Language

Economics and the Theory of Relativity

Jonathan,

You did mischaracterize my comments a bit and basically sidestepped the issue of racism, though that was expected as I prefaced in my comments about how many folks react to the topic.

I'll point out a few areas where I think you missed the boat on what I was saying — though I don't think it was done in malice and some of it might be do to my failure to elaborate on certain of my points.

First, the big point is that wages are relative, and have value in relation to prices. Low wages and low prices, relatively, are not any different than high wages and high prices. If you make $5 an hour and gas costs $5 a gallon, you get the same amount of gas as when you make $1 an hour and gas cost $1 a gallon. What has happened in recent times, though due to factors I point out in my comment (factors such as war and greed in the money markets — price gouging, possibly) is that prices for a number of necessities, like energy, have risen at a relatively much higher rate than wages, so there is an imbalance, and it particularly hurts lower wages workers (independent of immigration), since this inflation is a regressive in nature (everyone needs gas, pays the same for it, regardless of their place on the wage scale).

So it's when prices begin to outstrip wages that problems begin to creep up - and that can happen in a low or high wage environment, so I don't agree that we are any better off when prices are high and wages keep up, since that is really no different than when wages are lower and prices are lower (as long as a relative balance is maintained across each of those scenarios).

That's just simple cosmic relativity theory applied to economics.

In the case of your question about unemployment, I'd argue you are far more likely to see unemployment kick in at higher rates if wages and prices get out of balance, than if both wages and prices remain in rational harmony. Again, in a capitalist society, one of the first costs that an employer will trim (after getting rid of the health club memberships and other easy price points) is jobs - which are linked to the prices and wages. If prices spike, increasing an employer's cost of doing business, jobs will get cut. If wages spike, increasing the cost of doing business, jobs will get cut. If wages and prices rise in relative harmony, or fall in relative harmony across the broadest range of the economy, job security is increased. (Now, different industries will be affected in varying ways by the price/wage dynamic, since rising fuel prices might increase the demand for service-station workers, but it also leads to job cuts in the auto industry, thereby replacing good-paying union jobs with low-wage service sector jobs, which is another form of wage depression independent of immigrants. Technology also plays a role in wage depression, since machines don't draw a wage.) I don't' make the rules; that's just the system we have right now.

So I'm not saying, nor am I advocating, that it's better that wages are low. All I'm saying is that if you apply classic capitalist theory (and we do live in a capitalist society right now) the working person (and I grew up in a union family that lived through these cycles) is better off when, as a whole, prices are stable, and his or her paycheck remains in relative balance with existing prices — so that they are not losing ground month to month. This does not imply that wages do not rise at all, since that is not reality, or we could still buy a loaf of bread for 10 cents. And it doesn't mean that the worker should not strive to improve his or her relative standing in the wage/price continuum — but that is a question of what value a society places on what work, and that gets to Al's point.

If anything has contributed to wage inflation, it has occurred at the higher end of the pay scale, with the outrageous salaries being paid to many individuals outside the working class.

You can't simply dismiss these dynamics I speak of by simply saying you disagree, without advancing some reasoning. That isn't fair, and prevents us from getting to an expanded reasoning on this subject.

And as far as your contention concerning the impact of immigrant labor on existing wages, you took my argument and reversed it. I said that absent any immigrant labor, the ability of workers to increase their wages would likely not be that great, given the dynamics at play in the society right now — weak unions and a prevailing political will that works against adequate increases in the floor on wages, also known as the minimum wage. Those dynamics could change, and have in the past, but the reality is workers have taken it on the chin on that front for years now. I lived through it as my dad worked on the railroad, and like many other working class families, we saw the relative buying power of our wages depressed in a slow bleed as the “global economy” kicked in. (Compare inflation-adjusted railroad wages today to those of the 1970s if you want to verify that experience.)

But you argued that immigrant workers have led to a further erosion of wages for the working class, because new immigrants work for less. Al's argument addresses the remedy to this problem on one front — if they aren't illegal, they can organize and demand wages on par with other workers and the erosion can be stemmed.

But you also ignored my diagnosis and remedy as well, which is not exclusive of Al's insight. I attribute this wage erosion to the effects of free trade (or neoliberalism run amok). I'd argue even if the workers stayed in Mexico, wages would continue to erode in the USA for workers here — and they have by all evidence -— since capital always seeks the lowest level of investment for the biggest return, which means jobs have moved from the unionized Midwest, to the nonunion “right to work” Sun Belt, and where possible to the sweatshops of the Third World.

For that reason, I suggested we need to recoup some of that lost capital (which has been moved around the “flat world” to assure lower labor costs so that the return on investment is increased) and reinvest it in social programs here that benefit the working guy, or we will continue to see an increasing imbalance created between wages and prices (flat and falling wages in the face of rising health care costs, housing costs, food costs, education costs, etc.). That is a bad outcome, and it is happening all over the country independent of the immigrant labor issue.

Now, I suspect I could say more, well, I know I could, but I think that helps to better clarify my points.

Reply

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