Why is FAIR TRADE better than FREE TRADE?

[DBT]

Much of the harm from the French revolution was destroying the capital that allowed labor to function.

Again: it shouldn't have come to the point where people felt the need for violent revolution. At which point it's too late for peaceful reform.

The point was the harm came mostly from eat-the-rich. The position you have been advocating.

You need to support that claim, a description, evidence and examples. Stating it means nothing. I call BS.

 

[DBT]

You just don't want the employer to benefit from that investment.

Not so. Everyone should benefit from the arrangement. As I've said countless time, the fundamental problem (there are of course other problems) is a power imbalance between individual workers and management. Collective bargaining helps to address that imbalance and allows workers greater leverage and a fairer share of the wealth they help to create with their time, skill and labour.

You have said those costs were known when the owner decided to engage in business and thus have no bearing on how much of the pie he should get. Yes, they were known and the increased pie they produce was part of the decision to make the business in the first place!

Where did I say how much of the pie the owner should get? Citation please.

 

[DBT]

Free Trade: improve your performance, become more valuable, fill more need, become less replaceable.

Fair Trade: play the victim card, demand higher wages even though your value is declining, drive up (labor) costs so your gang profits at the expense of all consumers and society generally.





No, changes in technology or in other production factors came earlier, causing wage stagnation to those workers who did not adjust.

New technology and more cheap labor have always been the main factors, and there is nothing new about wage "stagnation." All these same complaints about low wages go back to the 19th century, and even earlier. The ups and downs in the numbers don't give evidence what particular factor caused which up- or downward shift in the employment numbers, regardless of Left- or Right-wing ideology claiming one way or the other.

A major cause has to be the increasing replaceability of certain workers, i.e., the declining need for them = their declining value. Politicians pushing the wage level up artificially causes reduced jobs, while the market wage declines due to higher supply of workers. The wage "stagnation" is inevitable and can only continue, until the labor unions can figure out how to repeal the law of supply-and-demand, like Joshua figured out how to make the sun stand still.

. . . wage stagnation began before it was the greatest factor, including in industries where mechanization is still not a large factor, construction, repairs, etc.

That's not how a market works. There's spillover. If a type of job is eliminated, these will switch to other professions pushing down wages. construction workers and janitor type jobs are typically the types of jobs people switch to. So you're just arguing against yourself now.

That's not what I meant, not even close.

Here is an example;

Nothing here or from any other labor union talking-points list addresses this basic principle: you cannot improve production by driving up wages above the level necessary to attract the workers needed. If the wage level is forced up higher, it must necessarily result in some reduced production and lost jobs.

We have one case in history where the wages were driven up enough for us to see the result -- the case of Samoa -- and the lost jobs and reduced production was so great that it was easily recognized, and even the pro-labor crusaders had to admit that it did more harm than good.

But there's no case of the opposite, i.e., of empirical facts showing any net benefit from driving up the wage level. The union and pro-labor propaganda never has any facts to show how artificially-higher wages did anything but net harm. You can always point to some good happening to someone somewhere, no matter what is done to the wage level to drive it higher or lower, but there's no causal connection between forced-up higher wages and net economic improvement, i.e., for the whole economy.

Employers have every incentive to increase the wage level in those cases where there is a need to attract some workers because of supply-and-demand. I.e., any real need for higher wages, in this or that case, is automatically met by employers who do what is necessary to attract the needed labor.

''Unions should be prepared to take unlawful industrial action to win bigger pay rises because Australia’s laws make protected action too hard for workers, an influential unionist has argued.''

Every country has laws putting limits on how far labor unions can go. Collective bargaining is a form of anticompetitive behavior and restraint of trade, which is illegal for companies to do. The antitrust laws in the U.S. were once enforced against labor unions, which are cartels doing the same damage to the economy which companies do when they combine or collude to set prices and production levels.

There is no economic argument why collusion by companies is bad for the economy but collusion by wage-earners is good for the economy. Of course in many cases it's good for those producers doing the collusion.

It's best if ALL producers have to compete with each other rather than combine to fix their prices and terms at levels which reduce competition between them. Labor unions are granted more latitude to engage in anticompetitive acts, but every nation puts limits on it at some point. Because unions are cartels, they have to recognize that they are not granted unlimited freedom to engage in collusion. Small independent contractors are theoretically prohibited from engaging in price-fixing, but some of them probably do it anyway (and the harm is minor). And states define the limits on unions, in laws, allowing them to hold meetings (illegal for companies) to set terms.

The phrase "laws make protected action too hard for workers" is subjective -- There's no objective standard for setting the limits on cartel behavior of unions. Laws against unions were much more restrictive 100 - 200 years ago, when unions were mostly illegal. In the early 1800s labor meetings to demand higher wages were illegal and were usually broken up, and arguably this might have been better for the economy, because it's better if ALL producers have to compete rather than collude with each other to set their terms.

However, it's probably easier to allow some union organizing activity, governed by regulations, because it's too difficult to police all the workers and forbid meetings. So the laws are enacted to impose rules controlling how far they can go, protecting those workers not sympathetic to the union demands. Workers who want to compete are entitled to protection from the aggressive workers engaging in class warfare against the employers.

If your higher union income is due to suppressing workers who are willing to work for less, then that extra income is not earned in the competitive marketplace, but is surplus income, higher than the real value of the workers. And that artificially-high labor cost results in net damage to the economy, despite the benefit to certain workers who succeeded in getting their demands met (at the expense of the rest of the economy).

In Australia wages have stagnated for four years despite continued economic growth and improved labour productivity in part because . . .

