fundamentalist: “That’s probably true, althugh I might disagree with the percentage. But for the most part, with exceptions, these a young people and immigrants working at entry-level jobs. Entry-level jobs aren’t supposed to pay a living wage because new workers don’t have the necessary skills.” etc.

It’s amazing how cloistered your view is yet, how certain you are of its truth. No, there are 35 or 40 million among us ensnared in low wage jobs and all that goes with that kind of poverty. And not just black people, nor in Appalachia. Every state in the union (well, maybe not Massachusetts) has its population unable to rise from poverty. The condition is multigenerational.

A few, like yourself apparently, rise from this condition and congratulate yourselves endlessly. But the way out you took is not available to all, for reasons of intellect and education. Many are just hopelessly stuck.

“Say we raised the minimum wage to $20.”

That’s just silly. Positing absurdities doesn’t prove your argument.

In any case, minimum wage increases are not necessarily the best approach to take. There are those among us who like the negative income tax, for people filing with low wage earnings. I think Cato has some interesting speculations in this area.

Michael: “I am a humanist, meaning that I consider the welfare of the population to be of greater importance than the welfare of some economic unit like the dollar.”

fun: “Don’t think that the two are necessarily opposed to each other. The welfare of the poor is intricately tied to the value of a dollar.”

It’s a simple equation. By paying the low-level workers whose efforts create their fortunes less, investors make more. So regardless of the value of one purchasing unit, over time the buying power of the one group diminishes… while the buying power of the other grows beyond their ability to consume. So they must then look for ever newer vehicles for investment, else be compelled to stack their vast fortunes in warehouses.

A logical move is to expand consumer credit, further enabling their workers to survive for the moment on borrowed funds.

You then offer an extended paean to the Waltons, who are merely the inert relatives of the guy who built the empire (now deceased). Collectively they have the acumen and drive of a sackful of doorknobs. Yes, jobs have been created at the stores. But they are far fewer in number than the low-paying jobs that were extinguished by those stores.

Collectively, payroll has decreased per unit of sales. That greater efficiency is expressed in lower prices. But it results in fewer employees, getting paid less than before Wally forced the mom and pop stores off the employment map. The net result is a diminution of value for working people: fewer jobs, each paying less than before.

Michael: “The productivity increases have already occurred. Between 1973 (a convenient watershed year) and 2004, productivity increased nineteen percent, while real wages increased about one percent.”

fun: “Actually, productivity fell from 1973 until about 1992, then rebounded until about 2001 and has been flat since.”

Not so. Take a look at chart no. 2:

http://www.econedlink.org/lessons/index.cfm?lesson=EM221

Which says: From 1950 to 1973, productivity grew at an average annual rate of 2.8 percent. But from 1973 to 1995, growth in productivity slowed to an increase at an annual rate of 1.4 percent. From 1996 to 2000, productivity increased at an annual rate of 2.5 percent, almost equal to the 1950 to 1973 rate.

fun: “Average real wages lost ground from ’73 until ’92, then rebounded with productivity.”

I’d be happy to look at any source you can find for this.

fun: “The difference between socialist/Keynesian economics and Austrian econ is that the socialists pit workers and owners against each other while Austrians rightly see how dependent each is on the other.”

What a crock. The tone of the article here is that the contribution the workers make toward perpetuating our generally prosperous economy is nil. No one, not even the Chicago School, more belittles the worth of labor in the value-added process of(for example) transforming ore in the ground to automobiles, computers and the like.

fun: “Price inflation does not cause a net societal gain. If prices rise the same amount as wages, there is not net gain.”

I didn’t say it did. You didn’t take the time to comprehend my argument… which is that when labor gains a greater share of the total pie, prices may rise but purchasing power increases even more. While when ownership gains the greater share, prices drop but even more so does purchasing power among low-end workers.

This has nothing to do with the size of the total money supply. It has only to do with the way the pie is cut.

