Lots of other prices are “sticky” like that. It’s a psychological thing—nothing special about wages.
The question was about wages, not how to survive. Lots of people who earn wages don’t live on them. Lots of people don’t sell their labor at all. Children, disabled people, retired people, people in business, etc. don’t live on wages.
How to get enough money to live is an entirely separate question from how “wages work”. There are lots of other ways to survive that don’t involve wages—making and selling things, telling stories and writing books, gifts from family or friends or charitable organizations, making art, receiving grants, spending money previously saved or invested, welfare payments from governments, etc., etc. (A lot of talk lately about “Universal Basic Income”, too.)
Really “how wages work” and “how to get money to survive” are two entirely disconnected subjects. Mixing them together only leads to confusion (and I’m sorry to say, misery).
My question is specifically about the game theory of employee/employer relations, with wages as a key example, not generally “how to get enough money to survive”. But of course the need to survive affects that game theory, right? Because, for example, equilibrium reasoning assumes agents with a comparable ability to coordinate (whereas managers are fewer than workers), and it assumes immortal agents (which humans aren’t).
Managers are fewer than workers but there are thousands of firms in every country (as well as millions of workers) so in either case we’re well into the law of large numbers. There’s no practical way for thousands of entities to form stable cartels (without government backing).
If you worry about employers in a city forming a cartel to keep wages low, shouldn’t you worry even more about supermarkets doing the same to keep grocery prices high? There are a lot fewer supermarkets than firms that employ workers.
And all other prices are set by dealings between mortal entities.
I don’t think there are good reasons to treat worker-employer relations as any different than seller-buyer relations for any other goods or services.
I think you’re complicating things needlessly by treating the labor market as different from all other markets—cartels and unions are the same thing. Scabs and those who undermine cartels are the same thing. Price controls are price controls.
In general price caps (say, rent control) are bad because they cause shortages, blunt incentives to provide more supply and improve quality, and prevent people from buying things at prices they’re willing to pay. Price floors (say, minimum wages) are bad because they create gluts (unemployment), reduce incentives to create jobs, and prevent people from selling stuff at prices they’re willing to accept (esp. the labor of the least-skilled workers).
In general. There’s nothing terribly different about the labor market vs. other markets.
> so in either case we’re well into the law of large numbers.
True. But this doesn’t help with the part where a manager can outlast a given worker in a negotiation-war. Say a manager has 10 employees. Given a manager, an employee makes 10 widgets per year. Right now, the manager takes 1 widget from each employee per year. A person needs 7 widgets/year to survive. So the manager goes to the first employee and says, okay, now I’m going to take 2 widgets / year from you. Should the employee quit? They’ll have costs to look for another job, and maybe will have to move, and maybe they won’t even find a job that pays more than 8 widgets / year. Should they bargain, holding out for 9 widgets/year? The manager is already getting 9 widgets /year from the other employees. The employee, though, is starting to starve.
You’re saying that other managers will bid for the employee. They might… but I don’t see why it’s true in general that the managers bidding against each other for employees overpowers the incentive to lower wages. Do you? Can you give an argument, e.g. a toy example? Do you want to make a claim like “most businesses have conditions where managers can’t ‘exploit’ workers” for some appropriate value of “exploit”? For example, it seems like if managers can only manage up to 10 employees (e.g. because it’s hard to manage), then things are bad for the employees. Unless they can coordinate. But coordination might be hard in some cases. We could say, that’s not stable because there could just be more managers… but is that right? It could be a general fact, but I don’t see why, and I’m asking for arguments.
>I don’t think are good reasons to treat worker-employer relations as any different than seller-buyer relations for any other goods or services.
Yeah this really doesn’t make sense to me. Can you expand? Are you saying that you expect the equilibration dynamics to output “roughly the same” result, or “roughly the correct” result, or “roughly the best feasible” result, in most / all markets? Why would that be? It seems like parameters of the market, like asymmetric information, difficulty of collusion for different parties, cognitive costs of computing relevant stuff, transition costs between different options, iterative dynamics (e.g. starving to death, Matthew effect), etc. would make the equilibration look different in different markets, maybe drastically different, and maybe drastically bad / unjust / suboptimal.
>In general price caps....
Ok… but I’m not particularly arguing for any of that. I’m trying to understand what your (/people’s) models of how these things actually go. I wouldn’t guess that you’d agree with the very strong claim “a bunch of individuals making local causal best-responses produces trades that are optimal for long-term flourishing of humankind”, but I don’t know specifically how your models differ from that.