The higher productivity is due to improved technology created by scientists and engineers, not by the workers who operate the machines. Higher labor "productivity" means higher value of the machines, produced not by the workers. It does not mean higher worker value, but often lower worker value because it means fewer workers are now needed in order to produce the same output as before.

. . . stagnated . . . in part because wage growth from enterprise agreements has been in decline since 1998.

translation: the workers have become less valuable and thus have less bargaining power than before, due to changes in the way business is done. Wages decline when the workers' value declines, due to changing conditions, including business finding better ways to produce. Workers (or any other producers) who cannot adjust to the changing conditions are less valuable and can expect their incomes to decline.

Lyons seized on the “wage crisis” to argue that employers give low pay rises “because they can” and . . .

translation: because the bargaining power of those workers has declined due to their declining value. Thus the employers "can" give less due to the declining leverage of those workers because of their declining value. It's only because of this declining worker value (due to many factors) that employers "can" do this.

. . . give low pay rises "because they can" and that unions need to see the stagnation as an opportunity to organise and “aggressively position collective action and . . .

No, anticompetitive cartel behavior is not what they "need to" resort to in response to their declining market value. Anymore than this is what businesses "need to" do if they are becoming less competitive and thus less valuable. Rather, what all producers "need to" do is improve their performance, to become more competitive and thus more valuable or MORE needed rather than LESS needed, or less replaceable rather than more replaceable as in the case of these workers experiencing low pay rises.

But if producers follow this labor leader's recommendation, then all producers will just resort more and more to anticompetitive behavior, becoming less productive but more aggressive at assaulting and crushing their competitors.

. . . and “aggressively position collective action and unions as the way to win pay rises and end wage theft”.

It's no more THEFT than when a syndicate crime boss accuses a company of "theft" for not coughing up the demanded protection payments. Aggressive criminals and other sociopaths always think it's "theft" when their demands are resisted or they fail to beat their victims into submission. The criminal mentality tends toward the worldview that anything standing in their way -- e.g., competitors who perform better, also better crime avoidance techniques -- is something immoral which is "stealing" from them. Like striking workers imagine that the replacement workers are "stealing" their jobs.

Lyons labelled enterprise level bargaining “a failure” compounded by “very tight restrictions on industrial action [and the] absolute legal prohibition of secondary boycotts or solidarity actions”.

To the labor leader anything is "a failure" if it protects consumers, and thus the nation, from the damage of the artificially higher costs imposed by the striking workers. So the "failure" of the union to thwart the market is a benefit or success to the society in general which profits from the higher level of competition.

Workers were “atomised”, leading to greater use of contracting out and labour hire to drive down wages.

translation: If it saves on labor cost, it's a crime against the working class -- there should be a law against it. Nothing which improves the company performance and service to consumers should be legal if it could result in higher pressure on workers to improve and become more competitive.

Lyons called for “genuine collective bargaining” including acting “outside the formal system” of protected industrial action.

translation: The right of workers to inflict harm onto consumers must not be abridged. Those workers must be protected against anything requiring them to improve as a condition for pay increases. Companies must not be "protected" from aggressive actions by workers to intimidate them into paying them higher than their market value. It's their God-given entitlement to be paid more than their value, whatever they have to do to gain those higher wages.

Lyons told Guardian Australia that unions “absolutely” should be prepared to take unlawful industrial action such as walkouts.

translation: to take violent measures against replacement workers, and commit crimes against anyone else, including customers who buy the company's products -- no one has any right to stand in the way of the striking workers on a crusade to drive up their wage level higher than their market value.

"If the formal system for getting a pay rise doesn’t work, we’re entitled to ignore it,” he said. “The alternative is to concede we’re not going to get a pay rise and that’s not acceptable.”

translation: The end of higher wages justifies any means, no matter how criminal or violent or aggressive or injurious to society. Anything goes if the alternative is that their demands would not be met.


Furthermore:

''Although it’s rarely celebrated, the right to strike is a fundamental human right enshrined in international law. The right to strike is closely associated with the right of employees to collectively bargain with their employer and also with the rights of freedom of association. For workers, this usually means the right to both join a trade union and to be an active participant in it. In any health check of the right to strike, invariably it is necessary to also examine the capacity of employees to collectively bargain through the unions they belong to. They are inextricably linked.''

''But when it comes to the right to strike, Australia is a backwater. The ILO has been a constant critic of Australia’s failure to comply with its international legal obligations arising from the severe restrictions it imposes on collective bargaining and the right to strike. The criticisms have gone unheeded. Industrial action, including strike action, is dying out. The number of employees whose employment is governed by collective agreements is receding at a rapid rate and the proportion of employees who are union members has collapsed to the point of existential crisis for trade unions. Union density hovers at a pitiful 14.5% of the workforce.''

This kind of whining simply describes the plight of the uncompetitive as far back as one can go in economic history, indicating how the economy generally is made better off (despite the uncompetitive whining ones), as the uncompetitive have pressures put on them to improve their performance rather than rely on Crybaby Economics or on cartel activism like guilds trying to suppress production by non-member competitors who might profit by means of their superior performance (including lower cost).

It's good for all consumers, or society generally, that the producers/workers experience these pressures to improve their performance, though it provokes the crybaby outbursts from those less competitive and their activist crusaders such as the above true-believer labor leader zealot who can't understand that it's the whole society who is supposed to benefit, not just his band of crybabies.

How long did it take to produce that wall of text.

Given it looks like the same emotional waffle over and over, crybaby, etc, I would say a wasted effort.

