Wage Determination

[Leveller]

How long has the term "German engineered cars" been a solid brand?

They've had success in engineering prowess for some time. You do see differences in the nature of education. Germany, for example, has much more vocational training than the Brits (with informal on-the-job training often preferred; with official training figures overinflated by 'health & safety' nonsense)

[Chloe]

Right, but the wage itself is determined by what you value more. And what the other person values, if say you and others decided a doctor shouldn't earn six figures but only five, then it remains for him to decide that that wage isn't worth his effort. So if you go too low you might go without a doctor.

Same applies to your janitor.

I don't really disagree but I guess my point is should the gap really be so wide?

[Peter1469]

It's going to sound like a cop out but I think it just kind of depends, and I don't think there is a true way to fairly determine a wage. For example logically a doctor is probably going to make more money than like a janitor would because of the extra responsibility a doctor has when it comes to help saving lives and also the additional education, but with that being said both the doctor and the janitors jobs are vital in their own way and who is to say that the janitor couldn't have had that same opportunity as the doctor if his or her situation were different growing up and finishing grade school? I think the more that wages are polarized and the more that wages vary across the board ultimately it will lead to an even greater divide. I think our goal should be bringing more people together and in a more equal way than increasing the competition and gap between the haves and the have nots. My parents would probably look at me like I am an alien if they heard me say this but should a doctor make a six figure salary and a janitor barely make a five? I don't know, a big part of me says no.

yep

[Chloe]

yep

That's why I keep some thoughts to myself

and yes I know I am a huge hypocrite when it comes to that because I obviously take advantage of their wages.

[Peter1469]

That's why I keep some thoughts to myself

and yes I know I am a huge hypocrite when it comes to that because I obviously take advantage of their wages.

And you should.

Or do you really want to bleed off some of you As to let your dim classmates get higher grades?

[Chris]

You referred to supply & demand. I gave you the detail used to understand how supply & demand operates. I don't care if you're not interested. Being helpful is just part of my nature.

I know what supply & demand are, you're not being informative.

Here's my post again:

What determines wages is not abstract formulations. Those may be descriptive in a general way of what happens, but, if they lay any claim to being scientific, they are not prescriptive. Regardless, their abstract nature divoces them from the very real people.

What determines wages is simple: What the market will bear, a phrase used for the myriad subjective valuations made by individuals as employers and employees as to what they hope to gain out of the social contract. Right now where I am there's a great demand for what I do, companies are willing to pay more and I can ask for more. Just a year ago the reverse was the case, the supply of those who can do my work was too high and going salaries were low. Not only does this vary across time but also across space as the next city up the road may have the opposite situation.

Where did I say anything remotely related to your response:

We know that supply & demand cannot understand the labour market. Marginal revenue product of labour (determined by the marginal physical product and the price of the product) doesn't explain the existing wage differentials

Where did I say anything remotely resembling "supply & demand cannot understand the labour market"? The notion, that notions can understand is odd in itself, ideas aren't agents. There's nothing in my post that suggests such nonsense.

Where did I say anything remotely related to "Marginal revenue product of labour"?


No, I don't expect answers. Nor do I expect you will address what you don't like to hear.

I don't care if you're not interested.

Contradicted by the fact you have in form at least replied twice now.

[Chris]

I don't really disagree but I guess my point is should the gap really be so wide?

That's determined by doctors and janitors and those who hire them.

[Chris]

...but with that being said both the doctor and the janitors jobs are vital in their own way and who is to say that the janitor couldn't have had that same opportunity as the doctor if his or her situation were different growing up and finishing grade school?

Adam Smith said much the same thing, so you're in good company!

Indeed it was Adam Smith's labor theory of value that Marx borrowed while rejecting what Smith said about the Invisible Hand, sort of like throwing out the baby and keeping the bathwater.

From http://www.investopedia.com/terms/i/...ixzz2NH8Rvfh7:

Definition of 'Invisible Hand'

A term coined by economist Adam Smith in his 1776 book "An Inquiry into the Nature and Causes of the Wealth of Nations". In his book he states:

"Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it ... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

Thus, the invisible hand is essentially a natural phenomenon that guides free markets and capitalism through competition for scarce resources.

Investopedia explains 'Invisible Hand'

Smith assumed that individuals try to maximize their own good (and become wealthier), and by doing so, through trade and entrepreneurship, society as a whole is better off. Furthermore, any government intervention in the economy isn't needed because the invisible hand is the best guide for the economy.

[Peter1469]

I don't really disagree but I guess my point is should the gap really be so wide?

How much does a doctor pay to become a doctor and how hard does she work to do it?

How much money does a janitor pay to become a janitor and how hard does he work to do it?

[Leveller]

I know what supply & demand are, you're not being informative.

So you knew demand is determined by the marginal revenue product of labour? It seems to me that you use the term 'demand' but don't actually know how its modelled.