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Pastimes : Austrian Economics, a lens on everyday reality
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To: gpowell who wrote (195)4/25/2003 8:05:43 AM
From: Don Lloyd  Read Replies (1) of 445
 
gpowell,

A starting point in looking at real wages is determining labor productivity.
Add to this that there are high transaction costs for both buyers and sellers in the labor market, with the result being fewer transactions and lower efficiency. Further, much of the the labor market is composed of bilateral monopolies. These two observations would allow for persistent inefficiencies to exist.

mises.org

"...The determination of wage rates--like that of the prices of material factors of production--can be achieved only on the market. There is no such thing as nonmarket wage rates, just as there are no nonmarket prices. As far as there are wages, labor is dealt with like any [p. 594] material factor of production and sold and bought on the market. It is usual to call the sector of the market of producers' goods on which labor is hired the labor market. As with all other sectors of the market, the labor market is actuated by the entrepreneurs intent upon making profits. Each entrepreneur is eager to buy all the kinds of specific labor he needs for the realization of his plans at the cheapest price. But the wages he offers must be high enough to take the workers away from competing entrepreneurs. The upper limit of his bidding is determined by anticipation of the price he can obtain for the increment in salable goods he expects from the employment of the worker concerned. The lower limit is determined by the bids of competing entrepreneurs who themselves are guided by analogous considerations. It is this that economists have in mind in asserting that the height of wage rates for each kind of labor is determined by its marginal productivity. Another way to express the same truth is to say that wage rates are determined by the supply of labor and of material factors of production on the one hand and by the anticipated future prices of the consumers' goods...."

to be continued

Regards, Don
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