The "market wage" is a pretty simple concept. It is the lowest wage an employer can pay to attract and keep the kind of employees he needs. He can pay more than the market wage, but he can't pay less, because if he pays less, he won't have enough employees. For the worker, the market wage is the highest wage offered by any of the employers he's willing to consider. He can work for less, but it would be stupid to do so unless there are offsetting benefits, like a shorter drive to work. When you abandon the market wage and go to a negotiated or collectively-bargained wage, things get more complicated. The two sides have to agree, and that's impossible, because no employer is going to willingly pay more than the market wage. Collective bargaining is a farce. First of all, the union negotiators have to figure out what they are going to ask for, and that can’t be easy because the members themselves aren’t likely to agree. One union rep speaking for the whole membership is about as practical as representative democracy. The members all likely want more, but can they agree on how much more? The employer, on the other hand, is thinking “I can get all the workers I need for $X an hour less than I’m paying these guys now, and they want more?” The only thing that's going to make the employer agree to pay more than the market wage is fear - fear of a strike - so it is not really negotiation, it's extortion. The problem is, there is no such thing as a "fair" wage, just as there is no such thing as a "fair" price for a gallon of gas. A fair wage cannot be determined by human beings. Some economists think it should be based on the value the worker adds to the product, which means that when productivity increases, wages should also increase. But increases in productivity are likely due to improvements in technology rather than any extra contribution from the employee. Even if the employees do deserve the credit, there remains the problems of distributing the reward. Did they all contribute equally to the increase in productivity? And shouldn't some of the gain be passed on to the customer? Both Henry Ford and Walter Reuther thought that wages should be enough to enable workers to buy the product. Using this logic, Boeing workers should be able to buy 747s while McDonalds workers would have to settle for Big Macs. Samuel Gompers of the AFL clarified the issue as follows:
There is just no good alternative to the market-determined wage. George Will put it this way in Newsweek (12/1/08):
I guess you could call the market wage a fair wage, but that is just confusing. Let's just call it the market wage. |