Quite so, JS. And I would point out that the employee and the consumer are one and the same person. And that his wants, needs and preferences, when you come right down to it, are indivisible. By whatever means necessary, he or she would like to finish up the month in the black. And the current model, of less pay and cheaper prices, has over the years put him or her increasingly in the red.

Anyone seeking to see if improvement could be gained would suggest we try the other model for a while. It is working quite well in Europe, and the value of the Euro continues to maintain a quite healthy level.

In the first case, anyone’s evaluation must be seen as subjective. If you’re an employee, the bosses keep it all to themselves, hanging out on the golf course while you pay their bills. And if you’re in the investor class, you see a need to beat your agents (executive management) mercilessly with a stick to see that they don’t give away all your God given income to a bunch of rabble with dirty collars.

But certainly we all see the tripartite nature of employment: there is labor, there is management and there is ownership. For this admirable economic system to work, there should be some sort of parity between their rewards.

Demonstrably, there is not. Again, using the convenient period 1973-present as our field of study, we find tremendous gains during the period on behalf of capital and management, with levels of remuneration hitherto undreamed of… at the expense of the guys who actually do all the work. Even a brief glance at the econometrics will offer abundant evidence that this is so.

If you admit, and find all this equitable and fair, I think that just identifies you by class.

My own class identity, if you’re still wondering, was forged in the crack where the demands of ownership on upper management, those of management on the serfs below, and the needs of my labor force all came at loggerheads. I came to see outcomes as being victorious if all three parties came away from my negotiation equally disgruntled.

And I got pretty good at it. That brings us to the action of the laws of supply and demand on labor rates.

Here I think mere theory ill equips us to the task of keeping the economic engine in good tune. After toiling in the fields of others, I took what I learned and formed my own company.

Further, I had the elemental good sense not to sell control to faceless investors, by incorporating. I stuck with a field I could self-finance.

So there was no onus to please either ownership or management. I could do as I pleased. And I found the most satisfying course to be (1) that I got more business by charging my customers a little less, and (2) I paid my employees a little more, keeping them both happy and motivated to do good work.

Naturally this formula gained me less profit (a concept I interpreted as my wages for running the show). I only made double or triple what my employees took home, as opposed to several hundred times– as one sees in executive pay packages nowadays. Yet I was still able to retire on schedule, with a clean conscience, and I have enough cash to meet all my needs without having to scrimp.

Funny how that all worked out. I would call it a life successfully lived.

Next, Gene Berman has hit a number of nails on the head. And your comments deserve a proper response.

Gene, you say “Your arguments are stated and organized with a clarity identifying you as serious. And, you are right..none of the other commentors has refuted your arguments with their own. rather, they have provided a few sound-bite-type counters.”

Thank you for the left handed compliment. I braced myself for the following “But…” phrase. And you do not disappoint.

“But the fact remains that you are about as far wrong as it possible to be. Moreover, you are of an intelligence level that has been able to absorb the propaganda dispensed by almost all of mainstream American education for well over 70 years and integrate it to a degree worthy of a socialist professor.”

As it turns out, my experience is not in academia. I never thrived in that arid environment. And back in ancient times, when I was an undergrad, the profs, hired by this right-to-work state to inculcate the young, didn’t lean left in any fashion. Not even in the social sciences– history, sociology and anthropology. So I missed my dose of propaganda, subsequently going out into the world to form my own impressions as to where the gears and levers were located.

My experience has largely been in personnel management, where I directed the labors of others. So all my comments come from the school of Reality, where I had to balance payroll according to the needs of my work force as well as against the value of their efforts to the company.

“The reason that the economic theory to which this site subscribes and seeks to propogate has not yet succeeded in its aims and, in fact, does expand so relatively slowly is due in part–a significant part–to the fact that it contains no “segments” which can be considered (and either proven or disproven) in isolation from the whole. It is comprehensive and fully integrated, taking as its only “assumption” one underlying reality: that men ACT, that is, men do whatever they do because they prefer that mode to some other at that moment in time.”

