Thursday, March 20, 2014

Why 'Paid-What-You're-Worth' Is a Toxic Myth

From AlterNet, an essay by former Secretary of Labor Robert Reich:

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour. 

Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive. 

The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom.

More here.

When you own a business, most of your costs are fixed.  The cost of rent, various bills, supplies, raw materials, etc., are non-negotiable, more or less.  Labor, however, in stark contrast, is NOT a fixed cost.  You can pay as low of a wage as you can get away with.  And that's a pretty big deal in terms of economic theory.  Indeed, Marxist economist Richard Wolff asserts that this key factor, the arbitrariness of labor costs, is essentially how the capitalist makes his money: by paying his worker less than the value he creates with his labor, the capitalist is able to pocket the difference as profit.  The bigger the difference between the wealth a worker creates and the amount he is paid, the more money the capitalist makes.

I mean, sure, there's this intellectual construct known as the "labor market," which philosophically reduces human beings to a function of supply and demand, as with, say, pork bellies or uranium, but because most capitalists in the pursuit of common interests have devoted collectively billions of dollars over the years, through various strategies such as manipulating government, moving production facilities across the country or abroad, and others, to RIGGING this "market" in their favor, it's all something of a sick joke.

That is, a worker's REAL value is only understood in terms of the wealth he creates, NOT in terms of supply and demand, which the bogus "labor market" doesn't even accurately calculate, anyway.  So that's the context in which all discussions of labor unions, the minimum wage, welfare, wealth inequality, taxation, etc., MUST be understood: capitalists make their money by paying workers less than the value they create, and those capitalists will do ANYTHING THEY CAN to squeeze their labor AS MUCH AS THEY CAN.

Kind of makes right-wing whining about "redistribution" problematic at best, and total bullshit at worst.