Supply-demand model of labor markets is broken, preventing pay raises

http://www.businessinsider.com/supply-and-demand-model-of-labour-markets-is-fundamentally-broken-2018-6

by dgudkov • 8 years ago

18 7 8 years ago

" As I've noted before on Business Insider, the part-time gig economy has broken a fundamental link in capitalism that was good for workers. Pay rates no longer move upward as unemployment moves downward because companies like Uber, Just Eat, and Deliveroo can switch their demand for labor on and off on a minute-by-minute basis. Self-employed folks making a living on Etsy, Amazon, Airbnb, or eBay know their clients instantly go elsewhere if they raise their prices by even a few pennies."

Anyone who's studied the basics of Econ knows that this situation is called a Perfect Competition (as evidenced by nothing less than the admission of perfect elasticity of demand). It's not just that employers became 'more powerful', individual workers became more powerful in the sense that startups have been intruding on economic fiefdoms. What used to be monopolistic competition or even oligopoly (e.g news services) is now facing fundamental market structure changes that bring the cost of labor down to its 'true' value. It turns out the 'true' raw economic value of a lot of labor is what it would be under serfdom: subsistence wages. This is to say that individuals have become more able to enter previously restricted markets, with the consequence that few of them pay very well.

(Exercise for the reader: Consider the correlation between the implicit class-signaling based monopoly of higher education and its effect on wages compared to the rest of the increasingly competitive malthusian economy.)

pascalxus• 8 years ago

They mention, as evidence that the number of people looking for work is less than the number of job openings. I would argue that both of those numbers are flawed.

First of all, Having a job opening doesn't mean you urgently need a position filled. I've seen companies post the same job opening year after year after year, and get hundreds of applicants and still never hire anyone. Someone i know, (a data analyst) would often apply for these jobs, never ever hearing back or getting any kind of feedback on what they're looking for. There simply isn't any need, the posting is just there because someone forgot about it. If these companies were at all serious about hiring anyone, they'd at least get their career section of the web site straightened out.

Second, I think the total number unemployed may be miscounted. I know the unemployment rate number has huge problems.

lemoncucumber• 8 years ago

Second, I think the total number unemployed may be miscounted. I know the unemployment rate number has huge problems.

Maybe you’re referring to the fact that it only counts people who are actively looking for a job, and ignores those who would like to have a job but have given up looking?

ponzored2• 8 years ago

Cut social security and payroll taxes, deliver money right back into the hands of the workers. If more people are employed the need for these services is lessened anyway.

With advances in medical care, people can keep working until they are 70 or 80, at a lower rate eg. part time. Work keeps the brain active and prevents degeneration.

Finally reduce the cost of land and rents which is the major cost of life for the majority of workers. Do this by limiting immigration and keeping the country at a stable population, not growing endlessly.

If people truly need welfare or Government services, such a subsidised tuition, healthcare or a cash handout, then tally the paid amounts against their individual tax file, and claim the amounts back by increasing their tax level by single digits. If there is still an unpaid amount at death, then claim it from their estate.

Doing all this you can substantially cut the welfare state and encourage work. The end goal shouldn't be a UBI or negative income, it should be that 20 hours of basic work should be enough to allow you to afford a basic life.

hekfu• 8 years ago

And how do you address the massive injustice in wealth and opportunity distribution already present because of centuries of capital and power sharing the same bed? I'd be all for your proposal if it included a way to nationalise all capital above a certain threshold, bring everyone to that threshold and then distribute the rest based on merit. But I don't think that is possible. But your proposal assumes not just a just world, but that the world already has been just for 100s of years

ponzored2• 8 years ago

Ah yes, I have a solution for that. Link tax breaks to having children, and penalise the childless wealthy. Eventually society will be mostly comprised of the descendents of the successful, and inequality will be reduced.

Millionaire parents having one child concentrate their wealth into a small part of society. They should instead be having multiple. Success and intelligence has a genetic component, so you're improving the overall health of society through such measures as well.

Otherwise there are far less radical things than breaking up and dividing wealth (which has worked horribly in the past - look at the USSR). Simply breaking up large monopolistic tech companies such as Valve, Google and Amazon for example, as was done for Bell Telecom.

Supply-demand model of labor markets is broken, preventing pay raises

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