[bena]

Despite some weird issues with your post, the problem lies in that companies get to basically engage in a sort of labor arbitrage.

They're paying someone $5/hr to provide them with $10/hr of value. The worker should be entitled to at the very least some of that extra value in the form of wages. Actually, all of it, but you know, get what you can.

That's the issue. There's $5/hr of value being essentially taken by the employer.

And before you come with any "but the business needs to profit", that's already accounted for. We're talking about what the worker provides to the company. The company can impart additional value as well. And that is what the company should be profiting. So if the company's infrastructure and economies of scale allow it to effectively sell the employee's effort at $15/hr, it does get to pocket that $5/hr. That's fair.

But like I said, due to the radical power imbalance, employers often get to engage in labor arbitrage. In which they underpay labor because employees often have no recourse. That doesn't make the labor worth less.

[hntrader]

If the employee's effort contributes (can be sold for) $15/hour, then that is the value of the employee to the company.

The company is therefore happy to pay between $0/hour and $14.99/hour to the employee, depending on the supply of relevant labor.

Where did the $10/hour number come from?

[bena]

You do realize I made up all of the numbers, right? They're hypothetical numbers to illustrate a point. Because it is really difficult to pinpoint the actual value of labor and whatnot. And I'm not looking to discuss whether any particular job is worth any particular value. So I use a fictional, hypothetical world where I already know the values (because I made them up), to highlight a core point.

Which is why a lot of people want to steer away from the conversation of what labor is worth. Because we may have to admit that companies are short-changing their workers (no matter where they are working).

> $15/hour, then that is the value of the employee to the company.

That's an assertion that I do not grant you. And by definition of the fictional world I created, would not be true. The value they provide is $10/hr.

But let's assume that it is $15/hr for a second. Then, if the company provides no value whatsoever, then why should they get anything?

Why can't the worker just go and sell to whoever the company was selling to and make the money directly?

That reason is the value the company provides. And it is worth something. And I'm completely willing to acknowledge that. Just because something can be sold for $X doesn't mean any single part of the chain to produce that item provided all of the value.

[hntrader]

> You do realize I made up all of the numbers, right?

Yes, I realize that.

I figured out the misunderstanding. Your $10/hour figure is net value after wages ($15/hour - $5/hour), whereas I was assuming you meant gross value provided by the employee to the employer. So, at least we're on the same page regarding that now.

> That reason is the value the company provides.

Yeah, exactly. Labor is one of the factors of production. The company puts all the factors together in a way that individuals cannot (due to scale or whatever), and pays labor a rent based on market prices. It also pays land or capital (other factors of production) rents too, based on market prices in the property and corporate bond markets.

Where we depart is on the normative judgement that labor should be paid more of that surplus value creation than what it's currently getting. The fact is that they currently are capturing some of that value creation, and that amount is determined by supply and demand in the labor market. The reason they don't get more is there's a large over-supply of fungible unskilled labor which just isn't that useful. It's like if there's a glut of capital or an over-supply of land (e.g. in a rural area); the rents go down accordingly because the inputs just aren't scarce. To introduce an intentional mispricing in the labor market, which would need to be done by force, will lead to a misallocation of resources. If inequality is a concern, there are less economically damaging policies to consider.

Where we especially depart is on the framing of this as exploitation. This mindset only leads to more human suffering. If you offer someone a job for $X+1/hour when their alternative is $X/hour, you've made their life better off, and we want to incentivize this as much as possible instead of condemning it because $X+1/hour is "too small". It is after-all what pulled China out of poverty, and if we instead had pushed this exploitation narrative, we might not have seen this humanitarian miracle play out.

[bena]

No, it is not "net value after wages". It is exactly what I said it is. It's the value the employee provides. It is not "net value - wages".

And I'm saying that explicitly, it's not up for debate.

The price of the item is the sum of all the value of all parties have put into the item. $15 is the sum of the values all parties invested. The employee invested $10 worth of value, the employer invested $5. But the employee is only getting compensated for $5 of that value because of a radical power imbalance.

Most of China is still poor.

You seem to be hung on this "better off than before" thing. And while it may be technically true, it's kind of missing the point. Something can be better than nothing and still not fair.

[hntrader]

The company rented the employee for $5/hour and got $15/hour revenue as a result.

Gross value = $15/hour

Net value = $15/hour - $5/hour = $10/hour

This is an uncontroversial and standard use of "gross" and "net". Replace "employee" with anything else ("bitcoin mining rig") and you'll see what I mean.

You can define "net value" above to be the same as just plain "value", and that's fine, I believe we're talking about the same thing there.

  "because of a radical power imbalance"

No, it's just supply and demand, it has little to do with power.

