Wednesday, May 20, 2009

No worker can ever be underpaid

One of the doctrines dominating the economic "thought" in Bulgaria can be summarized as "Prosperity by starvation wages". Its proponents claim that, because of the lack of natural resources in Bulgaria, the only way we can have a competitive economy is by paying super low wages, far below their market value. Of course, the real result of this policy is bringing labour productivity down to the level of wages, because productive people tend either to become less productive or to emigrate. So Bulgarian economy is anything you like but NOT competitive.
However, our brave employers, both government and private ones, never let facts deter them from logic. And their logic is really impenetrable. If an employee never asks for pay rise, he is apparently happy with his wage and it doesn't need to be increased. If he asks for pay rise, he is arrogant and insolent and so doesn't deserve even a penny more.
Here, I expect some people considering themselves economic experts to ask me how I can determine the market value of a wage. No problem, darlings - like the market value of any other product: by the law of demand and supply. If you want to buy a pair of shoes for (say) EUR 10 and cannot find any shoes costing as little, or if the few shoes you find at that price are of too low quality to be used by any person alive, this means that current market value of shoes is definitely above EUR 10. By analogy, if nobody agrees to work for the wage you are offering, or if the only people who agree are those who cannot really do the job, this is a sure sign that the position is underpaid. I have already mentioned this a year ago in my post University teachers vote with their feet.
In the private sector, I have heard of numerous cases when the employer refuses to increase somebody's salary from (say) 500 to 600 leva, then the worker leaves and the employer has to replace him with two people receiving 700 leva each and combined doing less work than the lost employee. However, the situation in the government sector isn't significantly better, and I strongly suspect that private employers are just following the example of government. The immediate trigger for me to write this post were the obstacles put to my colleagues Victor and Eva (not their real names) to prevent them from receiving higher wages.

4 comments:

alik said...

Hallo...
Nice blog...
Nice you too...
Smile...

Charles N. Steele said...

Here in the U.S. it's different -- the prevailing doctrine is that government must act to keep wages higher than the market level.

The one thing "everyone" agrees on is that the free market wage rate is completely unacceptable. After all, it wouldn't do to have wages reflect actual productivity, since this would mean government bureaucrats would have negative wages.

Maya M said...

Because our traffic policemen are notoriously corrupted, we have a joke that not only should they be deprived of salaries, but also should be charged to do their job, similarly to the rent one pays for growing crops on land that isn't his own.
The same holds true for some buraucrats, I guess :-).

Chuck Horton said...

You are brilliant. It will be some time before the echoes of Marxism disappear all around the world. He really didn't understand the value of labor, and this confusion still appears in many policies in nations around the world. Labor brings nothing to the value of a product. The value is only determined by the market place. It is and always will be a voluntary exchange in a free society. Labor is supplied or withdrawn based upon labor's willingness to enter into the voluntary exchange of his labor to produce the product or service to be supplied for the value the marketplace has placed upon the product or service.