[swiftisthebest]

It isn't how hard you work. It's how much value you provide that determines your salary.

You can work really hard smacking rocks together. It provides no value to the world at large, and thus, you cannot get paid to do it.

[danbruc]

The price is not only determined by value but also by scarcity. If there is a lot of demand for unskilled work, then wages will go down and the business owner can capture the difference between the value produced and the wages paid.

It is of course more or less by design that several factors go into the price so that different feedback loops can affect different factors in an intertwined way. For example high demand for specific skills is supposed to lead to higher wages which in turn is supposed to encourage more people to acquire those skills which then finally satisfies the demand.

And in theory this is all fine but in reality it is not as easy as in the economics text book. Some of those feedback loops are slow and take years to react, some of the factors are constraint in one way or another and just can no go where one would like them to be.

And the article is not talking about smacking rocks, it is talking about building houses and producing food, things fundamentally more valuable than building websites. And if you are doing work that is valuable and physically demanding, then you should be able to demand compensation for your hard work and not have to accept whatever you are offered but that of course fails if people undercut each in order to get the job.

I am not sure that it is even possible to [easily] decouple price factors like value and scarcity without ruining the entire system, but one has to admit that at least in practice and at least in some situations mixing value and scarcity leads to undesirable results.

[swiftisthebest]

If what you say is true and you believe it, then surely you're for deporting all illegal immigrants who artificially deflate wages by working for less than is legal.

[danbruc]

That does not follow from what I said, you can also just declare them legal and enforce paying them minimum wages. Heck, you can even try to keep them illegal and enforce minimum wages, if you discover an illegal immigrant working below minimum wage just go after the employer and leave the worker alone.

And I am not a US citizen or living in the USA, so I have no stakes in what happens to illegal immigrants in the USA and in turn also no well-founded opinion. On the one hand there is the law and if you violate it, you have to deal with the consequences, so there is certainly a point for expelling illegal immigrants.

On the other hand you probably should also take the lives of the immigrants into account. Can you justify the consequences? Ripping families apart, sending people back into unsafe futures or countries? And what about the economic consequences?

Maybe the USA could pardon all current illegal immigrants while then being more aggressive towards new ones? I really don't know what I would suggest, that is not a topic I ever really thought about.

[YPCrumble]

You provide no evidence for your claim that building houses and producing food is fundamentally more valuable than building websites.

If there are more than enough homes already why would building an extra home be more valuable than building a website? If there is enough food why would producing more food be more valuable than building a website?

If a hundred workers picking vegetables can be automated by a machine programmed by a developer is these workers' labor more valuable than the developer's labor?

The best indicator we have for the value of one's labor is the free market. There is an exceptionally high scarcity of people smacking rocks together; if I founded a rock-smacking startup I might not be able to find an investor to bankroll my endeavors.

[danbruc]

You provide no evidence for your claim that building houses and producing food is fundamentally more valuable than building websites.

I meant that in the sense of [basic] human needs, if there is already enough food and housing, then there is of course not much value in producing even more. And I certainly did not want to advocate paying people high wages to pick oranges just for the sake of it.

But this touches my exact point, we use the price as a scarcity signal to steer production and it is certainly a good thing for products so that we are not overproducing things. But I am less convinced for the price of work. While it is good in the longer term to push people into the direction of jobs with unsatisfied demand, it seems bad in the shorter term because it leads to the devaluation of work in case of a high supply of work.

If a hundred workers picking vegetables can be automated by a machine programmed by a developer is these workers' labor more valuable than the developer's labor?

The value for consumers remains unchanged, the effort required to produce this value decreases drastically. In my book the developer should not get paid 100 times the salary of a worker just because he managed to produce the same value as 100 workers, he should get paid the same as one worker because they did the same amount of work, at least in a first approximation just looking at working hours. The benefit of the automation should go to the consumers reducing the price by a factor of 100.

You my argue that in this situation there is no incentive to innovate and that this is a bad thing and I agree with that, the benefit for you is indeed pretty slim, you only get to enjoy the lower vegetable prices. Therefore in reality the the thing should probably be not that black and white to incentivize innovation, but I don't think you should get 100, 50 or even 10 times the wage of a worker.

And just in case, I am none of the downvoters, I don't downvote things I disagree with.

[brlewis]

How much value you provide determines the upper bound of your salary. Supply of people willing and able to do the work determines the lower bound.

[pg314]

It's the upper bound if you assume perfect information and a perfectly efficient market. It's often hard to measure the value an employee provides, which means there is imperfect information. If you look at CEO compensation, which is determined by the board, often staffed with friendly CEOs from other companies, it doesn't look like an efficient market either.