Lots of other prices are “sticky” like that. It’s a psychological thing—nothing special about wages.
The question was about wages, not how to survive. Lots of people who earn wages don’t live on them. Lots of people don’t sell their labor at all. Children, disabled people, retired people, people in business, etc. don’t live on wages.
How to get enough money to live is an entirely separate question from how “wages work”. There are lots of other ways to survive that don’t involve wages—making and selling things, telling stories and writing books, gifts from family or friends or charitable organizations, making art, receiving grants, spending money previously saved or invested, welfare payments from governments, etc., etc. (A lot of talk lately about “Universal Basic Income”, too.)
Really “how wages work” and “how to get money to survive” are two entirely disconnected subjects. Mixing them together only leads to confusion (and I’m sorry to say, misery).
My question is specifically about the game theory of employee/employer relations, with wages as a key example, not generally “how to get enough money to survive”. But of course the need to survive affects that game theory, right? Because, for example, equilibrium reasoning assumes agents with a comparable ability to coordinate (whereas managers are fewer than workers), and it assumes immortal agents (which humans aren’t).
Managers are fewer than workers but there are thousands of firms in every country (as well as millions of workers) so in either case we’re well into the law of large numbers. There’s no practical way for thousands of entities to form stable cartels (without government backing).
If you worry about employers in a city forming a cartel to keep wages low, shouldn’t you worry even more about supermarkets doing the same to keep grocery prices high? There are a lot fewer supermarkets than firms that employ workers.
And all other prices are set by dealings between mortal entities.
I don’t think there are good reasons to treat worker-employer relations as any different than seller-buyer relations for any other goods or services.
I think you’re complicating things needlessly by treating the labor market as different from all other markets—cartels and unions are the same thing. Scabs and those who undermine cartels are the same thing. Price controls are price controls.
In general price caps (say, rent control) are bad because they cause shortages, blunt incentives to provide more supply and improve quality, and prevent people from buying things at prices they’re willing to pay. Price floors (say, minimum wages) are bad because they create gluts (unemployment), reduce incentives to create jobs, and prevent people from selling stuff at prices they’re willing to accept (esp. the labor of the least-skilled workers).
In general. There’s nothing terribly different about the labor market vs. other markets.
> so in either case we’re well into the law of large numbers.
True. But this doesn’t help with the part where a manager can outlast a given worker in a negotiation-war. Say a manager has 10 employees. Given a manager, an employee makes 10 widgets per year. Right now, the manager takes 1 widget from each employee per year. A person needs 7 widgets/year to survive. So the manager goes to the first employee and says, okay, now I’m going to take 2 widgets / year from you. Should the employee quit? They’ll have costs to look for another job, and maybe will have to move, and maybe they won’t even find a job that pays more than 8 widgets / year. Should they bargain, holding out for 9 widgets/year? The manager is already getting 9 widgets /year from the other employees. The employee, though, is starting to starve.
You’re saying that other managers will bid for the employee. They might… but I don’t see why it’s true in general that the managers bidding against each other for employees overpowers the incentive to lower wages. Do you? Can you give an argument, e.g. a toy example? Do you want to make a claim like “most businesses have conditions where managers can’t ‘exploit’ workers” for some appropriate value of “exploit”? For example, it seems like if managers can only manage up to 10 employees (e.g. because it’s hard to manage), then things are bad for the employees. Unless they can coordinate. But coordination might be hard in some cases. We could say, that’s not stable because there could just be more managers… but is that right? It could be a general fact, but I don’t see why, and I’m asking for arguments.
>I don’t think are good reasons to treat worker-employer relations as any different than seller-buyer relations for any other goods or services.
Yeah this really doesn’t make sense to me. Can you expand? Are you saying that you expect the equilibration dynamics to output “roughly the same” result, or “roughly the correct” result, or “roughly the best feasible” result, in most / all markets? Why would that be? It seems like parameters of the market, like asymmetric information, difficulty of collusion for different parties, cognitive costs of computing relevant stuff, transition costs between different options, iterative dynamics (e.g. starving to death, Matthew effect), etc. would make the equilibration look different in different markets, maybe drastically different, and maybe drastically bad / unjust / suboptimal.
>In general price caps....
Ok… but I’m not particularly arguing for any of that. I’m trying to understand what your (/people’s) models of how these things actually go. I wouldn’t guess that you’d agree with the very strong claim “a bunch of individuals making local causal best-responses produces trades that are optimal for long-term flourishing of humankind”, but I don’t know specifically how your models differ from that.