viernes, 6 de mayo de 2011

Wages of Sin

You should know about the madness of raise wages by a simple law, if possible, so this blog would not exist because we do not have enough time to spend the money from our salary. Unfortunately raise wages by law is not possible and the reasons behind the increase in wage levels are others that do not contradict the laws of economics or of logic.

To discuss what causes that in some countries the level of real wages is higher than in others, the example of Benegas Lynch is a good trigger:

When a painter of La Paz, Bolivia, moved to Vancouver, Canada, to continue their work seen their incomes increase astronomically, which is not due to the Canadian employer is more generous than the Bolivian but because the capital structure forces him to pay higher wages

But to finish a good understanding of the cause of high wages prefer the short text of W. M. Curtiss [1] that explains it very clearly:

In a free and competitive market, the price of a product or service depends on what someone is willing to pay for it. The same applies to the wages of labor. The employer must be willing to pay, if you want people who work for him. MUHC what you pay depends, in turn, how much their workers can produce.

Therefore, we find relatively high wages in a country where labor productivity is high. Where we find an extremely low level of wages, we can be confident that the productivity of workers is low. Here we talk about real wages, of course, that is what can be bought with the wages, not money wages. In a country experiencing high inflation, money wages can rise to astronomical heights, but used to buy very little, anyway.

The reason why there is a tremendous difference in the production of workers from different countries [...] can be briefly summarized in one word: Tools. The term includes tools and equipment factories, as well as the machinery that operates the worker. A man who has good tools to work, is more productive than having bad tools. The United States currently requires an average investment of 16,000 dollars [in 1952] to provide tools to a single industrial worker ...

To provide tools for workers should save a portion of the previous production. There is no other way. Workers compete for the use of tools, the more abundant is the supply of tools, the greater the likelihood that each worker is paid a high salary to use them. Workers who use their organized strength in order to thwart the production, thus avoiding saving for new tools - or whether new capital - tend to close their only path to true progress.

In conclusion we return to Benegas Lynch, who says:

No alchemy possible in economics. If capital structure is maintained by saving dose sufficient to pay off existing equipment, wages remain unchanged, if consumption or capital flight revenues dwindle, and if the cap rate increases, increase revenue. And for the latter is necessary to have civilized and stable institutional frameworks that guarantee property rights.

You know... We can print a infinite quantity of papers and call them "money", the one you like most (Dollar, Peso, Euro, Yen)... but that just doesn't solves the problem.

Parts of this text were based on

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