 

[Bomb#20]

If it is the case that the author of the article denies the role of owners, managers, planners, etc, I don't agree with that point.
I have said that the running of a company is in effect a partnership. It takes both management and workers to run a business.

Okay, good; we're all agreed. But that just takes us back to Loren's complaint in post #712:

"But you pretend to know how much value they contribute."​

You replied:

"No pretense needed. ..." [explanation followed]​

That was a claim that you really do know how much value the workers contribute. So how do you know? Since you aren't relying on attributing 100% of production to the workers, you don't get to refer us to the Davis article you quoted, because he relied on it. So are you up for taking another stab at it? How would you go about calculating how much of the wealth created is attributable to the workers, and how much is left over to be attributed to the owners?

 

[DBT]

If it is the case that the author of the article denies the role of owners, managers, planners, etc, I don't agree with that point.
I have said that the running of a company is in effect a partnership. It takes both management and workers to run a business.

Okay, good; we're all agreed. But that just takes us back to Loren's complaint in post #712:

"But you pretend to know how much value they contribute."​

You replied:

"No pretense needed. ..." [explanation followed]​

That was a claim that you really do know how much value the workers contribute. So how do you know? Since you aren't relying on attributing 100% of production to the workers, you don't get to refer us to the Davis article you quoted, because he relied on it. So are you up for taking another stab at it? How would you go about calculating how much of the wealth created is attributable to the workers, and how much is left over to be attributed to the owners?

The article does take infrastructure, etc, into account. Read it again. I'm not at home, I can't quote on my phone.

 

[Bomb#20]

Where did I say how much of the pie the owner should get? Citation please.

I think Loren may be referring to this exchange:

DBT: For example: ''Wages have been stagnant for a generation despite sizable increases in overall productivity, incomes, and wealth. For instance, our nation’s output of goods and services per hour worked (productivity, net of depreciation)...

LP: And why is the productivity number not inflation corrected but the wage number is?

DBT: It's the ratio, considering that within the given period productivity, goods and services, rose by 64% per hour worked while wages only grew by 6%...

LP: Ratio of what? How are you measuring productivity?

B20: He already said how he's measuring productivity: "our nation’s output of goods and services per hour worked (productivity, net of depreciation)". DBT and the Economic Policy Institute are simply taking the total production, dividing it by the number of hours worked, and labeling the result "productivity".

DBT: Owner has a workshop, supplies tools, runs the business while paying staff the going rate for the required skills. ... Production is up but wages have failed to keep up with increased production. According to the metrics, workers are falling behind. Workers are not getting their market value.

B20: Huh? What is it you think "market value" refers to, if not "the going rate for the required skills"?

DBT: Huh? Market value as in wealth created. Market value has more than one meaning... Who would defend this level of exploitation?

B20: Ah, so you meant "Workers are not getting the wealth created.". ...Now let's start taking owner input into account. ... So by symmetrical reasoning to yours, it follows that the workers are exploiting the owners.​

You appear to have labeled it "exploitation" for the workers not to get all the wealth created by the partnership of owners and workers. If that doesn't imply that zero is how much of the pie the owners should get, then you expressed yourself unclearly. That's on you.

 

[ZiprHead]

Much of the harm from the French revolution was destroying the capital that allowed labor to function.

Again: it shouldn't have come to the point where people felt the need for violent revolution. At which point it's too late for peaceful reform.

The point was the harm came mostly from eat-the-rich. The position you have been advocating.

 

[Bomb#20]

Since you aren't relying on attributing 100% of production to the workers, you don't get to refer us to the Davis article you quoted, because he relied on it.

The article does take infrastructure, etc, into account. Read it again. I'm not at home, I can't quote on my phone.

No worries; it's here:

https://www.investopedia.com/financial-edge/1011/whats-your-employee-value.aspx

It says:

First, accounting is both an art and a science. The science aspect embodies everything that is quantifiable, such as salaries, benefits, equipment depreciation and other costs. ...

Expenses Assigned to Physical Plant
Utilities, Maintenance, Rent or Mortgage Costs and Insurance
These expenses may be divided equally among the number of employees to determine their individual costs against these total expenses. Whether the building in which you work is large or small, there are numerous costs involved in its operation and maintenance. Mortgage or rental costs top the list. ...

Equipment
Computers, telephone service, cell phones, the use of an automobile and other equipment, required by the job, and supplied by the employer is another major expense that figures into the equation. ...​

I take it that's the sort of thing you're referring to by "The article does take infrastructure, etc, into account.", yes?

That sort of thing isn't what it takes to attribute part of the created wealth to the owners. Davis is calculating expenses here. He's taking into account the wealth consumed in the creation process so he can correctly determine the net income, which he's going to use "to divide the firm's net income by the number of employees". If he didn't do that -- if he ignored physical plant and equipment and so forth -- then he end up dividing the firm's gross income by the number of employees. So in that case he'd overestimate the wealth created, he'd attribute more than the actual created wealth to the employees, and he'd leave for the owners a negative amount of created wealth. But he knew better than to commit that error. Yes, the article does take infrastructure, etc, into account -- exactly to the extent it needs to in order to bring the amount of wealth creation attributed to the owners up to zero.

In order to attribute a positive amount of wealth creation to the owners, he would have to take infrastructure into account more than that. He'd have to include not just expenses -- stuff like "Mortgage or rental costs top the list." -- but also some return on investment.

 

[DBT]

Since you aren't relying on attributing 100% of production to the workers, you don't get to refer us to the Davis article you quoted, because he relied on it.

