Reply To: Income Inequality Chime-in


It sounds like he’s basing it on the labour theory of value (JohnD might also be right with “objective theory of value”).

But voluntary exchange isn’t necessarily based on payment according to what each contributes to the final sale of the product.

People are paid for their time & effort on the basis of what they agree to. Now, in the example of the auto, the worker(s) could agree to be paid on-commission, receiving a percentage of the sales (minus expenses) – as many auto salesmen are (at least partially). But these aren’t the contracts they agreed to. Even the union auto-workers don’t always negotiate for contracts like that.

Now, some actually do: it’s called a “profit-sharing agreement,” and this is perfectly acceptable when mutually agreed to. But the post’s author seems to believe it would be better for an outside third-party to intervene and impose such an agreement even where the employees themselves aren’t pursuing it (when it comes to the American auto industry. . .you should tell him it’s perhaps a bad example, dude. Unless he’d also be happy if the workers were forced by outside intervention to accept a “profit-and-loss-sharing agreement” – so the workers have to kick in some dough if they lose money).

But, note, this is why many employees prefer wages: if they wanted the risk of entrepreneurship, they’d become entrepreneurs and expose their income directly to the fluctuations of the market*

*His rejoinder may very well be that their incomes are exposed to risk, in the sense that they could be laid off, or their hours cut. And there is a sense in which this is true. But there is a perception of – and to a significant degree a reality of – less fluctuation in working for a wage than working on commission or for yourself as an entrepreneur – noting that many people who start businesses don’t get a income from that business for years, if ever (many businesses fail).

What he really wants is for the employees to get the reward of risk, without sharing the full downside of it. I mean, run it by him whether he’d be willing to have outside parties intervene to force employees to work for nothing until a business (say, a restaurant) turns a profit. My bet is he’ll dance away from that.