This isn't true. Profit refers to revenues that exceed opportunity costs. Capitalism merely pollutes profit as an allocative mechanism by accentuating it further through the creation of inefficient economic rents
No. A voluntary market is characterized by the absence of coercion. I.e. a market where no one has a gun to your head. And this is exactly what we have today: a voluntary labor force. What you are describing is an unbalanced market, where employers have a disproportionate amount of power over workers due to involuntary unemployment. This is due to a shortage of employers (or "job creators") that are capable of putting people to work. You see, it is in the nature of capitalists to compete with each other. (As long as they are not powerful enough to co-opt the government in their service and create cartels.) Capitalists will try to acquire workers and grow bigger than each other . . . and in the process they will create an environment where workers are in demand and can therefore negotiate for higher wages. Unfortunately though, we have Bolsheviks running our government, and they are falling over themselves trying to stop the capitalists from fully exploiting the workers. They are thusly preventing capitalists from employing workers to their full capacity, and perpetuating an unbalanced market.
No. Profit is nothing more than an extension of the price system, which is anything but an inefficiency. Profit is a signal to entrepreneurs that their efforts are needed here rather than there. Take for instance, a guy that builds a windmill to provide power for his village. He is able to sell his electric power at a certain price that varies over time as demand rises and falls. Now subtract his investment in the windmill and operating costs from this amount, and he is left with a profit X. And now another guy comes along and sees that electricity can be sold at higher prices during peak hours, but this is not necessarily when the wind is blowing. So, he builds a giant battery and buys electricity from the windmill guy when it is cheap and he sells it to the village during peak hours when it is expensive. The windmill guy cries foul because the battery guy is stealing his profit. But in actuality. this is the market telling these guys that "Yes, windmills are great, but having electricity when we need it is better. We need more batteries than we have relative to windmills." We know this because batteries can still make a profit at the windmills' expense. As soon as there are enough batteries to smooth out supply, windmills are in demand again, and windmill owners' profits rise at the expense of the battry owners', telling people that ok, we have enough batteries now . . . build more windmills. A high profit is a signal to entrepreneurs that we need more of that thing. A low profit signals the opposite. The current system only seems unfair because so-called "capitalists" have employed the government to gum up this process and enhance their own takings through subsidy, tax and barriers to competition. So capitalism concentrates wealth in order to build capital machines . . . but this can somehow be better accomplished in a way that is neither capitalist nor socialist? Ok, you got me. What is it??? And then those nineteen workers who can't drive the bulldozer at the same time as the other one . . . become CAPITALISTS!!!!!!!!!!!!!!!! AGHHHH!!!!!!! They only own the capital and are unable to do any work, because only one guy can sit in the seat at once. That's the basis of capitalism in business--the notion that workers would rather own the mean of production so that they can put themselves out of work and retire.
Within an utopian context? Then 'yes'. However, we know that that doesn't. Without doubt we know that underpayment, underemployment and underpayment are the norm. Labour contracts based purely on exchange should lead to a market wage based on productivity criteria. No such market wage exists. Instead, as noted, we have a shift away from wage determination according to supply and demand criteria. We have market concentration and we have hierarchical systems employing artificial human resource management techniques such as wage norms. Wrong! Involuntary unemployment in capitalism only requires employers to be motivated by profit maximisation. See, for example, the shirking approach used in efficiency wage analysis. If you're American that makes no sense. The US has been characterised by neo-liberalism and therefore a labour market flexibility that has encouraged greater exploitation. See, for example, the relatively low minimum wage.