I am avidly reading and learning at this site. And I’ve formed one solid observation thus far: that it is the Austrian School that is composed of academics with scant experience of the real world, and that the elixir they’re selling is based upon an internally consistent bubble of theory, divorced from the actualities of the workplace and marketplace. Put another way, I strongly suspect that the advocates I encounter on these pages have never had to butt heads in the actual workaday battleground of management vs labor. Thus, respectfully, you have formed some outlandish ideas as to what is actually taking place there.

In my world, the consumer and the producer are one. This individual both works for money and spends it, and hopes that the net balance between those activities is a positive one. Sadly, since about 1973, this person has been steadily losing ground.

I attribute the reason to our country’s adoption of “trickle down” theory, according to the tenets of Mr Milton Friedman and under the direction of the character actor Ronald Reagan. And observe that over the duration of this experiment, those being trickled down upon have gotten poorer and poorer, until the typical net worth of the family unit has approached zero.

And I have further observed that the money being taken from their pay checks has accrued in the pockets of capitalist investors, growing fat on the accumulation of unearned income.

And that the needs of the two groups have intersected at the moment of easily available consumer credit. So much cash has piled up that it can’t find a home in the financial markets without causing huge speculative bubbles, where too much money chases a finite store of value. So it has been loaned out to the desperate wage earner to help his ship from sinking.

The beauty of the plan is that the cash being loaned allows the lender to continue living off the fruits of his wealth, enabling him to become an idler and no longer have to contribute anything to society. The borrower enters the cycle of debt, and pays out to his owner many times the amount of money he has borrowed. So for millions of Americans, life is possible at the disadvantage of becoming a wage slave.

My approach was to always give a little more in wages, and to ask a little more in effort. And I’ve found that to be a workable approach to management.

Interestingly the credit trap also works on an international scale. Have you noticed the resemblance between the worker’s reliance on debt and America’s reliance on overseas dollars? We make very little now, but have accumulated an inordinate share of the world’s capital. So we trade our dollars– pictures of presidents– for real goods. Then the makers of the products we consume loan the money back to us, enabling us to buy more. Thuis gradually, nations like the Chinese come to own us… as our trade imbalance and federal budget become ever increasingly out of kilter.

The money, here, is not real. But the trap is… and both the American worker and the nation itself have become ensnared in it.

It is fashionable to parcel out blame to one of the two political parties– usually, for some reason, to the Democrats. But surely everyone can’t have missed the fact that this is a bipartisan effort. Spend, spend, spend… but never tax. That way the party rolls merrily on, and no one ever has to pay the piper!

Your commentary is great – I guess I say so because my thoughts and opinions used to square with yours 100% (_especially_ after majoring in Economics in school, and taking classes like Labor Economics, Economics of the Public Sector, etc).

The only difference is the framework that we look at things through – _everything_ changed for me when I read several very influential works in Austrian economics.

The initial responses to your comments were not so great, but they improved very quickly – Magnus’ were especially on the mark, and I hope you carefully read and respond to them.

You may see us as ignorant and squaring against the interests of the worker, but the truth is that no one is more concerned about the worker than Austrian economists.

If you take the time to begin reading some of the clearer books that address the issues you have brought up, your views on these issues are likely to change dramatically. I recommend:

-> Economics in One Lesson
-> Economics for Real People (These two books address your issues directly, and are both simple, straightforward, and rewarding reads about what we think of as real economics)
-> Money, Bank Credit, and Economic Cycles by Jesus Huerta de Soto (the clearest book on the Austrian Business Cycle theory and monetary policy, period, written only in 2006 – money and monetary policy are the most confusing and conflicted areas in economics – this book refutes Keynsianism, Monetarism, Neo-classical theory, and shows step by step how inflation of the money supply enriches some at the expense of many and cause recessions and depressions. 100% recommended)

If you can read all three of these books and not undergo a complete change in the way you look at the world, I would be very surprised.

