gpowell,
The following is the basic part of a contrived example which I am using to think about both premium wages and how productivity figures into wages. I am leaving out the analysis to allow you to have an unbiased reaction --
Assume a tropical island whose inhabitants consist entirely of 4 mass market fiction writers, A, B, C, and D, and 3 possible employable assistants, X, Y, and Z.
Each of the writers works for a total of 5 1/2 hours per day and transmits their work to their publisher in NY electronically. Writers A, B, C, and D earn $5M, $500K, $50K and $5K per year respectively, as the public enthusiasm for their books varies widely. Each author actually writes for 5 hours per day and expends an additional 1/2 hour making coffee and sharpening his pencils.
It is this additional 1/2 hour per day that can be shifted onto an employed assistant, allowing the author to write a total of 5 1/2 hours per day, increasing his salable output by 10%. For simplicity, assume that a given assistant can only serve a single employer.
Making simplifying assumptions that each author is indifferent to whether his momentary work is writing, making coffee, or sharpening pencils, and that he will continue to work a total of 5 1/2 hours per day instead of taking more leisure, we need to determine the value of an assistant for each of the 4 authors. We will assume that a given author will hire a given assistant if and only if the wage paid is no greater than the value the assistant represents.
Since each author will write and earn an additional 10% when aided by an assistant, the annual additional net value of an assistant is $500K, $50K, $5K, and $500 for writers A, B, C, and D respectively, less the actual wage paid.
Since there are only 3 assistants available to serve 4 authors, a market wage must be high enough to reduce the demand for assistants to match the supply. This is accomplished by an annual wage of $501, pricing author D out of the market.
Regards, Don |