No, it does not have to be overly expensive. Most people want to work because they want the benefits of a job - money, insurance, education, challenge, even social interaction. Some people enjoy their work, for others it is a means to an end but a route they are willing to take. It is a minority that truly do not want to work, and in their case the solution is simple - don't force them, just fire them. Don't subsidize an unwilling worker, give him his freedom to pursue something more to his liking. The expense in firing an employee is actually due to the government, unions, and the legal system. To minimize the chance of a lawsuit or federal intervention, a company must follow a process that takes time and resources away from productive activities. How much would you have the govt pay people that cannot or will not work? How would it compare to the minimum wage? If its not enough to meet their basic needs (what I call a living wage, but you can call it a living stipend or whatever term suits your fancy), then you are forcing them back into the workforce, which is no different then a company forcing a person to work. Then you would let the employee set the terms of his employment? Then there are no inflexible job requirements such as work hours or mandatory skills? Many jobs have inflexible requirements, people that want the job either accept them or seek employment elsewhere. The more demanding the job, the higher the compensation. I don't think your solution is workable at all. If I understand it, in your approach the govt simply pays people to stay at home, and the pay will have to be enough to support that person and his/her dependents. I may not like any of the terms set by any employer - hours, delivery schedule, education and past experience requirements, dress code, commercial drivers license, union membership, lack of a babysitter or day care at work, cubicles instead of a real office, the list is endless. What are you going to do when half the population decides they would rather pursue their hobbies or just watch tv instead of get a job? What are you going to do when nobody wants to do the really hard nasty jobs - sewage treatment plant, pick strawberries on the farm, clean the dog cages in the kennel, etc? Your system requires people to be conscientous, use their time wisely and profitably (for society, not necessarily profitable for the individual), and do what society needs to be done even if the individual doesn't want to do it. That's not how I am using the phrase. A person with a 9-to-5 mentality has agreed to be at work for that period of time only, and they would rather be doing other things at the other times of the day. They are willing to invest a specific part of their lives to their job, but they are inflexible in their dedication and priorities. They have partitioned their life in such a way that it suits their needs and desires. In some companies, that level of committment is not enough. How "profit" is used does not change its definition. Profit is what is left over after the bills have been paid. If its used for R&D, to pay shareholders, pay down loans, or in employee profit sharing, it is still profit. We do agree that the product of an employees labor should be rewarded. That does not mean everyone receives the same compensation, or that the CEO or owner should not receive significantly more than the average employee. Thanks for the clarification. Some companies oeprate for the short term at the detriment of their company. Most owners do not operate that way. That is not my experience. I have never encountered anyone or any organization that held employee owned status against a company. In fact, having the owners materially participating in the company is a positive trait which investors and regulators like to see. For employee owned companies, all owners are materially active in the company.
This is actually a case of market failure. Without protections to the labour contract (necessarily engineered according to concerns over uncertainty) there is always a risk of ex-post reneging on the deal. Protections against firing therefore ensure contracting is credible and reduce costly job turnover
The labor contract protections seem to protect the employee far more than the employer. Who protects the employer who hires a woman who knows she is pregnant, but doesn't tell the employer until shortly before they demand maternity leave? Who protects the employer from an employee who doesn't meet the minimum qualifications, but has a disability or is of a protected group and chooses to sue the employer claiming they were fired for their disability or race? Employers are very careful who they hire because it can cost thousands in court fees or settlements to fire an incompetent worker, not to mention the wasted training time and the time spent without a needed employee. Businesses want to reduce job turnover, since it is expensive to train new employees. They don't need the government to make regulations to encourage them to do so. The regulations all are focused to protect workers, and end up just making it harder for businesses to justify hiring people.
Clearly not the case. Employers benefit significantly through the reduction in turnover and protection of human capital. As I said, the problem is a lack of credibility generated by differences in the ex-ante and ex-post cost-minimisation decision. By eliminating the uncertainty created by this difference, via legally enforcable contracts, the firm maximises expected revenue (via productivity of its workforce) Its a market failure created by uncertainty. Sitting on your hands isn't an option!
How does forcing a company to keep an untrained worker on the books during maternity leave increase productivity? How does forcing a company to pay thousands in court for firing an employee that didn't have the minimum skills required for the job increase productivity? Personally, I think that in a market like this companies should be allowed to pursue a "cage match" style hiring mechanism. If you have two positions, hire ten potential workers and start training. As time goes by fire the slowest and least productive workers until you get down to two. This would provide temporary work for a few workers and allow the business to ensure that they get motivated and skilled workers. Overall it could easily be set up to be cheaper than the current hiring methods.