Please try to take the time to read these (the last two are available as free downloads on Mises.org), and see if they don’t cause you to look at things in entirely different ways than now.

Both sides of the bargain are looking for advantage. There’s no doubt that if labor were to hold the power (as they briefly did after WW Two) they would demand more than they were owed– just as presently the management is in a dominating position, and takes far more from both labor and the shareholders than can be justified. That is in the nature of the human beast.

IMO, the proper approach to all this is not to further juggle control in favor of the guys currently on top, but to endorse a system where each side of the triangle has a roughly equivalent say in how the pie is to be cut.

Bosses are certainly worth something to the company, as are investors. But to say the workers are irrelevant and worth no more than whatever pennies are tossed on the ground for them is, I think, a distortion.

A note on the minimum wage. Yes, there are people without rights today, who work for less than the minimum, fill these dirt jobs and cower in fear that they will be discovered. They are called the “illegals”.

Let’s say they earn four bucks an hour, or $8,320 a year. And let’s say they want to put a roof over their heads, and the cheapest trailer they can rent is $600 a month. Using the 30% rule, it would require the earnings of three of them just to pay for one trailer. And that in fact is how they live.

So you see, we’re already there. We have no minimum wage. Most fry cooks and shelf stockers earn more than the official minimum anyway, so it’s absolutely not a limit to employment figures.

ICE recently raided the big hog plant down the road in Tar Heel, losing most of their workers to deportation. So did they them just dip into the huge pool of unemployed labor, locked out of the market by the minimum wage? No, they advertised and found no takers. Even offering twelve bucks an hour, no one else wanted to do the work. Just desperate Mexicans.

The lowest paid US citizens here would be illiterate ex-felons with no more than an eighth grade education. Their pay rate starts at about $6.50. Hardly anyone was affected by the increase in the minimum wage.

It’s important to understand why the modern union isn’t a fair institution. In Ontario, for instance, law says that a shop can choose to unionize with the agreement of only 50% of employees. With the union thereby in place, the other 50% can choose to join the union or not, but regardless they must pay the same union dues that the union members pay (about 2.5% of their salary).

In other words, even if they don’t support the aims and wishes of the union, dissenting workers are required by law to financially support those aims. This amounts to forced participation in a group and amounts to a major violation of individual rights. About the only thing an individual who doesn’t support a union can do is quit. But if their chosen profession can only ever be exercised in a union-controlled environment, quitting is not an option. Thus unions in Ontario prosper on the backs of unwilling members.

Governments in Canada, the US, and Europe have all created labour laws that limit the rights of individuals not to join unions, though it’s probably the worst in Canada. If you think it’s fair that the majority uses law to exert force over the minority, then we’ll just have to disagree. But if you see the unfairness in that, you’ll have to reconsider your support for the modern union.

The only fair unions are those that operate in a free society that has rid itself of laws that force participation.

The source of this worldview is the ancient idea, going back millennia that wealth is limited and no man can gain wealth except by taking it from another. This view of wealth was true for most of history because productivity gains were very, very low and most rich people got their wealth by stealing it.

However, the Dutch Republic of the 17th century made it very difficult to steal another’s wealth as nobility had done for millennia. And the Dutch perfected capitalism which caused productivity rates to grow for the first time in history. Under capitalism, especially after the industrial revolution, enormous amounts of new wealth were created, and the creators had to share the wealth with workers in higher wages and with the public through lower prices of goods. For the first time in history it became possible to gain wealth by creating new wealth rather than taking the wealth of a neighbor. The interests of workers and employers are not antagonistic, but complementary and absolutely dependent on each other.

