Don’t f*ck with wages?!

Posted: 25 August 2017 in Uncategorized
Tags: , , , , , , , , , , , ,


There’s nothing that gets mainstream economists going like a proposal to raise workers’ wages.

Except the idea of raising workers’ wages in other countries.

Then you’re screwing with both wages and international trade. And mainstream thinkers just won’t allow that.

That’s why Eduardo Porter considers the AFL-CIO’s proposal that the North American Free Trade Agreement guarantee that “all workers — regardless of sector — have the right to receive wages sufficient for them to afford, in the region of the signatory country where the worker resides, a decent standard of living for the worker and her or his family” a “fairly loopy idea.”

As I see it, the only thing loopy about the proposal is the idea that the Trump administration would actually take it seriously.

Then there’s MIT’s David Autor:

Stipulating that countries must pay above-market wages when producing export goods for the U.S. feels like outrageous economic imperialism.

And finally Harvard’s Dani Rodrik, according to whom the idea of a living wage

is very difficult to define and can be harmful to employment if enforced too strictly.

So, there you have it: according to mainstream economists, attempting to raise workers’ wages, especially wages in Mexico and elsewhere, is “loopy,” an example of “economic imperialism,” and “harmful to employment” if actually enforced.

Now, to be clear, as I showed earlier this year, workers on both sides of the border have lost out, and their losses are mostly not due to NAFTA. The wage share of national income was declining in both the United States and Mexico before the free-trade agreement was implemented—and it’s continued its slide since then.

Why then are mainstream economists so opposed to raising Mexican workers’ wages—which, after all, is merely an example of leveling-up as against a race-to-the-bottom?

It’s because mainstream economists actually believe workers are paid according to their productivity. They get what they’re worth. In other words, “just deserts.”

But that’s the problem: there’s nothing necessarily just about the prices set in markets, whether for labor power or any another commodity. Raising workers’ wages above current rates—on both sides of the border—represents a different kind of economic justice. It may not be neoclassical justice, which is the only thing Porter, Autor, Rodrik, and other mainstream economists recognize.

It’s a justice based on the idea that workers lose out when they’re paid a wage but create more value than what they receive in the form of wages. They produce a surplus, which their employers appropriate. Both their Mexican employers and their U.S. employers.

Raising workers’ wages would mean there would be somewhat less surplus available to their employers in the form of profits. And that’s a kind of economic justice mainstream economists simply won’t accept.

  1. Magpie says:

    People have short memories. I have seen this quote, attributed to Joseph Carens, used as argument for the justice of globalisation:

    “Being born a citizen of a rich country in North America or Europe is a lot like being born into the nobility in the Middle Ages. It greatly enhances one’s life prospects (even if there are lesser and greater nobles). And being born a citizen of a poor country in Asia or Africa is a lot like being born into the peasantry in the Middle Ages. It greatly limits one’s life chances (even if there are some rich peasants and a few gain access to the nobility),”

    When all this globalisation thing started for real, more than 20-25 years ago, the talk among people like Porter, Autor, and Rodrik was that everybody would be a winner. It wasn’t just that rich-country consumers would get cheaper imports coming from poor countries; it was that they, as workers, would get better jobs.

    Poor-country workers would also win: they would get those hand-me-down manufacturing jobs paying them a decent wage.

    Everybody’s wages, it was claimed, would go up. The idea — allegedly — was to raise everybody’s living standards to “nobility” levels. The leveling-up you mentioned.

    From the start things sounded iffy, as Larry Summers’ infamous memo shows. But anyone asking questions was summarily dismissed by the likes of Paul Krugman. Chinese Foxconn workers would jump to their deaths, South African miners would be murdered in mass, Bangladeshi seamstresses would burn to ashes.

    Now decades after that, rich country workers lost their manufacturing jobs, pretty much the same kind of people claim the idea of giving poor country workers decent wages is “loopy”, “economic imperialism”, and “harmful to employment”. You cannot go against the natural laws of economics…

    Except, of course, in the case of the incomes of people like Porter, Autor, and Rodrik, Krugman and Summers, as Dean Baker has explained endlessly: there are tens of millions of talented graduates in poor countries who would be more than happy to move to rich countries to work there, even for a fraction of what local graduates earn. Consumers, too, would greatly benefit from that.

    What really, really pisses me off is those people’s sheer shamelessness. You see, they truly deserve their nobility.

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