Wages are not arbitrary and have little to do with "social justice." Wages are essential market signals and the most important factor in determining wages in any given time, place and professional is supply-and-demand.
In Chicago, most non-union electricians that I know earn $40 an hour, which reflect the high demand (relative to the available supply) for electricians. We can conceptualize high wages as market signals that indicates the relative need for a particular service and offers incentives to supply that need. Without the incentives of higher wages, it is extremely doubtful that a sufficient number of workers would invest their time and resources to develop the necessary skills to fill that position.
In Chicago most fast food workers earn minimum wage, which reflects the surplus of and low demand for unskilled labor. Most activists who push for a "living wage" for low skilled retail positions fail to take into account the economic law that when wages are raised beyond that which is dictated by market forces greater unemployment will occur. In addition to raising unemployment it lowers incentives for the said individuals to develop greater human capital that will allow them to increase their income and on an aggregate level to foster a more productive, dynamic economy. This is especially true in an economy that increasingly rewards skilled workers and penalizes low skilled workers.
As with any commodity, increasing the the supply of unskilled workers has lowered wages in key sectors of the economy and contributed to the increasingly unequal income distribution. Several government policies have contributed to the increase in the supply of low skilled workers:
1. Unlike New Zealand, the driving force of our immigration policy is not to attract highly skilled, highly educated immigrants. Whereas their criteria for accepting immigrants is a point system that focuses on bringing in workers that meet the needs of an increasingly high tech economy, ours is based on family reunification and a diversity lottery. Coupled with our almost complete lack of internal enforcement, the end result has been the influx of millions of workers who on average possess educational and skill levels considerably below those of native born workers. Predictably the results of this increase in the supply of labor has lowered the cost of labor in key sectors of the economy, which translates to a shift of income towards the wealthier Americans who consume these goods and services. And predictably the growth in economic inequality has been most pronounced in areas that have seen an influx of low skilled immigrants (such as California & Arizona) and less pronounced in areas that have remained more homogeneous (such as Utah and Iowa). So, it seems as if the progressive goals of equality and diversity may be somewhat incompatible.
2. In the past over 1/3 of immigrants returned to their nations of origin. A large segment of this group was composed of individuals who were unable to economically advance. This equalled a self selection system in which the most productive, adaptive immigrants remained, which encouraged upward economic and social movement. But, the expansion of the welfare state greatly diminished this self section system, allowing for unproductive individuals to remain. This further increased the supply of low skilled workers.
3. Even as school funding has surged, many public schools have done very little to prepare students to partake in a dynamic global economy. Their inability to assist more students in the development of the skills necessary to seize the opportunities that high-tech, creative sectors of the economy has doomed them to low pay jobs. The end result has been a less productive economy and a more skewed distribution of wealth.
http://www.carseyinstitute.unh.edu/images/photos/US_income_Inequal_5-15-2006_rev.jpg
I actually agree for the mostpart here except for that first line (There is plenty of social injustice.). However, the top-heavy distribution of wealth, loosely regulated markets, and culture of greed in every major industry including entartainment (Hollywood, music, pro-sports) also perpetuate those valid points in the second and third paragraphs.
ReplyDeleteThe underlying cause for illegal immigration has been left out. Mexico's economy is horribly corrupt and top-heavy as well. It slows legitimate growth and reduces faith amoung the masses in their own system. Which drives illegal immigration to the richest nation on Earth just a truck ride away.
I know that you're doing your very best to dance your way around that particular form of evil. I know that you have a dog in the fight. But this issue is not going away.
What I meant in that first paragraph is that too many are intoxicated by the 'fame and fortune' they see on TV and too little by a desire to learn a legitimate skill or trade and make a contribution to society. Extreme wealth not only makes the economic equation top-heavy and therefore, impossible to solve without a re-distribution of wealth. It also has a corrupt influense on society in general.
ReplyDeleteI appreciate your thoughtful comments, but I do believe that you are incorrect in your assessment that "loosely regulated markets" are responsible for an ill-distribution of wealth.
ReplyDeleteAnd I do agree with you that the poor state of Mexico's economy is a major factor that drives people north. Interestingly, the Mexican state strongly intervenes in the economy, which (for a variety of reasons) actually contributes to the ill distribution of wealth there.
But, honestly that's there problem and not our problem. The role of the American government is to protect the interests of American citizens and not those of other countries.
I take back the comment about dancing. You're the most respectful critic by far that I've run into yet. Too bad you'll never get a job on talk radio. You're too rational and your mouth isn't big enough.
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