Keynesian/socialist econ follows the old, pre-industrial revolution worldview of antagonism and limited wealth. Austrian econ, with took up the torch from classical liberal econ, follows the post-industrial revolution worldview of expanding wealth and cooperation/dependency made necessary by the division of labor that Smith emphasized. It’s up to you to figure out which worldview matches reality the best.

A great many of us are being paid adequately for our efforts, and they do not concern me. But about one third of the labor force are being paid far below the cost of making an adequate living in this country.

Neither you nor anyone else has any means of making an evaluation of the “adequacy” or “fairness” of any price for anything EXCEPT by reference to the market in which it exists.

Therefore, anyone’s unilateral, subjective, hypothetical, disinterested opinion about what you think that someone else ought to pay a third party is, by definition, arbitrary and meaningless.

This is a key point. Please think it over thoroughly.

They are also being paid below the value they add to their company’s fortunes… which would not exist without such efforts.

Ah, the Marxist Labor Theory of Value rears its ugly head.

The price of anything (including labor) is not determined by the “value” it supposedly adds to the good that is sold. The good is sold on the market, and prices fall to market-clearing levels, having nothing whatsoever to do with the cost of producing it. See above re: how prices are determined.

Of course, goods that sell at a price below the cost of production tend to disappear rather quickly (unless you have a government subsidy, for example). But the market price of labor (just like anything else) is not determined by the “value” it supposedly adds.

Their lives are necessarily squalid and insecure, and basic necessities like health care and higher education are pretty much beyond their means. Their existence indicates a societal malfunction.

Where to begin?

A. I don’t know who “they” are exactly, but many people who earn a relatively low wage do so because they are part-timers or students or simply young or unskilled.

B. Not every job is worth the amount of money it costs to own a house and a car and a flat-screen TV, and no amount of legislation will ever change that fact, any more than legislation will repeal the law of gravity.

C. Medical care and a higher education are not basic necessities. Food, clothing and shelter are. Obesity is a far greater problem in America, particularly among the poor, than lack of true basic necessities.

I am a humanist, meaning that I consider the welfare of the population to be of greater importance than the welfare of some economic unit like the dollar.

This is absolutely meaningless. The dollar has no welfare. Free markets produce the greatest welfare. Therefore, any law or regulation that interferes with free markets, by definition, creates a sub-optimal economy, thereby reducing the population’s welfare.

Besides, if you want to help the “population,” then you should produce a valuable good or service at the lowest market price. You will have done far more to save people money and improve the economic conditions of everyone you deal with than you will by supporting the crimes of this Mafia organization called “government.”

So I consider that the current trend, toward more very poor and very rich, with fewer among us in the comfortable middle, to be one in need of correction.

Free markets create a middle class. Freer markets expand their ranks. Government intervention, including unionism, destroys the middle class by limiting opportunities for entrepreneurship, creating de facto and de jure monopolies, imposing arbitrary restrictions that favor existing producers and exclude newcomers, etc.

There are a great many jobs where rapacious employers are milking their serfs beyond any need, simply because they have the power. I know WalMart employees, for instance, who admit the prices are low but say they still can’t afford to shop there.

I wholeheartedly suggest that you start a business competing with these rapacious serf-milkers immediately.

By your own admission, there is an “excess profit” being made. You therefore are in a position to provide a competing good or service at a lower market price.

Given the apparent magnitude of the rapaciousness of these serf-milkers you have identified, there is probably room in that obscene profit margin for you to both pay your employees more than any other employer, while also lowering your prices to outsell the competition.

Your employees will love you for freeing them from the squalid state of milked-serfdom, and your customers will hail you as a genius and a godsend for selling your goods at prices far lower than anybody else, thus saving them even more money to help lift them out of their squalid milked-serfdom.

Or, I guess, you could get the government to just take all the money. And then you could pat yourself on the back for being a humanitarian.