Table salt is cheap because there's an oversupply of table salt. The same with unskilled labor.

House cleaners are cheap. I'd be happy to pay them $100/hour (that's the amount of subjective value it brings me) but I only need to pay them $20/hour - and that's because of an oversupply of house cleaners. I, as an individual, have no power here. There's no power structure I am exploiting to suppress the wages of house cleaners, in fact the market is very decentralized. Power is not a significant causal factor.

  "Most of China is still poor."

Right, but they are much less poor and getting better every day because people ignored the exploitation narrative and went ahead and hired all those people on sub-$5/hour. Hopefully they keep hiring people on sub-$5/hour and continue the great work of lifting even more people out of poverty.

[bena]

Yes, 15 - 5 happens to be 10. I'm not arguing it isn't. That happens to be a coincidence in this case. Or an artifact that I've chosen increments of 5 to make the numbers.

The employee is paid $5.

What the employee made is sold for $15.

The value of what the employer brings to the table is $5.

So there is $10 of value in what just the employee did. But he's only getting paid for half of that value. The rest is being captured by the employer because the employer can dictate terms.

You're arguing that the radical power imbalance shouldn't be addressed because that that radical power imbalance can be exploited.

And China's income disparity is getting worse. And the rural areas aren't much better off.

Wouldn't it be even better then if they hired people for more than $5/hr?

What's so wrong with paying a fair wage for fair work?

[Chris2048]

What you are arguing is that employers should never benefit from employee labour i.e. all profits must be passed on to the employee.

If I pay someone $5/hr to provide them with $10/hr of value, the benefit to the employer is $5/hr.

If I pay someone $10/hr to provide them with $10/hr of value, there is no benefit to the employer.

Why would anyone care to employ anyone for no benefit, beyond charity?

Furthermore, "$X/hr of value" is a little suspect - the $ value of something is only determined after a product or service is sold; and there may be many contributing factors to that sale. Determining what % a given action contributes towards a sale is subjective, and usually resolved in the following manner: "How much would this cost me if I bought from someone else" i.e. determined by the market, the exact thing which would be destroyed by your proposal.

If a product is made by several workers on a production line (and assisted by designers, machine maintainers, sales & marketing etc etc) how do you determine the $ value of each contribution, beyond auction-style competition?

On that point: what is the value of drinking water? If you never drank water you would die, so it is arguably worth a lot - so why pay so little? a lifetime of water keeping you alive is worth thousands of dollars, so why ever pay less that $3 a litre?

Of course, I understand the true aim here: If minimum living wage is $LMW pa then no job should pay less than that.

What complicates this is;

1) people can have multiple jobs to meet $LMW, so maybe an hourly rate should be the standard i.e. if you pay 0.5 $LMV then you should only take half the usual working hours (so people can get a second job) and the job should not be so physically or mentally draining that it would disallow this either.

2) jobs based on commission become tricky as profit is not guaranteed. I suppose you could just pay $LMW and grant commission once you're over some quota. That said, invalidating some of these schemes may be beneficial. Maybe self-funded start-ups should be required to pay themselves a token wage from savings?

3) $LMW will differ by area, QOL is hard to determine and this will require a lot of influence in the market by government. That said, a flat national rate might equalise this; giving benefit to poorer areas, and pushing people out of the areas of concentrated wealth. At the same time, this has negative effects; binding people to poorer areas and pushing them out of concentrations of wealth..

This might not address your concern though, if $LMW is $5/hr, your worker bringing $10/hr of value still won't be paid more.

Final point: lower wages, can bootstrap businesses inter high-paying ones, and careers into higher paying ones (e.g. see low/unpaid internships). Even larger established businesses may be more likely to take a gamble on something if they can initially pay lower wages until the project is profitable. All of this has downside too. It's all a question of shuffling debt - arguably a business owner with no obligation to pay higher wages at a later stage should therefore shoulder all debt from unprofitable stages, and should take on a loan rather than pay lower wages; At the same time, smaller business owners might not have the credit for that; Maybe a better option would be some kind of scheme where lower-paid employees are compensated in company bonds?

[bena]

No I'm not.

The employer is adding $5/hr of value to the end product. That is their profit.

You cannot pay someone $5/hr to provide them with $10/hr of value. You provided them with $5/hr.

You can pay someone $5/hr to provide you with $10/hr of value. In which case, you are undervaluing their work by $5/hr.

[Chris2048]

> You can pay someone $5/hr to provide you with $10/hr of value

What is "$10/hr of value" as distinct for what you paid for it? Is it based on how much you sold the end-product for?

If that's the case, you paid $X/hr to earn an extra $X/hr - in other words no extra profit, is that not correct?