Monday, January 20, 2014

The Lie of the Labor "Shortage"

     Oh you humans.  Currently you are being flooded with propaganda that you simply MUST have more workers, because there is a terrible labor "shortage".  (At the same time you are also being told that automation is reducing the need for human labor.  Are any of you so-called homo sapiens paying attention?).  

     There is no such thing as a labor shortage.  There is only prosperity and poverty.  Prosperity is defined by the inability of employers to find people who will work for low wages. This causes wages to rise - it's called supply and demand, sillies! - and forces more efficient use of labor.  The people complaining about a labor shortage simply want to turn the world into an overpopulated cesspit of misery so that they can use their control of resources to lord it over the rest of you.

     Anyone who talks about a labor "shortage" as anything other than an unalloyed blessing is the sworn enemy of all of you humans who work for a living.

     Imagine that you own a piece of prime agricultural land in Mexico.  There is an endless supply of agricultural workers and tenant farmers who will work your land for you at little more than subsistence wages.  You are rich without having to do any work yourself, indeed, without having to know anything about farming!  Life is good.  Now imagine you own a piece of agricultural land in Iowa.  If you advertise for workers at $2/hr with no benefits, you won’t get any takers.  You will have to offer much higher wages: if you are a poor manager possibly so high that your farm’s income can’t cover your labor costs, and you go bankrupt.  Does this mean that there is a “shortage” of workers in Iowa?  Of course not, that’s a lie: agricultural production in Iowa is as good or better than it is in Mexico.  It’s just that in Iowa a more limited supply of labor means that wages are higher, employers are forced to invest in machinery to make better use of labor, and much of the work is done by farmers who own their own land rather than on large plantation-style estates.  The work always gets done.  But if your status as a rich person is threatened by a “shortage” of poverty, the tendency is overwhelming to claim that this “shortage” of poor people threatens farming in general, and that by increasing the labor supply to the point of lowering wages you are not in fact the stupid selfish monster that you are, but a noble hero who is preventing famine. 

     Market forces can never create wages that are too high.   The Neoliberal dogma that capitalism requires an army of unemployed workers to drive down wages is asinine.   Compare Switzerland to Haiti; how exactly is Switzerland dysfunctional?

     The same dynamics affect all forms of human endeavor, from truck drivers to plumbers, engineers to flight attendants, soldiers to nurses.  A tight labor market means high wages and high status for workers, the owner-operator dominates, and a society that is overall dynamic and productive.  A flooded labor market means high profits and high status for the rich, the plantation dominates, and a society that is overall impoverished and stagnant.

     Suppose that I have a business making electrical fixtures for domestic houses.  I design a new set of outlets that requires the use of substantial amounts of gold.  It turns out that I cannot profitably sell these fixtures unless I can purchase gold for $50/ounce.  But currently gold costs over $1000/ounce.  I’m losing money!  I might go broke!  I might need to get a job! Too bad.  This is how a market- based economy allocates resources.  This is the market telling you that gold is too valuable to be used in your electrical fixtures.  The market will reserve the use of gold for more appropriate purposes, and substitute other materials such as copper for electrical fixtures.

     Suppose now I have a business that will only be profitable if I can acquire labor for $1/hour, but the going rate is $10/hour.  I’m going out of business!  Too bad.  This is the market’s way of telling you that labor is currently too valuable to be used in such an inefficient way.  In a high-wage economy, labor is reserved for applications where it is really needed.  The economy will adapt to expensive labor, in the same way that it adapts to expensive gold, and everything that needs to be done will be done.  Destroying the value of labor will help incompetent or greedy businessmen make a quick buck, but it will destroy the bedrock on which prosperity is based.

     There is a debate about the utility of minimum-wage laws.  Minimum wage laws are indeed useful, but not for the reasons normally proposed.  Minimum wage laws cannot create wealth.  You can’t legislate prosperity: going to a country where the median wage is $1/hour, and legislating that it will be $10/hour, just won’t work.  However.  A minimum wage law can help informal labor that doesn’t have a union from getting a raw deal.  More importantly, a minimum wage law can help prevent the rich from destroying the value of labor.  Suppose unskilled labor goes for $10/hour.  Think how much more profit could be made if I only had to pay $1/hour!   So I and my fellow employers import foreign workers, and drive down the value of labor: soon, everyone is making $1/hour.  But if the minimum wage is $10/hour, I cannot claim that there is a ‘shortage’ of workers willing (i.e., desperate enough) to work for $1/hour, because that’s illegal.  Thus, while a minimum wage law cannot increase wages, it can help to avoid having high wages driven down.  Not a solution to all the world’s problems, but a useful tool nonetheless.

    It is very hard for you humans to think poorly of something that benefits you personally, and vice-versa.  The rich and powerful, because they are rich and powerful, are especially good at arranging things so that they benefit, and also at propagating the idea that what benefits the rich personally is also good for the greater society.  None of you silly humans likes to think of themselves as a bad person, even though some of you truly are vile.  And besides, hiding the existence and the effects of population policies means that the rich get uncontested control over the single most important economic tool to ever have existed.  Hence the smoke-screen of propaganda and neglect on the issue of population that is now nearly impenetrable.

There is not, never has been,
nor will there ever be,
a labor shortage.

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