you might start with I DONT KNOW and proceed from there… We have so many bright minds, we ALL could learn something without being interrupted with noise.
lexalexander - September 7, 2010 at 11:56 am
If livefreeordie2 is so confident that CEOs are being paid what they are worth, then I am sure he/she will not object to allowing shareholders to set compensation directly for officers/directors.Speaking as an owner/risk-taker, I can assure you that almost all of them, at least in publicly held companies, are grossly overpaid by any reasonable measure.
livefreeordie2 - September 7, 2010 at 12:49 pm
lexalexander #9 – Please go back to comment #4. I said specifically that they are paid what they are worth “in the opinion of those doing the paying.” Personally, I agree with you that they are grossly overpaid. I think you’ll find that in every instance, shareholders have a voice. Of course, if you disagree with the majority, things won’t work out the way you want. The point is that corporate boards, backed by a majority of shareholders, pay what they believe is appropriate and that is the only measure, reasonable or unreasonable, that counts.
lexalexander - September 10, 2010 at 10:47 pm
No, son, corporate boards are not “backed by shareholders” when it comes to CEO pay. They’re backed by a rigged system. There’s a difference.