The article does take infrastructure, etc, into account. Read it again. I'm not at home, I can't quote on my phone.

No worries; it's here:

https://www.investopedia.com/financial-edge/1011/whats-your-employee-value.aspx

It says:

First, accounting is both an art and a science. The science aspect embodies everything that is quantifiable, such as salaries, benefits, equipment depreciation and other costs. ...

Expenses Assigned to Physical Plant
Utilities, Maintenance, Rent or Mortgage Costs and Insurance
These expenses may be divided equally among the number of employees to determine their individual costs against these total expenses. Whether the building in which you work is large or small, there are numerous costs involved in its operation and maintenance. Mortgage or rental costs top the list. ...

Equipment
Computers, telephone service, cell phones, the use of an automobile and other equipment, required by the job, and supplied by the employer is another major expense that figures into the equation. ...​

I take it that's the sort of thing you're referring to by "The article does take infrastructure, etc, into account.", yes?

That sort of thing isn't what it takes to attribute part of the created wealth to the owners. Davis is calculating expenses here. He's taking into account the wealth consumed in the creation process so he can correctly determine the net income, which he's going to use "to divide the firm's net income by the number of employees". If he didn't do that -- if he ignored physical plant and equipment and so forth -- then he end up dividing the firm's gross income by the number of employees. So in that case he'd overestimate the wealth created, he'd attribute more than the actual created wealth to the employees, and he'd leave for the owners a negative amount of created wealth. But he knew better than to commit that error. Yes, the article does take infrastructure, etc, into account -- exactly to the extent it needs to in order to bring the amount of wealth creation attributed to the owners up to zero.

In order to attribute a positive amount of wealth creation to the owners, he would have to take infrastructure into account more than that. He'd have to include not just expenses -- stuff like "Mortgage or rental costs top the list." -- but also some return on investment.

It's just a brief article that gives an outline on calculating employee value in wealth creation and company profit. It's not comprehensive. Everything cannot be said in a brief summary, it's just meant to give the reader an idea of thecost to benefit/profit ratio in running a company. It doesn't exclude employer/owner input.

I don't exclude owner/management input. Nor do I suggest that only employees should benefit from the arrangement.

If it's not clear, my position is simply that workers have, for the given reasons, been losing out over the past three to four decades. Stats and charts show that the upper echelons of business and society have made tremendous gains in income and wealth while the average workers income stagnates.

Which has nothing to do with the claim that 'only workers contribute to production,' which was neither stated or implied.

 

[Lumpenproletariat]

The wealth inequality complaint makes no sense (ceo/worker pay ratio too high).

You are trying to defend the indefensible. You do that by invoking things like a 'third piece of the pie' as if there is a completely separate component to the economy. You state it without explanation or evidence to support your claim.

I have explained what I'm talking about repeatedly -- the money that goes into building the factories etc.

The remuneration of ceos doesn't come from that money. That's why it's irrelevant.

The remuneration of ceos doesn't come from that money. That's why it's irrelevant.

The remuneration of CEOs is a drop in the bucket of the amount of money under discussion.

And when you plot CEO pay vs company size you get a very different picture to the one you're painting.

No, you're the only one that wants to include irrelevant money into the discussion. The discussion is ceo/worker pay ratios and nothing more.

This UNEQUAL PAY dialogue still goes further, nowhere. Pechtel's flaw is failure to provide the appropriate WALLS OF TEXT necessary to explain the real income/wealth of those CEOs.

Elon Musk is now said to be the richest person in the world -- "worth" 188 billion $$$ and his "salary" something over 2 billion. But what does that number mean? Musk cannot really go to the bank tomorrow and withdraw 188 billion just like that (or even half that) and go to spend it, or spend 2 billion every year on consuming luxuries -- but most people worth half a million $$ probably could "withdraw" their money to spend (or most of it), if they sacrifice some interest or other minor benefit. In most cases of one's "worth" or income rising higher and higher, the percent of that wealth which they can just get from the ATM to go on a spending spree gets smaller and smaller, because it's really "tied up" in different deals in process, and a large part of that wealth could easily evaporate overnight if something goes wrong somewhere.

So maybe that rich CEO's real wealth/income is not as much as the number suggests.

The discussion is ceo/worker pay ratios and nothing more.

Why not assume that this is a pretty wide ratio, regardless what the exact and real number is. Even grant that it's 100 billion to 100,000. Or for the more typical CEO -- 100 million to 100,000, or 1000 : 1.

Is that obscene?

It is really irrelevant to anything, and absolutely pointless. The ratio of many workers in the U.S. to a typical Haitian or Bangladeshi is probably 500 : 1, or to many immigrants or refugees even more.

And if we're talking about "pay" ratio, what about a volunteer worker who is paid ZERO $$$? So that worker's "pay" is infinitely small compared to a minimum-wage worker. Is that obscene, that one worker's "pay" is infinitely higher than another's? And in some cases that volunteer worker is really worth more than the minimum-wage worker.

The whole "unequal pay" debate is senseless and meaningless. It has no more meaning than the whining of a child at a party who got less ice cream than another.


Forget ceo/worker pay ratio, and other crybaby slogans.
What is legitimate redistribution?

All that makes any sense is whether there are some income-earners who are receiving more than is necessary in order to get them to perform their needed function, in the production. It's impossible to calculate exactly how much each producer's real contribution is. But we can make reasonable guesses, and these are not so far off that we're unable to use them to make a guess how much could be taxed away with minimum loss in their performance (whereas increasing some worker pay artificially is just pandering to uncompetitive crybabies).

