Re: How does productivity turn into higher wages?

From: The Trucker (mikcob_at_verizon.net)
Date: 01/18/05 

Date: Mon, 17 Jan 2005 16:41:42 -0800

wilfred wrote:

>
> <zerge@hotmail.com> wrote in message
> news:1105994298.131535.139850@z14g2000cwz.googlegroups.com...
>>
>> r...@telus.net wrote:
>> > On 17 Jan 2005 08:21:29 -0800, zerge@hotmail.com wrote:
>> >
>> > >As productivity increases in an industry or in a country, salaries
>> tend
>> > >to rise.
>> > >Can anyone explain the cause-and-effect that leads to this dynamic?
>> And
>> > >I mean at the decision maker level: what happens in the minds of the
>> > >employers and employees?
>> >
>> > It's just that the increased production has to go _somewhere_.
>> >
>> > -- Roy L
>>
>> Yes, I understand it at THAT level. Supply is demand etc.
>> I just don't understand the thought processes of the employers and
>> employees, see? What specific market pressure makes the employers
>> decide to pay more and/or employees ask for more?
>
> Increased production leads to higher profits, should wages remain
> constant, but employees tend to notice that a larger share of the pie goes
> to the top, and negotiate higher wages. Employers may be more willing to
> grant wage increases as they are increasingly able to. I suppose in the
> very long term wages should tend towards the marginal product of labour,
> but will usually be prevented from reaching that level.
>
> Increased productivity may also encourage employers to employ more workers
> for the same amount of capital stock, if this is not an optimal
> labour/capital mix. Increase in demand leads to higher wage offered for
> labour.

_real_ wages are the stuff you get for the money you are paid. Even if
there is no increase in monetary salary the amount of _stuff_ we all
get has been increased due to the productivity. Now if nobody tells
the landlord that we have some slack here then all will be well. But
all too often he finds out that people can and will pay more rent.
As that happens he sucks up the excess and hoards it so as to increase
his control, his power, his wealth. Absent this rent stuff the
productivity increase would _always_ produce higher _real_ wages
because, as Roy L says, that stuff "has to go _somewhere_". 

-- 
"I know no safe depository of the ultimate powers of society but
the people themselves; and if we think them not enlightened enough
to exercise their control with a wholesome discretion, the remedy
is not to take it from them, but to inform their discretion by
education." - Thomas Jefferson.  http://GreaterVoice.org

Relevant Pages

  • Contractors have more choices (Re: I worked hard to become smug)
    ... tend to get paid more in wages than ... More experience does not mean higher productivity. ... > While population increased the number of available jobs had not, ... I still blame the employees for abusive employers. ...
    (soc.culture.filipino)
  • Re: Contractors have more choices (Re: I worked hard to become smug)
    ... tend to get paid more in wages than ... More experience does not mean higher productivity. ... >> While population increased the number of available jobs had not, ... >> abusive employers, some people still think they don't exist, they do. ...
    (soc.culture.filipino)
  • Re: Wal-Mart and Wages?
    ... >> The market doesn't need to be perfect, but will set boundaries ... >> on the level of wages. ... but there are surely limits on the extent to which paying higher wages ... will improve labour productivity. ...
    (sci.econ)
  • Re: Capital and Mark Monsons Land
    ... >>income of all workers fell, ... False measure, as productivity has risen, so has supply, however the ... this is what is meant by the "level of wages." ... helped shaped our economic understanding of organized labour today, ...
    (sci.econ)
  • Re: Immigration Crackdown
    ... >> Thumper wrote: ... Under the most significant change, disclosed earlier this week, many employers could be required to fire employees who used false Social Security numbers. ... In the article I saw, it gave as a reason the fact that after Bush's plan went down the tubes in the Senate, The Administration finally, acting quite out of character, decided that it actually ought to do the will of the people, and go after the illegals who were here. ... If they weren't here, wages would be forced to rise here, benefiting working people here, and distributing the economic growth more fairly than it is now being distributed. ...
    (soc.retirement)
Loading