I've already said: there are numerous contingencies that give an incentive for the employer to break an agreement. Those incentives, unless there are legal means to enforce the contract, will actually stop mutually beneficial exchange from occurring. Its a very basic market failure created through uncertainty. Its interesting that you chose pregnancy. This is often used to justify a supposedly form of discrimination (i.e. statistical discrimination where a 'group' characteristic is used to support an optimal reduction in wages; thus women are supposedly paid less because of the higher risk of periods out of the labour market). The evidence, however, fails to support this belief. We essentially get tabloidism to support inefficient practices.
You are saying it is more humane and efficient to tax those that choose to work voluntarily enough to provide those that don't want to work a living income? Lets assume we pay everyone over 12 (the age you can legally leave home) $30,000 per year. Any other income is taxed. $30K * 250M (those over 12) = $7.5T. Lets assume everyone currently working, continues to work, 130M taxpayers. We currently collect about $2T in taxes, so we would need to increase them 3.75 times. Anyone urrently paying over 26.7% in taxes, would shift to 100% (26.7% * 3.75 = 100%). Those in higher tax brackets, can't pay more than 100%, that creates a shortfall, so those in lower tax brackets, would shift to 100%. Except for SSI and welfare, which would be replaced by the $30K income, this example ignores all the other spending the Federal government. Most wage earners would be in the 100% tax bracket. Why would they work? Who motivates the employee? Is it the employeers job? Or, the employees responsibility to earn income by doing something they enjoy? What is the likelihood you would enjoy a job the government assigned you to? See my math above - not even close. The people demanding a living wage, are the politician's. The politicians want to be elected, so convince the voter they are being screwed by business people, and only government can fix the problem. Somehow, despite all the laws to improve the plight of the worker, their situation is getting worse. Try living off the land - even bad bosses are much more understanding. Just not viable alternatives. Yes they are. Their mommy and daddy won't pay their way any more. Why should the rest of us? Most people want to earn more income than they generate for their employer. Selling $100K worth of toys at a toy store each year, doesn't mean you should earn $100K. Subtract the wholesale cost of the toys, the expenses for the building, the buyers, stocking clerks, etc. Each step in the process adds some value. Building the toys, designing the toys, making the materials for the toy, etc. Each step is usually a lot less then the employee thinks it is. Many employees don't know their cost to an employer is usually 30% or more of their gross income. That pays for medical coverage, the employers portion of SSI & Medicare, unemployment, etc. Per Wikipedia I don't think you understand the dynamics of running a business. Executives that stick to a plan, during changing enviroments, fail. And, evironments always change. You say that like it is a good thing. Government invested in Solyndra, while descriminating investors knew it was a losing venture - the product was too expensive for it's target market. The US, and most state governments, are deep in debt. No company would survive with a debt equal to 7 years gross income, while continuing to spend at 50% above gross income. The government got there because they did no long term planning.
But a candidate who is already several months pregnant is guaranteed to be away from work for six weeks or more when the child comes. The potential employer should have the right to take this into consideration in the hiring process, especially since this extended absence will come while the candidate is still learning the job. This will delay the time when the candidate will become productive and increase the training cost for that candidate.
Providing false formation in an interview is a sack-able offence. However, you're really talking about a situation that rarely (if at all) occurs. In reality, its usually the employee that suffers. The example of 'false' statistical discrimination provides a perfect example. There is nothing in your posts to discount that the legal framework in this instance eliminates/reduces market failure. That's the nature of uncertainty; it necessarily allows for coercive relations and accentuates (failed) bargaining costs
No. Involuntary unemployment is caused by a shortage of job creators, not by the motive for profit. If there is only one employer in the whole world, then yes, he has a profit incentive to keep at least some people unemployed at all times in order to gain bargaining power over his employees. But if there are other job creators in the market, they have an incentive to come in and employ the unemployed. They may not be able to exploit the workers as fully as a monopolist could, but they can still take some of the workers' surplus value and make a profit. And for as long as there is even one unemployed person out there, an employer can come along and employ them and generate profit. As the labor markets reach full employment, each worker can not be exploited as much as they were before, but the employers can still make a profit off of them, so they will continue to provide those jobs.