It never makes any sense to compare one producer to another just because they are connected to the same company. E.g., the CEO of company X cannot be compared to a low-paid worker (like the janitor) in company X, as if somehow one must be a certain percent or ratio to the other because they're in the same company.

Rather, what makes sense is to leave it mostly untouched for income/wealth levels in about the bottom 50% of income-earners (or 60% or 40% -- a large percent), and put attention on the higher end, or the top 20% or 10% and higher, and recognize a certain element of "windfall profit" or increasing proportion of windfall going to those higher and higher wealth categories. This should include more than CEOs of corporations, but also high-paid celebrities and professional athletes and investors, tycoons and others, regardless what their job description is.

So all the talk of ceo/worker ratios is meaningless. Some "workers" too are in the extravagantly rich category, so you could just as well complain of excessively-high worker/worker ratios in some cases, where certain workers are paid too much higher than others, like 500/1 or 1000/1 in some cases. Surely that too is "obscene" and should be corrected.

The only remedy that makes any sense is a process which shaves something off the top from those in the "windfall profits" category, regardless if it's "profit" or even "wages" (in some cases), regardless what form of wealth or income or compensation it is, or how it's paid to them.


Scapegoating Employers = more crybaby symbolism

And no one has given any reason why EMPLOYERS as a class are somehow a target group to pounce on to correct any wealth imbalance or inequity. Any formula to push up someone's wages makes absolutely no sense (other than just letting the free-market supply-and-demand do it automatically in a laissez-faire manner with no outside 3rd party interfering with an employer's or worker's individual free choice).

No one has made any case why WAGES should be pushed upward (outside the normal free-market mechanism), in any manner, by any mechanism, either by the state, or by consumers demanding that companies pay higher wages. Obviously nothing can prevent consumers from arbitrarily choosing a product based on any whim they have, like companies paying workers more, or painting their trucks red or feeding their pigeons better or other symbolic act the customers might request ("the customer is always right"). But no such driving up wages artificially can make the economy any better, but only worse. And "fair trade" is almost always about forcing up the wage level, artificially, against the market supply-and-demand level, including crybaby demands to bring the CEO/worker "pay" more into balance. While "free trade" is about leaving the workers and employers free individually to make their choices, which results in the optimum best production level = best performance for the benefit of all consumers = higher living standard for all, regardless of any inequalities.

While at the same time it's fine for the state to collect from anyone's windfall profit to be redistributed to all of society.

 

[DBT]

Who said anything about equal pay?

 

[Lumpenproletariat]

Who said anything about equal pay?

strike "equal pay" -- insert "wealth inequality" or "ceo/worker pay ratios"

So, other than to correct that point, you're now agreeing that there's nothing about driving up wages (above the lowest level necessary to attract the needed workers) that would fix anything, and that it's best to leave wage levels to be decided by competitive free-market supply-and-demand, or free choice of individual workers and employers.

 

[DBT]

Equal pay was not your only error. Misrepresentation runs deep. I could start at the beginning but I don't see how it would help.

 

[Lumpenproletariat]

Why expect employers to babysit workers instead of paying them what they're worth?

worker "worth" = how much they're needed (and difficult to replace), not how much pity they gain by whining louder.

Just so that it is absolutely clear for the peanut gallery: poverty, in the presence of wealth, and in the situation wherein the poor are unable to leverage suitable wages despite hard and useful work, IS inequality.

Poverty is one example of inequality but inequality encompasses far more.

And note that most poverty is due to not working, not due to low pay. Driving up minimum wage makes it harder for those people to get in the labor force and thus increases the problem. You're actually part of the problem, not part of the solution!

We are talking about pay and conditions for workers, not the unemployed, which is . . .

Yes, you're ignoring the unemployed, and stepping on them by making it more difficult for them to get hired. Driving up the wage level makes hiring them more costly to the employer = less desirable to hire = less chance of getting hired.

This less hiring then means reduced production = less supply = higher prices to consumers.

. . . the unemployed, which is not a huge factor unless there is large pool of unemployed workers to draw from, which drives pay rates down simply because employers don't need to offer attractive rates . . .

Which they should not do. Higher cost (including labor cost) is always bad. That's why it's good to improve the machines or technology in order to bring down the cost by eliminating jobs, i.e., replacing the workers with something which does it at lower cost, just as replacing higher-paid workers with cheap labor is good.

Making it less costly = lower prices for consumers. So the whole economy benefits when employers "don't need to offer attractive rates" (higher cost = higher prices), because they can replace those costly workers with something less costly. Basic economics.

. . . which means lower production cost and more . . .

And thus more production and lower prices = higher living standard for all.

. . . lower production cost and more money in their own [employers'] pockets.

Which is bad to the uncompetitive employer-bashing crybabies, but is good for the whole economy.

It's true that the employer-scapegoating crybaby wants employers to be punished, but for everyone else it's good for employers to reduce their (labor) cost for the benefit of the whole economy.

Correct economics recognizes that the function of business is not to provide incomes to crybabies because they need the job, but to serve consumers, and to accomplish this using valuable workers at the lowest cost necessary to attract them.

Human nature 101.

Yes, it's true that employers naturally want to make as much money as possible, like everyone else rich and poor. And everyone hires others in one way or another and tries to get the best deal when they pay. Expecting employers or anyone to hire workers out of pity for them and pay them more than their value contradicts human nature.

 

[Lumpenproletariat]

It's called SUPPLY-AND-DEMAND

We are talking about pay and conditions for workers, not the unemployed, which is not a huge factor unless there is large pool of unemployed workers to draw from, which drives pay rates down simply because employers don't need to offer attractive rates....which means lower production cost and more money in their own pockets.

