Monday, July 25, 2005

The Standard For How Much You "Deserve"

What standard determines whether I can charge $5.15/hour, or $500.15/hour for my work?

It seems as though the modern (not classical) liberal mindset is that your salary can somehow be determined on an absolute standard based on how much education you have received, the unpleasantness of your work, the overall need for people in your line of work, and most importantly, your need for income. How many times have you heard the argument, "We need teachers and police officers! We should pay them more since they are so important!" or, "These poor workers are making barely over minimum wage and can't afford nice clothes like you can. We should raise minimum wage and make those evil corporations pay them more money!" To need and to deserve are two different things.

The problem here is that I am not the only seller of labor, and there are plenty of other people willing to work for less money than I might be willing to -- regardless of how much education I have received, how unpleasant my job might be, or how much income I need in order to lead the lifestyle I want. In order to compete with those people, I have to lower the price I charge for my labor from what I'd like to have to what I can reasonably obtain. It's not unreasonable for companies to shop around and find the best deals on labor, just as it's not unreasonable for you to shop around to find the best deals on new shoes. The standard for how much those shoes should sell is the same standard as for how much your labor will sell: the market -- the amount you pay for a close substitute should be approximately the same; if you charge much more, your shoes or your labor simply won't sell.

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