informationliberation
The news you're not supposed to know...




An Introduction to Austrian Economics: Understand Economics, Understand Everything
The Century of the Self: The Untold History of Controlling the Masses Through the Manipulation of Unconscious Desires
The Disappearing Male: From Virility to Sterility

The Obama Deception: The Mask Comes Off
Operation Gladio: The Hidden History of U.S. Sponsored False Flag Terrorism in EuropeThe New American Century: The Untold History of The Project for the New American Century
(more)
Article posted Mar 28 2013, 10:48 PM Category: Economy Source: James E. Miller Print

Misunderstanding High Wages

by James E. Miller

Private business unceasingly gets a bum rap in major print. No matter the rise in living standards or technological advances brought about through market forces, there will always be some wiry, neurotic journalist bemoaning over social justice and demanding that capitalism kills. Socialism has proven itself to be impoverishing and murderous. Even Sweden, every liberal's favorite exemplar of successful welfarism, had to concede to free enterprise reforms in the 1990s to avoid economic catastrophe. Still, the forces who find offense in disparate impact of race stay dedicated to tearing down enterprise.

So imagine the ecstatic squeal many a leftist exhale when they encounter a business which pays a high-wage for a seemingly low-skilled position. They proceed to use the example to bludgeon market advocates as an exception to the rule that minor skill translate to minor pay.

Trader Joe's, the eccentric but homely chain of grocery stores, satisfies the criteria for launching a liberal shame fest. Along with the convenience store chain QuickTrip, Trader Joe's is redefining what it means to earn a profit while treating employees "right" according to Sophie Quinton of The Atlantic. Currently, these relatively small businesses pay their clerks almost $40,000 a year plus benefits. By paying cashiers and clerks higher-than-average wages, it appears that the decidedly progressive store chains are slapping competitors in the face with a better business model.

Unfortunately for progressives, not everything is as clear as it may seem when it comes to the dismal science of economics. The market process is an infinitely complex series of actions and intertemporal calculations. For every good produced, the material was once harvested from some point on the Earth. How it arrived at the marketplace was dependent on numerous manufacturers, wholesalers, and retailers coordinating their dealings over time and space. No amount of government force can abolish this dynamism for something more efficient. Economic laws are universal in application – they cannot submit to state edict. So when someone who fancies themselves as a new-age thinker in economics heralds companies that pay well, it's likely they misunderstand real factors behind success.

Everywhere, at all times, wages are determined one's marginal productivity. That is, employees are paid by how much value, or income, they are able to add to a company's profit margin. If this were not so, then the worker in question would be a money loser. And because businesses don't exist as charities, the employed either adds to the bottom line or finds work elsewhere. Cries of disenfranchisement or profiting on the back of the meek do nothing but stir up emotion.

For nearly a century, liberals have used Henry Ford's business acumen to disgrace modern management. It is said that the CEO of Ford Motor Company was foresighted enough to pay his workers a wage high enough to buy back the products they churned forth from the assembly line. This "living wage" remains a leftist talking point in spite of its misattributed causation. Ford was no altruist when it came to making cars. He was as self-interested as any man, with entrepreneurial instincts that outwitted his closest competitors for over a decade. What afforded him the capability to offer high wages was the capital investment in machinery that increased productivity as well as the incentive to hire the most able-bodied workers. As essayist Garet Garrett remarked at the time,
That the buying power of the Ford wage earner alone was increased had in itself no social meaning--not then, not until a high-wage policy began to make itself felt as an example throughout American industry. But the immediate effect upon the individual was electric, and this was an effect produced not by five dollars a day in his pocket but by the contrast between the Ford wage and a wage anywhere else
The very same concept applies to employers such as Trader Joe's and QuickTrip. The reason these businesses pay high wages is to attract a hard-working staff. In doing so, employees provide better customer service and increase sales. This is no spark of innovation on the part of these irregular companies; just a sound practice. Elevated wages ultimately come from competency in satisfying patrons. Exceptions to the rule never last long enough to become a viable enterprise.

When progressives attack the low wages paid for menial work, there is a brash assumption that they, being the superior intellectuals, know how to flip a profit like the flick of a light switch. The painfully obvious question is why business owners haven't thought of such a practice sooner. The left holds nothing back when it declares the soul of capitalism dead or aloof to life's misfortunes. So why then are big retailers not following suit and pursuing the easy buck by paying high wages? Firms tend to operate at level believed to maximize profits. If, say, the CEO of Walmart thought that paying higher wages would result in increased productivity from low-skilled laborers, why is he not jumping at the bit at this opportunity?