Human nature 101. .

But you're using what happens to those who aren't working as evidence of what happens to those who are working.

A large pool of unemployed tends to drive wages down because employers have no need to offer better pay rates in order to attract applicants.

iow -- those workers have less value.

It's because of the oversupply of them that their value is lower and thus their pay is lower.

 

[excreationist]

.....Elon Musk is now said to be the richest person in the world -- "worth" 188 billion $$$ and his "salary" something over 2 billion....

BTW at the start of 2020 Elon Musk's net worth was apparently about $26 billion.... (Wikipedia) (Forbes)

 

[Bomb#20]

... In order to attribute a positive amount of wealth creation to the owners, he would have to take infrastructure into account more than that. He'd have to include not just expenses -- stuff like "Mortgage or rental costs top the list." -- but also some return on investment.

It's just a brief article that gives an outline on calculating employee value in wealth creation and company profit. It's not comprehensive. Everything cannot be said in a brief summary...

Fair enough. But it's the summary you pointed to, when challenged on how you know how much value workers contribute. Davis left out the wealth created by owners; that means you left out the wealth created by owners. So are you withdrawing your claim to know how much value the workers contribute? If you aren't, can you explain how you know?

If it's not clear, my position is simply that workers have, for the given reasons, been losing out over the past three to four decades.

Where, by "losing out", you are referring to the phenomenon that they are getting paid more than they used to be paid. You call this gain a loss because their incomes are rising more slowly than owners' and managers' incomes.

You call this exploitation, and workers not getting the market value of the wealth created; but you stipulate that production is not entirely due to the workers -- that the managers and owners help create the wealth. So how do you know the increase in the rate of wealth creation was due to an increase in worker productivity, and wasn't due to an increase in management productivity and/or an increase in owner productivity?

 

[DBT]

A large pool of unemployed tends to drive wages down because employers have no need to offer better pay rates in order to attract applicants.

iow -- those workers have less value.

It's because of the oversupply of them that their value is lower and thus their pay is lower.

Crap, multinational companies routinely take advantage of cheap labour in developing nations in order to turn huge profits. And you still ignore the reasons why workers have been losing their cut of the profits in developed nations....plus the consequences to society and the economy of having a permanent underclass of underpaid workers and a pool of unemployed who have little hope of improving their lot.

 

[DBT]

Fair enough. But it's the summary you pointed to, when challenged on how you know how much value workers contribute. Davis left out the wealth created by owners; that means you left out the wealth created by owners. So are you withdrawing your claim to know how much value the workers contribute? If you aren't, can you explain how you know?

If it's not clear, my position is simply that workers have, for the given reasons, been losing out over the past three to four decades.

Where, by "losing out", you are referring to the phenomenon that they are getting paid more than they used to be paid. You call this gain a loss because their incomes are rising more slowly than owners' and managers' incomes.

You call this exploitation, and workers not getting the market value of the wealth created; but you stipulate that production is not entirely due to the workers -- that the managers and owners help create the wealth. So how do you know the increase in the rate of wealth creation was due to an increase in worker productivity, and wasn't due to an increase in management productivity and/or an increase in owner productivity?

I pointed out that in practical terms it is a partnership. A business needs workers in order to function and provide goods and services to consumers while workers sell their time, skill and service in order to earn an income. A marriage of convenience.

The downside is a power imbalance between the two parties (unfortunately for workers), an imbalance that business interests are only too happy to take advantage of.....well, because, why pay more for anything than you really have to, right? Human nature 101.

 

[Lumpenproletariat]

Good reasons/evidence for the benefits of cheap labor and cheap imports and free trade.

The OP makes two assertions without supporting them with evidence or even any reference to theory. The first is that "free trade" or "fair trade" with low wage countries benefits the US's overall economy from the lower prices for some consumer goods.

All the evidence supports this, but very little in economics can be PROVED with empirical data.

But theory proves it. Lower cost per se is automatically a benefit if the word "benefit" has any meaning. To demand proof that lower cost is beneficial is like demanding proof that less pain is beneficial. It's basic to all economic theory that any lower cost has to be good, all else being equal.

If you don't accept this as proof, and still demand proof that there's benefit to lower cost, it means you also demand proof that less pain is beneficial. No one can prove you wrong if you claim more pain is just as beneficial as less pain. No one can prove there's any "benefit" if "benefit" doesn't mean anything, which it doesn't if lower cost is not a benefit. "Cost" and "benefit" are by definition opposite. Lower cost means it was easier to produce, with less pain and difficulty and so therefore could be sold at a lower price.

Nor can any EMPIRICAL evidence prove benefit or harm if you reject the basic premise that lower cost is beneficial or that less pain is beneficial.

This could be easily proven by pointing out when the lower prices occurred and reduced the overall inflation rate for the US.

This did happen, in the period of about 1980 to 2020. However, this is not PROOF, because you cannot prove the causal connection of one factor to another, as you imagine. Rather, the numbers during this period are totally consistent with the theory that increased trade/cheap imports does help reduce the inflation rate, or keep down the price level. Economists do not have a good explanation, widely agreed, why the inflation rate has been so low these recent years. But since there was increased global trade/cheap imports during this same period, it's reasonable to conclude that this contributed to the lower inflation.


Yes, trade and cheap imports increased, and lower inflation followed.

