Wednesday, January 19, 2011
Back to the second theorem
If the social contract has changed between workers and employers in the United States as stated in this piece from The Guardian, what will the future look like in the United State? One thing that is missing from our theorems is the notion of political and economic power. Another thing that is missing is the idea that wages are equal to productivity. If workers get less, does this mean they are less productive today than they were 30 years ago? Do you believe that?
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The following quote stood out to me as I read this article:
ReplyDelete"More and better machines (including computers), better education, and harder and faster labour effort raised productivity since the 1970s. While workers delivered more and more value to employers, those employers paid workers no more. The employers reaped all the benefits of rising productivity: rising profits, rising salaries and bonuses to managers, rising dividends to shareholders, and rising payments to the professionals who serve employers (lawyers, architects, consultants, etc)."
I believe workers are probably much more productive than 30 years ago. Much of this is due to the larger percentage of the population obtaining college degrees today.
First off, I am very tired of middle aged men continuously pointing out that women in the workforce have made the economy worse off in various ways (Since our second class, I have become much more aware of this and I have found these references in some pretty credible sources like the Atlantic and The Wall street Journal.) Developing the human resources of everybody gives the US a greater, more competitive talent pool, which is an advantage in this globalized marketplace.
ReplyDeleteI believe that the US is in the midst of an economic downturn. We have overly developed our markets so we have expanded into those that still have great potential and lower production factor costs.
No I do not believe that, and I do not think that the article that we read does either. Actually, the workers back in the 1960-1970s were being paid more than they are now, according to this quote: "Over the last 30 years, the vast majority of US workers have, in fact, gotten poorer, when you sum up flat real wages, reduced benefits (pensions, medical insurance, etc), reduced public services and raised tax burdens."
ReplyDeleteYet, regardless of the degree of work done by workers then and now, our workers are being paid less. And this is because of the gap that has been created between the middle class and the upper elite class. More people are being clumped into the middle class, while the upper class gains all the benefits of companies that are expanding, which is totally unfair. This is a sign of technology and outsourcing being beneficial to the top tier and detrimental to the employers who help get them there. It is hard to say who works harder, but they aren't reaping the benefits as they were 30 years ago.
I would think that due to the leaps of advancement in technology over the last few decades workers are definitely more productive (this is - what we all have learned to love - an assumption). This prompt by Dr. Mckinney reminds me of what we spoke about in class about the Vietnamese fishermen and how the wage rate does not represent what the wage according to the market should be. If my economic memory serves me right then wage rate should be equal to Marginal product (measure of productivity) multiplied by Price. According to this simple theorem(if i may call it that) and my assumption that productivity has increased (less labor utilized, better technology, and more capital used) then market wages should increase too. While I just thought of this, I feel like this could be a good way of explaining based on economic theory why wages go up over time!
ReplyDeleteBut obviously if we take into account real wages then the picture might not be so bright. As I said before, labor is more productive now (as my understanding is that nominal/market wage rates have increased over time whereas real wage might not have).
It makes sense to believe that productivity has increased over the last 10 years, let alone the last 30 or more. However, its this increase in productivity and technology why we are able to enjoy many of todays necessities at the convenience and low price we do.. I am thinking primarily in regards to Wal-Mart. They go through EVERY cost reduction possiblility in order to keep their prices so low, even past a morally acceptable limit. Cost reduction is the goal for any profit seeking firm, so I'm not all too suprised to see productivity go up while wages remain stagnate.. This may not be the case for every firm in the country, but it's sort of a negative incentive for those working at the bottom of the pyramid...
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