[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?

[hntrader]

I don't agree with the way you're divvying up the value creation to different stakeholders.

The employee combined with the employer are jointly generating $15/hour, and it's impossible to do attribution from an armchair. We just know that the entire company - the cyborg of labor/execs/machinery/land/IP/relationships/etc - is jointly producing that revenue.

Maybe the employer bought some expensive machinery that the employee relies on, has exclusive and cultivated relationships, rents expensive land, etc.

It's therefore presumptive to assert that the employer is contributing only $5/hour to that entire process. They're contributing $5/hour in wages, plus all the other stuff they bring to the table (machinery etc).

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

I'm not arguing that. I'm arguing that the radical power imbalance doesn't even exist, at least insofar as it is causally related to wages.

Unskilled labor is a fungible commodity just like table salt. That is how labor is priced. Supply and demand. Not power. There's no power structure that's dictating that house cleaners only get $20/hour. I hire a house cleaner for $20/hour because there's an over-supply of house cleaners.

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

I believe market prices for labor are fair, by definition, in that they reflect actual supply and demand.

If you think power determines prices, I can see why you would come to a different conclusion. But I believe power is causally mostly irrelevant here, which is why I'm at my conclusion.

Added bonus that market prices tends to lead to optimal resource allocation (barring negative externalities).

  "And China's income disparity is getting worse."

I'm not trying to argue it's perfect over there. But there's no disputing that China's economic growth over the last 30 years has caused an incredible humanitarian outcome, which is inconsistent with an exploitation narrative.