@63. David S:
Of course wage hikes are paid for by an increase in prices. However, the price increases are not larger than the salary increases, so everyone is better off.
The price increases are not larger than the salary increases? In your example, maybe not – they’re exactly the same.
At $75/hr, the laborer needs to work 1.33 hours to generate one unit of revenue (that’s the cost of living). Revenue = $100/hr, Labor = $75/hr
At $100/hr, the laborer generates the same unit of revenue in 1.25 hours. The difference is how much better off he is. Revenue = $125, Labor = $100/hr
Labor goes up $25, revenues go up $25. Why? Because in this hypothetical example, the increase in labor costs is being funded entirely by an increase in consumer prices. It’s not being funded by either a decrease in production costs or a decrease in profits. So the consumer is paying every single cent of the increase. You are merely taking the simple fact that two numbers, when increased in a linear fashion alongside each other, will yield a smaller and smaller ratio, headed towards 1 – and using it out of context in order to make an entirely fallacious point.
Once again you are completely ignoring the simple fact that wealth and prosperity are not measured by nominal sums of money but by actual tangible things that have value to humans. A piece of paper with an amount printed on it is not wealth. So when you talk about shorter times to produce a unit of revenue, you are talking about a shorter time to produce a unit of revenue that is worth less in a climate of higher prices.
Also, if you raise everyone’s wages across the board then the other costs of production – materials, fuel, transport etc – rise too.
Just bump the portion of labor costs from 75% of revenues to 80%, and every laborer is better off, because the value of their labor has been increased relative to other factors. Is that so hard to understand?
What I’m really finding hard to understand is that someone can so thoroughly misunderstand something which isn’t that hard to understand at all. The quote above shows the extent to which you misunderstand. Let’s consider ‘bumping the portion of labor costs from 75% of revenues to 80%,’ for instance. It doesn’t matter what those revenues are in nominal dollars, the proportions remain the same. If you increase prices by raising wages then all other costs of production increase too (what do you think happens to the price of steel when steelworkers get a raise?). So what 5% of the revenue pie are you going to shove aside in order to give the workers an extra 5% slice? You’re laboring under the delusion that you can simply increase wages and consumer prices to your hearts content while freezing all other costs of production. Sure you can – in the make believe world of pen and paper.
The simple truth is that you can increase median prosperity by distributing existing wealth more broadly – by dictating a higher wage for labor.
The only extent to which you can increase median prosperity by distributing existing wealth ‘more broadly’ is by taking from the rich – confiscating their profits – and giving it to the not so rich. It’s a simple socialist redistribution of wealth that you’re proposing. It’s a shame that such an economic philosophy has never managed to increase median prosperity anywhere – unless of course you’re talking about a median level of poverty.
I will say this again. Since wealth consists not of banknotes but of the things which those banknotes are exchanged for (at a rate of exchange which is not fixed in any sense of the word) then the only way in which you can increase the prosperity of the worker is by increasing their output.
I am happy to demean myself in the cause of the education of others. Your misapplication of logic and misunderstanding of arithmetic are troubling, and I hope to assist you in improving your comprehension. The realities of life show clearly that workers benefit when they mobilize to win improved compensation, working conditions and benefits through unionization.
Hilarious. The realities of life show no such thing, since unions exist not to improve the productivity of workers but instead to jack their wages above market levels, which will never improve general prosperity. The only prosperity it will improve, to some extent, is that of union workers – but only to the extent to which other workers are not unionized. In other words, their increases in prosperity come at the expense of other workers and those increases become less and less as a higher proportion of the workforce becomes unionized and procures the same gains. The only legitimate, non-destructive role of unions is to ensure that market rates are being paid and to ensure safe working conditions. Unfortunately this is not the role that unions have assumed.
