Labor Issues in Today Economy
11/29/11
Econ2510 Section 3
Labor Issues in Today Economy
In the Bloomberg BusinessWeek article “Jobs Returning Slowly-as Wages Lag”; Chris Farrell (an economics editor for the magazine) talks about how the recovering job market is being flooded with qualified cheap labor. In a market where employers either do not have to or will not compete for well qualified labor, the competition now rests on the jobseekers. Who are in competition with each other for who will do the work for the lowest wage. This is driving the average wage down in markets creating a market supply of labor. Jobs are returning to the job market slowly and wages are following behind. This brings up questions including should the government get involved; if they do how so? Should we let the market work itself out in time? In the article, Farrell references Paul Ostermen who touts the benefits of slowly raising the federal minimum wage. That might help driving up the wages, but, will it help keep businesses open? If the government doesn’t get involved will wages fester? I think companies need to find a balance where they can maximize profits and pay fairly for labor. To do this they need to ensure their marginal revenue product is equal to the marginal resource cost by hiring people. This would be the best outcome for everyone; it will create not only jobs but fair wages for the employee as well as the employer. I agree with Farrell’s prediction, “the social cost of stagnant wages and anemic household incomes will eventually undermine the productivity and competitiveness of the American business…and everyone will suffer.”
Econ2510 Section 3
Labor Issues in Today Economy
In the Bloomberg BusinessWeek article “Jobs Returning Slowly-as Wages Lag”; Chris Farrell (an economics editor for the magazine) talks about how the recovering job market is being flooded with qualified cheap labor. In a market where employers either do not have to or will not compete for well qualified labor, the competition now rests on the jobseekers. Who are in competition with each other for who will do the work for the lowest wage. This is driving the average wage down in markets creating a market supply of labor. Jobs are returning to the job market slowly and wages are following behind. This brings up questions including should the government get involved; if they do how so? Should we let the market work itself out in time? In the article, Farrell references Paul Ostermen who touts the benefits of slowly raising the federal minimum wage. That might help driving up the wages, but, will it help keep businesses open? If the government doesn’t get involved will wages fester? I think companies need to find a balance where they can maximize profits and pay fairly for labor. To do this they need to ensure their marginal revenue product is equal to the marginal resource cost by hiring people. This would be the best outcome for everyone; it will create not only jobs but fair wages for the employee as well as the employer. I agree with Farrell’s prediction, “the social cost of stagnant wages and anemic household incomes will eventually undermine the productivity and competitiveness of the American business…and everyone will suffer.”