1970/80 to 2020 is an unusual period of increased trade and reduced inflation rate, both happening gradually, with little ups and downs, throughout the period. There is no exact one point in this period where the increased trade or lower inflation rate suddenly began, though the trade increase is a little earlier. Trade increased gradually after 1950, more sharply from the 60s and 70s, with no one year as the starting point, and in the 80s the inflation rate declined noticeably and has recently been very low for a sustained period of years, which is unusual in history. This is what we'd expect if increased trade/cheap imports has a downward impact on the inflation rate. However, there are many other factors also which can influence the inflation rate, so this is not simplistic proof such as you're demanding and seldom is possible, for trying to establish any economic theory as fact.

Every time there is a lower price it helps to reduce the overall inflation rate (by a tiny increment), no matter where the lower price came from. The lower cost for electronic devices has occurred thousands or even millions of times. It's obvious that these have always helped reduce the inflation rate, as any lower price has to do. How can you possibly imagine that a lower price would not have its tiny influence on the overall price level?

Obviously each lower price has an impact which cannot be measured, just like the reduced oxygen consumption when one animal dies (and stops breathing) has to result in slightly less overall oxygen consumption worldwide, and yet the impact of this one death on the total oxygen consumption cannot be measured by measuring the total oxygen consumed to see if it decreased by a small degree. If all animals suddenly died at once -- quadrillions of them -- there might be a measurable decrease in the oxygen consumption.

Cause-and-effect: Resulting lower price can sometimes be identified, like when there's an unusually good harvest of a certain crop in one season. Or a disaster that disrupts production causes higher price. But it's seldom/never possible to prove that any one particular factor caused any one particular increase or decrease in price, because there are too many unknowns, or other factors. Rather, it's usually just a good guess that this or that factor caused it. Not proof, but a good guess.

Lower prices for a computer or printer today are probably due to the lower cost of production, compared to 20 or 40 years ago. But you could claim there were other factors, and it cannot be proved with 100% certainty that lower production cost caused lower price.

When I look at the data I don't see when this miracle from trade with low-wage countries happened.

It happened during the period 1980-2020, or 1990-2020.

https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ (scroll down a few lines)

This chart shows the consistently lower inflation rates after 1990, as the new global trade was increasing. It's true that there were many low inflation years also in the 50s and 60s, but these were irregular and not a steady pattern such as we've had for the last 20 years or so of a consistent gradual process of low inflation along with the new trade agreements. There is no one point where the pattern begins, as trade was slowly increasing even earlier. But it began rising more sharply after 1960, before which the curve is much flatter.

View attachment 31806

There is no one time point when the increased trade happened. What we can see is the 2 factors of increased trade/cheap imports beginning somewhere in the 60s or 70s, and then the decreasing inflation rates during the 80s. Maybe the Reagan "free trade" deals were only part of a longer trend happening anyway, and any results from this would be gradual over the following decades.

Another factor is lower tariffs, which is not the same as increased imports. This would lead to increased cheap imports and thus increased trade, even though this isn't the same as increased dollars spent on imports. So the dollars spent shown in the graph does not adequately reflect the total increased imports, because they became cheaper.

This graph shows the decreasing tariffs:

View attachment 31808

These lower tariffs indicate more imports though not reflected so well in higher spending on imports (at lower prices). So the lower tariffs also are likely a cause of the lower prices or decreased inflation we see in the numbers from about 1990 and later.

Every example of a cheap import has to be a factor in bringing down the prices overall. How is it possible for a lower price of a TV or microwave to not cause some incremental decrease in prices? It could well be that the increased trade/cheap imports are the major cause of today's lower inflation rate.

There is no proof, but as the trade has increased over these many decades, the inflation rate in the U.S. has decreased after the 70s very gradually and has stayed low. This is a very gradual and steady process of downward inflation rate, or remaining low, up to the present time. So the empirical evidence is very consistent with the claim that the increased trade causes lower inflation or lower prices overall. But this isn't PROOF. There are too many other factors. And there are glitches driving the curves up or down at various points.

The second assertion that the OP leaves up to faith for support is that the miracle of the lower prices for consumers outweighs the damage done to the US economy from the lower wages paid to the people who lost their high paying manufacturing jobs . . .

It's automatically good, by definition, for ANY cost to come down, including labor cost. Manufacturing jobs are no longer the "high paying" jobs they used to be, because most of those workers now are more easily replaceable, not only by robots but also by cheap labor. There is nothing automatically desirable about "high paying manufacturing jobs" -- what's desirable is the production itself, the product produced and the cost savings to benefit consumers. If the workers can more easily be replaced, then those jobs are no longer so "high paying" nor should they be, because they have become less valuable, as those workers became more replaceable.

Again, you must face the economics, the harsh reality:

more replaceable = less valuable

If you can't face up to such reality as this, you will never understand the economy and your solutions are only Crybaby Economics solutions for the uncompetitive who are losing their value. What they need is to change and become more valuable, not to whine and demand pity and "good-paying jobs" as an unconditional entitlement promised to them by Bernie Sanders and Donald Trump and other crybaby-panderers.

. . . who lost their high paying manufacturing jobs and from the increase in the national debt required to service the higher trade deficit.

No, there is no requirement to "service" the trade deficit with anything.

This is Wackadoodle Economics preached by mostly Leftist demagogues (but some Rightists too) pandering to the crybabies who can't deal with the reality of COMPETITION in the economy.

There is no correlation between the higher trade deficit and the higher budget deficits. If there were any causality, it'd be the higher budget deficits which caused the later higher trade deficits, which began around 1970, AFTER the higher budget deficits had begun decades earlier.