Labour theory and empirical evidence proves you to be wrong. The profit motive is not consistent with an empowered working class. Its something that orthodox and heterodox economics has been jolly good to agree over. This is nothing to do with monopsony. Now modern monopsony theory (e.g. job search frictions) will inform us how- even in an apparently competitive market- there will be underpayment (just one source mind you!) and a failure to exhaust mutually beneficial exchange. However, that refers to an increase in the equilibrium unemployment rate. Here, we're talking about something quite different. Its not a market failure in the traditional sense. Its an innate inefficiency generated by perfectly valid firm behaviour. Your whole argument is based on ignoring the reality of labour markets
LOL, that (as many of your other contributions) sounds like a statement from one of those computer programs that randomly attach words to make funny sentences. Maybe you are just an artificial intelligence project by some grad student? I don't think you have a clue what you are talking about. ex-post reneging on the deal....is that like the employee signing a contract to do a job and then not doing the job? Protections against dismissal without merit may be warranted, but thats not the current situation. The system is setup to make firing as difficult as possible irrelevent of the reason for dismissal. hiimjered is absolutely correct. The system is weighted heavily towards the employee. I've been involved in several lawsuits brought by fired employees, and I've been involved in the decisions to fire people. Most of the process has nothing to do with the employee contract (some companies hire "at will" and plainly state the employee can be dismissed with or without cause) or whether there are legitiamte grounds for dismissal, but is about generating the proper documentation and following an established process to prevent a lawsuit or to win a lawsuit if there is one.
Its called 'economics'. The impact of uncertainty on markets is, not surprisingly, studied in depth. Its actually on a par with 'hold-up', a problem that demonstrates how- due to uncertainty- the visible hand will often be preferred to the market (i.e. make rather than buy, despite the increased costs from more complex organisation methods). Here, we have a moral hazard created by an agreement made under uncertain conditions. When that uncertainty is ended, there is likely to be an incentive to renege and choose the action consistent with cost minimisation. Without credible contracting, the market will certainly fail and mutually beneficial exchanges will not necessarily develop. Your position is based on a zero understanding of the labour market (and contracting theory). Tabloidism doesn't impress me. As a SME consultant firm we have to deal with employer-employee disputes frequently. It is almost entirely due to poor management. However, I'm not a fan of "in my experience". I stick to the economics!
HA! That's EXACTLY what I was thinking. If so, it's actually quite good. I was thinking maybe English wasn't this guy's first language or something, so I wasn't going to call b.s. on this one, but since I'm not alone . . . You, Reiver, are either an AI, or you are so impressed with your ability to string together multisyllabic words that you feel that the entire forum here could use some linguistics training. I'm quite sure that you missed the point of my post. You are correct: monopsonies have no incentive to employ everyone. They have every incentive to leave the workforce underutilized and, therefore, underpaid. But there can be no monopsony in a competitive market. (That's kindof the definition of "competitive:" there are competitors. (I.e. more than one . . .)) So "monopsony theory" cannot inform us of anything concerning even an only "apparently" competitive market. Look, competition is not in the interest of capitalists, because it eats into their profit margins. But they will still compete with each other, because if they don't they lose their entire profit margin. And when employers compete for workers, those workers have more bargaining power, and they can get what they deserve in the employment contract. Profit is what motivates capitalists to fully employ the workforce - absent government interventions that prevent them from doing so.
