Nadine -
...Why do salaries easily rise in response to labor shortage in some professions, but nursing or teacher shortages must reach crisis proportions before any action is taken?...
This is because medicine and education are heavily regulated government monopolies and non-profits. In neither medicine nor public education are the ultimate consumers allowed to directly buy and pay for the precise amount and quality of nursing or teaching that they might choose. In neither case does a free market in labor exist.
...As you discussed in a previous post, when we discuss the minimum wage we are not discussing a simple transition from no impact on the market to major job destruction. There is
a range which will have no effect on employment,
a range which will have minimal effect on unemployment,
a range which will affect business models and create labor blackmarkets,
a range which will greatly increase unemployment, and
a range which will destroy businesses
The question is, how do you determine the boundaries of the ranges? And if you believe that it would benefit the country as a whole and the economy to raise the wages of the bottom 30% of the labor force, would it be a sensible public policy to set a minimum wage that had some effect on the labor market?
It doesn't work like that. At a given minimum wage level, some workers receive increased wages at the cost of reduced job security and possibly fringe benefits, while the lowest skilled entry level workers are locked out of safe and legal jobs entirely. The real problem is not the wage level, but the skill and productivity level. Instead of distorting the entire labor market, it probably makes more sense for government subsidies to employers for hiring the lowest skilled workers. (see below)
amazon.com
Rewarding Work : How to Restore Participation and Self-Support to Free Enterprise
by Edmund S. Phelps
Editorial Reviews
George Soros
"In this important book Edmund Phelps argues that the breakdown of basic societal norms is a consequence rather than a cause of economic disadvantage. His proposal of wage subsidies blends a pro-capitalist preference with a strong concern for social values and justice. This book is an important contribution to the debate on how to deal with economic disadvantage." --This text refers to the Hardcover edition.
Lawrence Summers
"Edmund Phelps' ideas are always new, always interesting, and always worthy of serious study. Creating work for all may be our greatest social problem. Phelps' strategy deserves serious consideration and debate." --This text refers to the Hardcover edition.
Book Description
Since the 1970s, a gulf has opened between the pay of low-paid workers and the pay of the middle class. No longer able to earn a decent wage in respectable work, many have left the labor force, and the job attachment of those remaining has weakened, also reducing employment. For Edmund Phelps, this is a failure of political economy whose ill effects have spread widely and are undermining the free-enterprise system itself. His solution is a graduated schedule of tax subsidies to enterprises for every low-wage worker they hire. As firms hire more of these workers, the labor market would tighten, driving up their pay levels as well as their employment.
Ingram
Political economist Edmund Phelps underscores the importance of earning a respectable wage to foster self-worth and responsibility. However, the wide gulf between the wages of low-paid workers and those of the middle class, along with the availability of welfare, has resulted in lack of loyalty or incentive among common workers. Phelps calls for re-engineering our economic system to help low-wage American workers achieve self-sufficiency and self-respect. --This text refers to the Hardcover edition.
From the Back Cover
[Phelps] takes the view that many Americans have been driven out of working life, and deprived of all the physical and psychological succor that work provides, simply because their wages are too low, especially when the amount they are able to earn is compared with the amount they can 'earn' in payments and kind via the welfare system by doing no work at all ... Phelps makes his economic case with forensic clarity.-Peter David, Wall Street Journal
About the Author
Edmund Phelps is McVickar Professor of Political Economy, Columbia University. He is also the author of Structural Slumps (published by Harvard) --This text refers to the Hardcover edition.
Regards, Don |