Those infused with the anti-capitalist mentality can find one million reasons why markets are exploitive and immoral, but are unable to come to terms with the truth that business owners are not endowed with a limitless pool of wealth. The left prides itself on putting rationality before creationism. Yet their mystic belief in government of the good and plenty leads to synapses of thought not pertaining to reality.

In the non-stop quest for crushing what's left of capitalism, great progressive minds never allow a minute to sneak by without bringing up the injustice of low wages. Businesses which offer a comparatively high number of dollars per hour are extolled for the compassion management has for the low class's plight. Anything less is a deliberate scheme to perpetuate destitution.

It's true that chain stores like Trader Joe's should be commended for a profitable business model. However, the high wages paid out to the lowest rung of the ladder are not a gift of commiseration. An above-average pay is a signal of high productivity. No member of management would pay an employee's wages at a rate that guarantees bankruptcy. Common sense dictates as much – which never fails to deter the rhetoricians of sciences they pretend to understand.
_
James E. Miller is editor-in-chief of the Ludwig von Mises Institute of Canada. Send him mail





Latest Economy
- The Food Police Turn to the Bottle
- Meet "Lowflation": Deflation's Scary Pal
- GM, Product Safety, and Death
- Is College A Waste Of Time And Money?
- Austrians and the Private-Property Society: An Interview with Hans-Hermann Hoppe
- We Do Not Live in a Post-Scarcity World
- A List Of 97 Taxes Americans Pay Every Year
- Government "Services" Explained In Under 30 Seconds









Comments 1 - 2 of 2 Add Comment Page 1 of 1
Nickel's 2bits

Posted: Mar 31 2013, 5:39 PM

Link
97104 Such wonderful, pro-capitalist propaganda. My favorite lie is this one: "Everywhere, at all times, wages are determined [by] one's marginal productivity."

Any capitalist who is being honest will tell you that this is complete BS: There is NO relation between productivity and wages that a capitalist will respect.

That's why we had horrors like "Triangle Shirtwaist", where the average worker worked piecework for around $7/week. If you were too good; well, Becky Kessler was highly productive and got her piecework up to around $18/week, but then they switched her to a fixed wage of about half that. They still expected her to have the same productivity, of course.

Which is actually the ultimate disproof of the above: The highly productive worker didn't earn more for that productivity at capitalist Triangle Shirtwaist, but is switched to a lower fixed wage because the owners wanted a higher profit. Productivity versus wages? No relation at all.

How little can they pay you? Can they get someone else cheaper? You're already working at a starvation wage, but the other guy isn't earning anything at all...so they told him that if he'd work for half a starvation wage, they'll boot you out and let him work. Next week, they'll be offering you a job for a quarter of a starvation wage.

In a pure capitalist system, all wages race to the bottom.

And that's why we wound up with a minimum wage.
Anonymous

Posted: Jul 21 2013, 2:06 PM

Link
72223 God bless Amurica!
No Unyuns!
No Minmum Wage!
Right ta Wurk!


Add Comment
Name
Comment

* No HTML


Verification *
Please Enter the Verification Code Seen Below
 


PLEASE NOTE
Please see our About Page, our Disclaimer, and our Comments Policy.


FAIR USE NOTICE
This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the DMCA and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.

About Us - Disclaimer - Privacy Policy



Advanced Search
Username:

Password:

Remember Me
Forgot Password?
Register

North Carolina Deputy Snatches Two Phones, Fails to Snatch Third, as she Handcuffs Man for no Reason - 04/22Bunkerville Was Not the BLM's First Rustler's Roundup - 04/22Cop Swerves His SUV Into Longboarders To Enforce $35 Bylaw Violation - 04/14Man Attacked By Cop For Asking Question - 04/22With Government Roads, the Customer Is Always Wrong - 04/22School Calls Cops On Runaway Special Needs Kid - 04/22Tax Day: What Kind of "Civilization" Are We Paying For? - 04/14The Disturbing Truth Behind Your Next Income Tax Return - 04/07

Rialto, CA Police Made to Wear Cameras, Use of Force Drops by Over Two-ThirdsCop Who Karate Chopped NY Judge In Throat Gets Off Scot-FreeFlorida Cop Smashes Compliant Woman's Face Into Car -- "Maybe Now You Can Understand Simple Instructions"VIDEO: Lapel Cam Reveals A Day In The Life Of A U.S. Police Officer (Tasing, Beating, Breaking & Entering, Stomping On Heads... and Laughing About It)Caught On Tape: Officer Sucker Punches Inmate In Face, Files Report Claiming 'Self Defense'Insult Person On Twitter, Go To JailSWAT Team Brings TV Crew To Film Raid Against Threatening Internet Critic -- Raids Innocent Grandma InsteadCop Karate Chops NY Judge In The Throat
(more)

 
Top