That’s probably true, althugh I might disagree with the percentage. But for the most part, with exceptions, these a young people and immigrants working at entry-level jobs. Entry-level jobs aren’t supposed to pay a living wage because new workers don’t have the necessary skills. They need a lot of training. Mobility out of entry level jobs is quite high. If employers were forced to pay a living wage to these workers, they could not afford them. Say we raised the minimum wage to $20. Employers would be forced to get rid of a lot of jobs, such as pizza delivery, and they would hire only highly experienced people for the remaining jobs. Entry level workers would have to work for free until they gained the needed experience.

Michael: “I am a humanist, meaning that I consider the welfare of the population to be of greater importance than the welfare of some economic unit like the dollar.”

Don’t think that the two are necessarily opposed to each other. The welfare of the poor is intricately tied to the value of a dollar.

Michael: “So I consider that the current trend, toward more very poor and very rich, with fewer among us in the comfortable middle, to be one in need of correction.”

I agree completely and Dr. Reisman has a good article on the site about inequality and how the state makes it worse with taxation and inflation policies.

Michael: “Meanwhile five of the nation’s ten wealthiest people are named Walton. This is an inappropriate bleeding of profits to an insignificant number of people– people, moreover, who do not contribute one iota to the bottom line.”

The wealth of the Walton family is tied up in stock in Wal-Mart. They got that wealth by growing a business with only average profits. In addition, they didn’t capture all of the wealth their businesses created. They created thousands of jobs for entry level workers and reduced the costs of food and clothing for consumers. Some have written that Wal-Mart has done more for poor people than all the efforts of the Fed’s “war on poverty” over the past 40 years simply by reducing their costs of living. The jobs they created are for entry level workers who have little or not skills. Without Wal-Mart, many of those workers would have no job opportunities at all. It’s true that the Walton heirs don’t contribute to the running of the company today, but is that a valid reason for taking away their money, which their dad earned by working very hard?

Michael: “The productivity increases have already occurred. Between 1973 (a convenient watershed year) and 2004, productivity increased nineteen percent, while real wages increased about one percent.”

Actually, productivity fell from 1973 until about 1992, then rebounded until about 2001 and has been flat since. Average real wages lost ground from ’73 until ’92, then rebounded with productivity. Most of the wage erosion was due to high inflation rates because wages rarely keep up with price inflation. But part was due to lower capital accumulation and investment in business because of taxes and inflation. Wages rise when business owners can buy better equipment for workers to use. Heavy borrowing by the Fed’s also hinders business investment. Roger Garrison in his “Time and Money” estimates that the Feds took 30% of all US savings in 2001.

Michael: “I guess you don’t know any of these people. A shame.”

That’s not fare. I was one of those people in my younger days and I know a lot of them. I got interested in economics decades ago because I wanted to know how to help the poor. The difference between socialist/Keynesian economics and Austrian econ is that the socialists pit workers and owners against each other while Austrians rightly see how dependent each is on the other.

Michael: “No. Capitalists would be FORCED to hike consumer prices, in many instances…But there would still be a net societal gain to be made, pulling up the bottom…”

Price inflation does not cause a net societal gain. If prices rise the same amount as wages, there is not net gain. In reality, Fed monetary pumping causes prices to rise faster than wage increases so that poorer workers never get ahead.

Michael: “It’s top heavy now, with too much idle investment money looking for a home, coupled with too much want at the bottom.”

I agree completely. But the problem is not with the free market. The problem lies in the socialist policies of the government. Most people think that the US is a capitalist nation. It is far from it. We differ from European socialism in insignificant ways. We have the second highest tax on corporations in the world, and state regulation in laws like SOX are even more burdensome. Businesses can not pay workers more because the state takes such a high percentage of profits, adds huge costs to operating a business through regulation, then steals even more through price inflation.

FT: “Before the Apple II was invented, not one consumed Apple II computers. Your assertion is fallacious.”

Had the first batch of Apples not been purchased, there would have been no second batch. The company would have folded, until they found a product that sold. A fuller statement would have included the fact that “Production sometimes precedes consumption… but it anticipates, and is dependent upon, consumption to be viable.”

