Understanding “half-paid” workers AIER

People often complain that, under capitalism, employers do not pay workers their wages. Gallup reported in 2018 that 43 percent of workers think they are getting a lower salary, while Robert Huff reported this number as 46 percent in 2019. In addition, depending on how you do a Google search phrase for such a claim, you’ll get thousands or even millions of hits.

There are several ways that that allegation can be true. But those who make such claims are not those ways. Moreover, the generally drawn meaning that government coercion will improve things is false.

Understandably, market processes do not guarantee that your compensation is equal to your value to your employer. They guarantee that your compensation will be at least as much as your next best known option (will be adjusted for other situations and preferences).

Say John and Jane are your potential employers. John offers you 60,000. If Jane values ​​your productivity at $ 75,000, how much will she offer you? It is uncertain. We just know that it must be enough to surpass John in order to attract you. Jane you don’t have to pay her price. He can offer 60,001. He can offer you 74,999. He can offer you some of this. But importantly, even if you pay Jane less than your full value, your supposed “wait” doesn’t hurt you. You are better than you John you have to make an offer.

However, if Gina joins those who want your services and offers you 70,000, Jane will have to lose it instead of $ 60,000 to keep your services. If Gene also joins 74,000 for your labor services, that would be the number that must be hit. In other words, the more competitive the market for your labor, the closer your salary will be to your employer, because the value of your options has reached your value to your chosen employer. And only the free market guarantees that you will be paid at least well. In a market economy, as Donald Boudrox puts it, “Low-wage workers are like $ 100 bills lying on the sidewalk … Although every employer probably wants to pay workers less than the productivity value, every employer is interested in earning. . “

It reveals why government coercion is not a way to increase the well-being of workers in general. Governments and their “big labor” influencers are constantly advancing mandates that impose barriers to entry and restrictions on competition in order to protect their preferred parties from open competition with other workers. While reducing entry barriers and increasing competition is a way for workers to get higher wages, such coercive government “solutions” actually guarantee that many workers will be paid much less than they would by taking away access to competitive offers for them. Services. For example, think of those who lose their jobs because of the increased minimum wage.

Government policy is also the source of another reason why workers’ wages are lower than their value to employers.

Government-directed staff benefits illustrate this. The cost of these benefits will eventually have to come out of the total compensation to employees. As Ludwig von Mrs. says, “If the law or business customs forces the employer to incur other expenses in addition to the wages he pays to the employee, the wages taken at home are reduced accordingly.” So while government sponsors demand credit from recipients for compulsory health coverage, staff training, family leave, worker compensation, etc., workers’ earnings are reduced to cover their additional costs. This compensation is to be paid to the employers and the wage workers identify a significant rift in the receipt, including praise to the government for the benefits, but such an order places employers responsible for lower wages.

Another source of “low pay” for such workers is the employer’s “contribution” to state unemployment and disability insurance, as well as half of their social security and Medicare taxes. Employers, knowing they will be hooked on these bills, offer higher wages and lower wages. Again, the money ultimately comes from the pockets of employees, but they blame their employers rather than the government for reducing the resulting homecoming. When employees say “I’m robbed,” they may be right – but they point the finger at the wrong suspect.

And this cost is enough. The BLS recently reported that for civilian workers, wage and salary costs averaged 69.1 percent of total compensation, while benefit costs accounted for 30.9 percent of total compensation. So if you think your salary is 30 percent less than your employer’s price, it doesn’t mean you’ve got a lower salary at all.

Corporate taxes have a similarly detrimental effect on employee compensation. To the extent that the impact of such taxes reduces tax-of-net income, they reduce the value of workers to employers. Again, government-funded extra spending receives money and praise from beneficiaries, while businesses are treated like scapegoats as if they have paid less. Steven Anten summarizes a recent data-driven study of corporate tax phenomena as showing that “labor carries between 50 percent and 100 percent of corporate income tax, with 70 percent or more of the potential consequences.”

Extensive and frequently repeated claims that people are not paid their dues to employers may be true in one sense, but not in the sense that those claims are commonly referred to. “Greed” or some flawed “ism” cannot be blamed. Further government intervention provides no magic solution. In a competitive labor market, this type of maximum “half-payment” is the amount that you value your most valuable employer more than your second-most valuable employer. And as labor markets become more competitive, this gap becomes smaller. Moreover, no matter how big the difference, workers are still better off if they accept any other offer.

The coercive power of government has many ways that force workers to take home benefits from their employers for less than their price which ultimately comes out of workers ’pockets at lower wages and reduces competition which leads to better offers to meet them. Protects their “friends” from the treasury and competition. So, if an employer pays someone to use the criteria, the government is the problem and the answer is to allow less mandate and free competition.

Gary M. Gals

Gary M. Gals

Dr. Gary Galles is a professor of economics at Pepperdine.

His research focuses on the role of independence, including public finance, public choice, firm theory, industry organization, and the views of many classical liberals and American founders.

His books included The path to policy failure, Defective premises, Bad policy, Messenger of peaceAnd Line of Liberty.

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