Monday, August 06, 2007

The value of labor

In my last post, I made a claim I should probably support a bit more thoroughly. Socialists often complain that capitalism devalues labor, when they are the ones truly capable of this feat. Some are bound to wonder how I can claim this, though others will simply know it as a given.

First, some premises on which to base this discussion:
The value of labor is not a fixed price. How could it be? Two men doing the same work, in the same place, at the same time, generally do not produce the same output. Once you factor in the market for their particular labor, the costs of materials in their area, and so many other variables, there is no comparison that can be applied across industries, cities, or any other category.
Labor is not merely found in the lowest levels of employment, as some would have you believe. Owners, managers, foremen, equipment operators, and janitors all work, and, in this discussion, will all be seen as providing some measure of labor.
Skilled labor requires an investment on the laborer's part. This investment involves time, money, and effort. Unskilled labor requires only a will to work.

As we all should know, capitalism holds that a man with some capital can start a business, employing labor as he sees fit, selling his product or service as he sees fit, and dealing with other businessmen to get the things he needs. Socialism holds that the people collectively own all business, and it must be run as the government wills, so that necessary products are made and everyone able is employed.

When everyone is employed by force, there is no difference between skilled and unskilled labor, management and those managed. Everyone is told where they shall work and what shall be required of them. Even in a utopian system, this leaves the individual at the will of the government, working where the government says he best fits. In an imperfect system, favors, mistakes, and willful negligence put many people in positions for which they are ill-suited, to say nothing of wages.

When everyone is employed by the needs of businessmen, there are still some problems, of course. Favors are still owed, though businessmen don't like to put anyone in a position to jeopardize their profits. Mistakes are still made, but these are remedied when they are found, since they affect the bottom line. In a utopian capitalism, everyone is employed by virtue of their abilities, free to change jobs when offered something better; free to fire someone who is hurting profit margins.

In capitalism, skilled labor is paid more, reflecting the investment made. In socialism, people are given whatever the government thinks they need. In capitalism, a man takes a risk on a new idea by investing his money in it or asking for loans. In socialism, he takes that idea to the government, and they choose whether to give it any thought.

But the worst way that socialism devalues labor is beyond that. In a socialist society, I am provided for. In a capitalist society, I earn my wage. Socialism devalues labor by not demanding it. Capitalism values labor by rewarding the productive.

Capitalism, it is said, makes the rich richer and the poor poorer. The first part is certainly true in many cases. A rich man can afford to invest in ventures that will increase his wealth. Those ventures, though, provide jobs for all classes. Class warfare is an insidious social disease. The rich do not wish to keep the poor poor. They wish to keep everyone wealthy enough to pay for the goods they produce. They don't do this, though, out of a social conscience, but out of a desire to increase their own profits. A rich man cannot afford to make the world too poor to purchase his goods.

I've also heard it said that some would lower wages and prices, thus forcing their employees to shop at their stores. Well, the competition, noticing this, would then be forced to reduce their wages and prices in order to regain lost customers. Suddenly, everything costs less. The situation hasn't changed--the numbers have. If I could afford that TV before, I can still afford it now. I don't need to look for a smaller one, nor do I have the money for a larger one. Nothing has changed except the numbers I'm dealing with.

Finally, many will point out the wealth disparity between the extremely rich and the rest of us. How many computers do you think run Windows? It's a product we eagerly consume. Bill Gates, then, provides everyone with all sorts of services (try to show me someone who isn't somehow relying upon a Windows-based computer). Do you provide nearly as many people anything that is nearly as valuable as that? I provide my services to a certain group of people. I am paid for that. If I decide that it is not a fair wage, I can quit. If I want to sell you an apple for $2, and you only want to pay $1, we may find ourselves adjusting the prices we would be willing to accept on that apple, or we may find others who will do business on our terms. If you don't want Bill Gates to make all the money, come up with a product everyone needs. Heck, you could even try to beat him at the OS game.

Where I came from, people expected no charity. If they needed money, they found someone who would hire them to do something. When I was in high school, a man who owned quite a few properties hurt his back and could not maintain the lawns on those properties all summer (that was one of the services he provided his renters). I did the mowing, and was paid a little more than I thought it was worth (I don't remember now how much I was paid). It was worth that much to him, just to know that it would all get done when he wanted it done, and I was more than happy, having earned enough money to keep my car going and put a stereo in it. He could've paid more. I would've accepted less. We came to a mutually beneficial agreement. Had either of us not liked the terms, we could have negotiated or walked away. That is the way to find the value of labor.


Robert said...

The US government and the IRS "devalues" labor to it's ultimate conclusion. Your labor is worth *nothing* to them... hence the fact that all income derived from your labor is treated as "gain" or "income" for the purposes of taxation. In the US system, your labor is worth exactly $0. Anything you get for your labor is pure profit.

Capitalism or not, it's hard to trump our tax system for devaluing labor.

Drew said...

Yes, our tax system is horrible about that sort of thing. I'm a big fan of the Fair Tax, since the only thing taxed is spending. Don't live beyond your means and you'll have no problem with taxes wiping you out.