Me: “Why on earth would you ever spend money producing something that no one was going to buy?”

FT: “Investors look for things like: projections, market investigations, try-outs, free samples, et cetera. It is not as if producers just go off producing willy-nilly – their investors will want some assurances first.”

But if the product doesn’t sell, the model fails. Unles, of course, the business model is to bilk investors by promoting an IPO designed just to get their money and run.

Me: “What matters is cash flow, not a one-time infusion of cash. Your fellow in possession of X amount of cash will one day spend it… like the fellow ending up with a fish who didn’t know how to fish. Whereas if he hires others to work in his factory, and sells them something they all want to buy, he has fresh fish on his plate forever. He has initiated a renewable supply of purchasers.”

FT: “You are confusing things. A producer makes products with a specific market in mind and not his workers. I could have a company with 100 employees making a million widgets per year – would my workers buy 10,000 widgets per year to keep the company going? Producers do not pay workers so they can consume what they produce – they pay workers according to the market rate for a certain job and based on the marginal utility that worker provides. In other terms, the worker gets exactly what he is willing to receive for his services.”

I’m not the one trying to confuse things. A “producer” should be thought of as the whole triumvirate: bosses, workers and investors. They should be united around the common purpose of developing a business plan that can reward all for their common venture. And, naturally, they generally produce for the world market or some subsection of it. Rarely do they produce for themselves alone.

However it was different with Mr Ford. Capitalism was in its infancy, and consumer demand was insufficiently developed. Thus he hit upon the idea of increasing his consumer base by paying his workers more.

I’m sure this new pay scale had the effect of helping lift other pay scales. And the effect was to increase the number of consumers affluent enough to be able to purchase a motor car. It was a giant step forward, enabling the establishment of a widespread, capitalist, consumer-based economy. Previously the economy was largely based on the carriage trade and on the wants of poor people.

Me: “My model would be Henry Ford– not exactly considered a dumbbell. He could have paid his workers far less than he decided to. But then they could not have afforded to buy his cars. Further production would have been useless.”

FT: “That’s not what he thought when paying more – he wanted to avoid turn over costs. He certainly did not employ enough workers to consume the 15 million Model Ts the company produced, that would have been absurd. Besides, wasn’t supposed to be the labor unions that increased wage levels, and not Mr. Ford? Or haven’t you seen that contradiction yet?”

I am commonly finding this intellectual flaw in the posts of a great many people. You seem to be following the sole-source theory of causality… that there can be one and only one cause for any given event.

But events are always complex; there are multiple contributing causes. So positing another contributory cause doesn’t “contradict” the one I’ve suggested. Ford’s business model and the rise of organized labor both helped increase the pay of the American worker.

And no, Ford did not sell fifteen million Model Ts only to his own workers. It took him a good many years to sell 15 million units, during a time when the consumer-based economy was rapidly expanding. Many more families, in addition to those of his employees, were seeing such increases in pay as to enable them to buy new cars, refrigerators, washers and other affordable wonders of the modern age.

My underlying point, of course, was that if everyone’s workers had been kept to starvation wages, none of this would have been possible. We’d still have had a few very rich masters and a vast horde of downtrodden masses.

And that is why we celebrate Labor Day.

Check this out:
http://www.abelard.org/ford/ford2-business.php

And whether or not Mr Ford was some kind of “socialist” is immaterial. He was a businessman… and his model made his company more money than did the companies of any other auto entrepreneur of his day. So the proper word for Henry Ford would be “more successful”.

The model involved (1) giving the workers enough excess spendable cash to buy his product, and (2) pricing the product lower than those being offered elsewhere. It was effected through the magic of mass production.

In the end, had the Dodges retired their complaint, kept their mouths shut and just kept their money in Ford Motors, the would have become more than adequately rich without the need to go off and start Dodge Motor Cars.

