Brain fart here, the argument that more wages = more unemployment.

[Broletariat]

I'm forgetting why this is fallacious, help me out.

More should be "higher" when applied to "wages" by the way.

I remember it had to do with blaming the worker and that was dumb because... something.

[jake williams]

Well, part of the story is that there's pretty limited empirical evidence, and what empirical evidence exists is often not because of "market forces" but because of actions by spite on the part of capital.

Anyway, the argument for higher wages leading to lower employment is this. At any given time, businesses employ as many workers as they can while still staying in profit. If wages go up, since each extra worker is less profitable, and because workers display diminishing marginal utility on average (ie. each extra worker typically earns less extra profit), the "cutoff" where the next worker is paid more than they "earn" for the business at is moved.

On a micro scale, accounting for averages, this is sort of true, with several caveats. At most businesses, if wages are substantially lowered, businesses will hire more, and conversely, if wages are substantially raised, businesses will hire less. However, in many, many businesses, an extra worker makes almost no extra profit. Think of a convenience store where hiring an extra overnight employee isn't going to lead to more sales. Also, often all workers are earning much more for the company than they are being paid. In situations like this, all workers will still be earning more than they're paid even if wages rise. Bourgeois economists often accept these conditions, arguing that their theory only works for the whole economy, and not necessarily at each individual firm. But again, they have little empirical evidence to show that this is the case.

On a macro scale, it's been argued that wage increases in the whole economy (for example, from statutory minimum wages) also increase consumer demand, that they act as an indirect stimulus and thus don't lead to any net loss in jobs. There's some empirical support for this.

All in all, not only are there theoretical arguments as to why some businesses would hire less if forced to pay higher wages, there is some minimal evidence in practice. (While the extent of manufacturing offshoring from advanced capitalist countries is often overstated, and while its causes are often fabricated, it is to some extent due to higher unit labour costs. That said, this raises complicated questions about what consitutes "the whole economy", trade balance questions etc.). However, in general, there are all kinds of cases where raising wages does not lead to fewer hires, and some empirical evidence where raising wages actually increases hires.

[Zapatas Guns]

The idea behind this idea is based on the idea that labor is like any other commodity in the market. It can increase and decrease based on supply and demand. So if wage goes up there will be less demand for it and if wage goes down there will be more demand for it. So, if people are paid less more businesses would want that labor and hire more, decreasing unemployment.


The reason that this theory does not work is complicated. In short, if labor is seen as a function of production, not of supply and demand, then it will begin to make more sense. If a company cannot make more money by hiring more workers they won't hire. It does not matter if they can get workers on the very cheap if they cannot get them to produce more value than can be extracted. Unemployment is used as a way of keeping workers at a high rate of profit.

Wages can decline over fear of unemployment as well. People may believe that a job that pays little is better than no job that pays nothing.

What is an interesting tidbit of information is that if labor really was based on supply and demand, than company executives with their fat cat salaries should have priced themselves out of a job decades ago.

[Ocean Seal]

I'm forgetting why this is fallacious, help me out.

More should be "higher" when applied to "wages" by the way.

I remember it had to do with blaming the worker and that was dumb because... something.
In a sense its not completely false. But I guarantee that the people who are earning higher wages are not worker's. Higher wages for CEO's, for property owners, for executives of any kind creates more unemployment for the rest of us. Higher wages for us simply means less profit for the ruling class. The fact is that even using "high" wages for normal workers the ruling class will still hire more because they will be making a profit. In any case, we want to get rid of the ruling class such that we can have 0% unemployment and higher wages.

Also if you really want to make your point: Ask them why they don't ask their employers for a pay deduction, so that they can help lower unemployment :laugh:.

[piet11111]

I'm forgetting why this is fallacious, help me out.

More should be "higher" when applied to "wages" by the way.

I remember it had to do with blaming the worker and that was dumb because... something.


Look at employment rates in the USA vs say sweden.