What amuses me is that folk are surprised to see economics on an economics sub-forum. The other fellow of course reckons 'liberalism equals socialism equals fascism' so we can't expect miracles, even with the simplicity of neoclassical theory Nope, you're just confused. This isn't about monopsony; its about the efficiency wage hypothesis (which admittedly is made more complex by internal labour markets and the use of hierarchical systems, rather than wage increases, to encourage worker compliance). Basic error. Consider, for example, dynamic monopsony. Here, we have the same result: firms facing upward sloping labour supply curves such that they, by definition, have wage making power). That result isn't delivered by having 'one buyer'. Its delivered by job search frictions and how workers are forced to adopt a reservation wage strategy. Thus, monopsony is the norm. Indeed, its crucial in understanding why there tends to be- ceteris paribus- a positive relationship between wages and firm size. You need to get the basics right!
I go with the AI rather than English as a second language. Sometimes a sentence will contain multiple concepts which are disjointed, but remain in the general topic. Some responses seem to miss the intended point being responded to, that could be a language and cultural issue. Still a really good program, I'd give the grad student an "A" and hire him to work in my capitalist free market money loving company.
Free markets? Closest you'd get is within post-Hayekian market socialism. Capitalism leads to market concentration and accentuates conflict, as demonstrated by the numerous sources of economic rent
There certainly are gains from profit sharing, as shown by standard references to shirking and a variation of voice effects (even if its purely about psychological changes). However, to derive the available gains, we need both ownership and control.
"Dynamic monopsony"???? Ok, now I know where you're getting your material: cut-and-paste from a bunch of theoretical studies by a bunch of fancy pants professors trying to impress the rest of the world with their overadequate vocabulary and equation-building skills. Maybe you don't get an "A" after all. (Still pretty good though.) This is all hogwash. They make assumptions that have no resemblance to the real world, and moreover, they are making up definitions to words to suit their own ideological preferences, as are you. Monopsony = one buyer. If you have more than one buyer, you at least have an oligopsony. So please freaking call it that. And what is so difficult to understand about this that you insist that I've "got my basics wrong?" When there are more employers competing to employ people, wages will be higher, even in the face of the firm's desire to make a profit. An upward-sloping labor supply curve does not mean that employers have total discrimination to set wages. This is more an issue with relative bargaining power, which is dependent on the number of options a worker has. More firms hiring will push everyone up the curve, or off of it. And most capitalists would still like to make a profit, so they'll opt to simply pay the higher wages. It is fallacy to take one observation (that wages are higher at bigger firms) and then go off on a theoretical grail quest to come up with such sphemeral and esoteric explanations for it. How about simply, smaller firms are able to offer flexibility and other perks to offset the lower wage they pay? People like to work in smaller firms, and you have to pay them more to be a number at a bigger firm.
Goes back to the work of the likes of Burdett and Mortensen. Its a dynamic form of monopsony as the job search decision has to be modeled (with a reservation wage based on the marginal costs and marginal benefits from further search). Its not particularly new stuff, but it does illustrate how easy it is derive monopsony conditions (Note that the results are the same; such as a minimum wage increasing both wages and employment) Again, merely referring to economics on an economics sub-forum. You've just been found guilty of making basic error. This is a ridiculous claim, particularly as you're typing 'without knowledge'. Dynamic monopsony is essentially a continuation of supply and demand theory. It is a particularly realistic approach as it models the consequences of asymmetric information (there's some irony there!). Monopsony is modeled by showing that the firm has wage making power. That isn't just derived by assuming the market and firm labour supply curve coincides. One we drop the ludicrous assumptions used in Supply & Demand 101 we appreciate that its the norm. You haven't understood monopsony. However, its worse than that. You referred to it when you shouldn't. The impact on unemployment, as I've already told you, is an increase in the equilibrium unemployment rate. Whilst that reflects a failure to exhaust mutually beneficial exchange, it does not coincide with involuntary unemployment. It does mean wage making power and guaranteed inefficiency. You'd have to assume some form of compensating differentials. Good luck with that! I look forward to your evidence in support