Moral: it’s always good to read more than one version of events before taking what you’ve read as gospel.

To my comment that laborers should be paid fairly, you offer “But then you have to ask who will determine what is fair?”

A great many of us are being paid adequately for our efforts, and they do not concern me. But about one third of the labor force are being paid far below the cost of making an adequate living in this country. They are also being paid below the value they add to their company’s fortunes… which would not exist without such efforts.

Their lives are necessarily squalid and insecure, and basic necessities like health care and higher education are pretty much beyond their means. Their existence indicates a societal malfunction.

I am a humanist, meaning that I consider the welfare of the population to be of greater importance than the welfare of some economic unit like the dollar. So I consider that the current trend, toward more very poor and very rich, with fewer among us in the comfortable middle, to be one in need of correction.

I also have the experience of having been an employer, and know there are many areas where the extra net gain from which one might increase pay rates is just not there. In those cases, I have to tell employees who need more money they should think about getting a better job; I can’t help them. There’s just no more money in the operation.

But there are a great many jobs where rapacious employers are milking their serfs beyond any need, simply because they have the power. I know WalMart employees, for instance, who admit the prices are low but say they still can’t afford to shop there. The pay is just too crappy. Meanwhile five of the nation’s ten wealthiest people are named Walton. This is an inappropriate bleeding of profits to an insignificant number of people– people, moreover, who do not contribute one iota to the bottom line.

No problem for the money, you might say. It’s merely a huge social problem. The costs manifest themselves in other ways, as we pay for the collective support of that part of the population who are chronically below the water line.

Your next comment:
”Austrian and Keynesian economics proposes that the worker get paid his marginal contribution. His marginal contribution increases through productivity increases, not through better negotiations.”

The productivity increases have already occurred. Between 1973 (a convenient watershed year) and 2004, productivity increased nineteen percent, while real wages increased about one percent. In fact, as the measure of inflation is being kept artificially low, wages have actually dropped abround a negative two percent, relative to purchasing power.

This indicates that the problem, regarding a fair allocation of gains according to merit, is one of negotiation.

In your view, the aura of money is so golden that anyone who has a bit extra enjoys the right to place his chips, take the entire profit of the operation he’s betting on off the top, waiting placidly on the terrace for his dividend, while the people whose efforts make that profit possible are only able to eke out the most marginal of existences due to the miracle of readily available credit. Being below the water line, they are no longer working for cash… they are working to repay debt.

I guess you don’t know any of these people. A shame. There are fifty or sixty million of them in this country, working long hours for subpar wages. But you do make one more valid point:

“Capitalists might decide to pass on the extra cost of labor to the consumer, in which case higher prices would destroy the gains that labor thought they had made in wage increases.”

No. Capitalists would be FORCED to hike consumer prices, in many instances. Dollar stores would become buck and a quarter stores. A 99 cent burger would cost $1.25. The price of many cheap consumer items would be going up.

But there would still be a net societal gain to be made, pulling up the bottom (the maintenance of a huge crowd of poor people is expensive for the reat of us). And there would even be a gain for medium- and top-end retailers, as more people could then afford their stores. There would be fewer write-offs at hospitals, for the rest of us to repay in the hidden form of higher hospital bills. And there would be an immense increase in tax revenues, enabling the country to begin repaying its runaway debt.

In short, such an economy would normalize, relative to the way it operates today. It’s top heavy now, with too much idle investment money looking for a home, coupled with too much want at the bottom. But this is the stuff you can’t learn in school.

Why is it that competition is regarded as a Good Thing when its between producers, but as a Bad thing when its between workers? Even when there is a labour shortage, employers will still aim at employing the best and compete for them, making higher wage offers for particularly productive individuals. Which is as it should be.

So, collective bargaining tends to shut out the least productive from any employment at all, while assuring that the most productive are paid less than they should be. THATS why unions are evil – they don’t play fair.

And yet, it persists, like a fungus that just won’t die.