No one can give any historical data or evidence or economic theory showing that a higher trade deficit causes a higher budget deficit. The last period of low budget deficit (or balanced budget) was in the late 1990s when the trade deficit had been soaring higher than ever and so should have caused the budget deficit to increase rather than decrease if there was any such causality.

I can't even begin to explain how a benefit that apparently doesn't exist can . . .

No, the benefit of lower prices (lower inflation) apparently does exist, according to the data, for recent years of low inflation.

. . . can compensate for the very real damage done to people who lose their jobs.

It compensates for it just as the benefits of automation compensate for the damage to workers laid off.

The benefits of more trade and cheap imports and cheap labor and more competition do exist, and are either shown by the facts or are totally consistent with all the data.

It's a basic premise of economics that more competition does benefit the economy, the consumers. And more cheap labor and more foreign imports = more competition. If you don't believe competition is good, then you must be opposed to antitrust law and anti-price-fixing law based on this premise.

Again, you can never prove exactly what factor caused any particular increase or decrease in inflation and other factors. But we have every indication that the increased trade has produced the expected lower prices (or reduced inflation) predicted, enjoyed by 330 million U.S. consumers.

The increase in the national debt is only mentioned because there are people here who put a great deal of stock in the national debt, but it is a placeholder that a high trade deficit does cost our economy.

More wackadoodle gibberish. No evidence, no data, no sound theory to show any such thing.

The higher national debt came first and possibly contributed to the higher trade deficit, if you demand A -> B empirical evidence/data. However, there's probably no causal relation between the two. A faltering economy could mean a decline in productivity, which in turn could cause a higher trade deficit, as the economy becomes less competitive globally. So a higher trade deficit in some cases might be a RESULT of something wrong in the economy, but not the CAUSE of anything wrong.

It is money that leaves our economy and causes increases in private debt or an increase . . .

More Snake-Oil Economics preaching that somehow if the money "leaves our economy" it's lost and we're all poorer as a result, which is delusional and paranoid. Billions of $$$$ cross over to other countries and cross into the U.S., and all of this is a net benefit to the buyers and sellers on both sides and to both countries, and any artificial interference with this flow only hurts us all. And it doesn't matter if the flow either direction should become higher or lower than in the opposite direction.

In the unlikely event of some extreme imbalance of the U.S. money flow, there are measures the Fed can take to offset this in order to counteract any possible inflation or deflation shock. But all the net movement of dollars either direction is so gradual and smooth that it's virtually impossible for anything to disrupt it, even though there are millions of changes going on regularly and no one can guarantee against sudden change happening.

. . . increases in private debt or an increase in the federal government budget deficit to replace the money that goes overseas as well as the increase in the national debt.

Pure wacko delusion. No debt needs to be increased to "replace the money that goes overseas." It's only the higher national debt which can cause some disruption or cost, not the trade deficit. This "money that goes overseas" is not any increase in debt which has to be paid back to someone. No one has ever given any explanation how the trade deficit does damage to the economy. That some jobs or factories are relocated is not a loss to the economy because these are done in order to improve the production = higher standard of living to the entire economy, just as automation improves the whole economy even though some businesses or jobs might become obsolete.

The failure to support these assertions dooms the OP before it even starts.

The assertion that lower prices are good for the economy is like the assertion that 2 + 2 = 4, or that pain is bad for people. Those who deny such assertions are the ones who must "support" their denial (that 2 + 2 = 4 etc.). How can letting people spend their money on something less costly not be good for the economy? And how can artificially obstructing them from the benefits of lower cost not do injury to them? How could anyone be made worse off by lower cost, or by less pain, all else being equal?

It reduces it to the level of a childlike argument like "free trade has to be good because free is good, right?"

The vast majority of the people here who have posted on this thread seem to have accepted these assertions. Can anyone tell me why?

They probably don't want to waste their time explaining to someone why free choice is good. If free is not good, then you would not even be able to post your whining Crybaby Economics arguments against other people having free choice. So obviously you are benefiting from free without anyone having to explain it to you. We assume the nation is better off because of abolishing slavery, to make people free. But there is no data to prove this. Probably the economy today is better as a result of this, but the benefits cannot be identified by data to show causal correlation to emancipation in the 1860s. But it's reasonable to assume there is net benefit to the country, because free = better or leads to better results for everyone.

(Btw, I have seen Ricardo's argument that comparative advantage supports "free trade" but that . . .

No, you have not seen that argument (not from Ricardo).

Why don't you first learn what Ricardo really said and quote it, and also how others then interpreted his terminology as a "free trade" argument. Or rather, why don't you just make your case against free choice without falsely attributing an argument to Ricardo which he didn't make.

. . . but that argument specifically rejects free trade when one partner in the trade has an absolute advantage over the other partner.

Maybe according to some Nutcase Economics wackos, but not anyone credible.

If you understand the argument yourself, then just give the argument, without pretending to have some authority figure to cite for it, which you do not have. Or, if you have some oddball interpretation from some later pseudo-economist crank, then give that. Though it's better to just give the argument itself without citing a guru authority for it and obsessing on the jargon ("comparative advantage" and "absolute advantage") for the sake of the jargon.

And lower wages is an absolute advantage.

Cheap labor is good for the economy -> higher production and lower prices = higher standard of living for all, regardless whether anyone has a "comparative" or an "absolute" advantage.

Just like volunteer work (ZERO wages) is good for the economy.

Besides Lumpenproletariat, the author of the OP, rejects the idea of the existence of comparative advantage, as do I, from previous discussions.)

But we're both full of shit according to Sri Quackananda who says comparative advantage is the Truth, in his Papal Bull on the Economy.