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Source link: http://archive.mises.org/2107/wages-and-labor-lecture-6-of-34/

Wages and Labor (lecture 6 of 34)

June 11, 2004 by


These are notes from the sixth lecture given at the Mises University. Any errors are mine, feel free to point them out so that I can correct them.


This lecture was given by Prof. DiLorenzo.


Why do people work?


A lot of anti-capitalist propaganda tries to convince people that work is the result of an unfair social system, and that workers are being systematically exploited. So, why do people really work?


  • Benefits > costs


  • People like labor


  • Curiousity


  • Like achieving something


  • Like the process


  • Satisfying particular wishes


  • Psychic profit




Labor


  • Labor is a commodity: Value Marginal Product –



    1. Marginal productivity of labor
    2. Price of commodity being sold


  • Human capital resources, Marginal productivity of labor.


  • Capital — increases the marginal productivity of labor, which increases wages ( P{q} * MP{l} )


  • Anti-capital laws slow income growth.


  • Capital accumulations are what really reduced / eliminated child-labor.


  • All labor is connected: When labor unions get wage-rates increased, companies lay off employees, who go elsewhere, causing more supply elsewhere and driving down prices.


  • No such thing as an “employer-cartel”:



    • If pay employee below his discounted value marginal product, he will be bid away by competitors.
    • To deny such would be to argue that hundreds of thousands of employers agree to set prices low:

      • Huge profit-incentive to cheat.
      • Historically, has never been done.




Catalactic Unemployment — voluntary unemployment in the free market.



  • Seasonal industries


  • Searching for better job


  • Unwilling to move


  • Laziness, sloth


  • Pay not high enough



    • Pay not high enough to compensate for welfare lost
    • Pay not high enough to compensate for the disutility of labor.




Institutional Unemployment — unemployment created by State-interventionism


  • Minimum wage, which prices people out of jobs: Why not make minimum wage $1,000 per hour?


  • Mandated costs (“benefits”) — any law that mandates any benefit increases the cost of employees, whether or not their “wage” goes up; e.g.:



    • vacation
    • health insurance
    • etc


  • Labor unions, which try to raise wages above the free-market level, via various means:



    • Strike or threat of strike
    • Propaganda war against the company, which could be disastrous
    • Sabotage company they work for
    • Note: During the Great Depression, laws were passed that allowed labor unions to drive wages up unbelievably high, causing enormous unemployment, exacerabing the unemployment rate during the Great Depression, worsening the depression.


  • Government spending, which drains off money from the private sector and causes inefficient resource-allocation.


  • Unemployment “insurance”


  • Laws that require companies to match labor wage rates


  • Child labor restrictions (15yr olds can’t work at McDonalds)


  • Restrictions on female labor — in the 80s, women sewed in their basements, and sold the products they made; labor unions convinced The State to shut them down on the justification that they’re being “exploited”, despite testimony of the women to the contrary. The obvious reality is that the labor unions wanted to eliminate the competition.


  • Occupational licensing; e.g., in NYC, it costs $300,000 to be a cab-driver.


  • Taxes, such as the pay-roll taxes and with-holding taxes.


  • The cost of State-mandated paper-work.

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