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Pastimes : Austrian Economics, a lens on everyday reality
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To: Don Lloyd who wrote (217)5/7/2003 2:19:57 PM
From: gpowell  Read Replies (2) of 445
 
As I see it the important question is not how the wage is determined, but why the companies are willing to pay it. The employees are essentially incidental to this negotiation, just accepting the highest bid.

I don't perceive any particular Austrian content either, other than a basic acceptance of the essential non-homogeneousness of labor.

If labor is heterogeneous then potential employees are not just accepting the highest bid. As you alluded to in your previous post (whereby the employer ranks each potential candidate), the employee actively participates in ensuring they have the highest possible ranking for that particular job. They do this by searching out the job for which their unique combination of attributes is a match.

The wage paid is determined by the relative negotiating power between the employer and the employee.

It is becoming apparent that you feel the employer is wrong to pay a higher wage for the candidate of their choice. If the firm is wrong, then the employer will have lower productivity than companies who get it right. Over the long run, as firms freely enter or leave the market, the wages paid will be commensurate with their contributions to output.

These are the essential elements of a free market. The fact that there are both government imposed barriers to a perfect free market as well as private collective bargaining associations, doesn’t change the nature of this free market process.

You are looking for differences in the wage paid, while keeping all else equal – with the possible exception of firm specific factors. In regard to this specific issue – bi-lateral monopoly sufficiently explains the differences.
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