This seems to describe disparity in tech worker wages across different cities. The value provided by an engineer in SFO is almost definitely not 2x what an engineer in SLC provides. However, the wages are way higher b/c cost of living in higher.
Companies don't pay your equal to the value you provide, they pay you as little as possible.
> However, the wages are way higher b/c cost of living is higher.
I think it's a little more subtle than this. The wages are higher because there's more opportunity for employees, who are being poached constantly, and often by companies with essentially limitless budgets. If you hope to retain engineers, you need to pony up in SFO, but less so in Omaha, where there are fewer people competing for talent. Companies say they pay for cost of living, but in reality, there are plenty of expensive cities where salaries are relatively low (e.g. much of Europe) and cheap cities where salaries are relatively high (e.g. Houston, though not necessarily for engineers).
Only in part though, many tech workers are getting paid in the top 10% of wages in a given area, not "toward the minimum wage necessary to sustain the life of the worker". I think highly specialized/niche workers are a clear exception to this "law".
The value provided by _the labour_ of an engineer in SFO is almost definitely not 2x what an engineer in SLC provides. There's value in a company having 200 engineers in SFO compared to 200 engineers in SLC, largely marketing related.
To engineers, of course, this all has a naked emperor vibe, but on the business side our industry is largely about fake it till you make it. And being able to afford engineering offices and staff in SFO signals "we've made it", independently of whether that's true.
Price of something in a competitive environment is equal to cost of it's production. What is the cost of production of services? It's the cost of living of a person performing those services.
Price has nothing to do with a vague concept of 'value'.
This is no "law". It presumes that laborers cannot switch to a different employer, that there is a massive oversupply of laborers, and that laborers are completely interchangeable. I'll accept that in conditions like that, wages will be significantly depressed. But this is not a truth in general.
In fact, laborers have strong incentives to want more than a subsistence wage. So many laborers are going to take actions to counteract this, such as by learning skills and gaining education to differentiate themselves. Then they are in demand with a smaller supply.
There are lots of people who are making more than minimum wage as required by the laws in their country. So this is obviously untrue.
Happily, indeed, the iron law is not quite as iron as it might sound. But Moloch's hand still grips firmly where it is given a hold: if you're working two minimum wage jobs because you absolutely need the money, where are you going to find the slack in your life to allow you to learn new skills and gain education? I work just one full-time job at substantially more than minimum wage, and even I can feel Moloch's cold caress and his call to sacrifice the long-term on the altar of the short-term; if my life weren't so comfortable, I can easily see how I might not even have the choice to resist him, let alone the willpower.
> There are lots of people who are making more than minimum wage as required by the laws in their country. So this is obviously untrue.
You're doing a huge sleight of hand here that's clouding your judgement, and it's that you're confining the sample size to a single country. We live in a global economy, thus the cost of reproduction of labor is determined globally. If you have companies A and B living in the same city in California doing roughly the same job, but moving their business to Thailand would increase their profit sufficiently, then one of the companies would relocate, make more profit/beat their competition. In doing this, they have decreased the cost of wages.
You are not wrong, but
All Economics is like this.
A "law" in Economics is supposed to work over infinite amount of time, over infinite amount of participants and so on. Technically they are not laws, but idealised long time trends.
Obviously they do not work exactly in real world, but that doesn't mean one should dismiss them entirely.
There are lots of people who are making more than minimum wage as required by the laws in their country.
This is a non sequitur since it really doesn't address the facets of the law itself. It is interesting you bring up minimum wage though, because the Federal minimum wage in the US is not even a living wage [0].
I also don't think it is a an iron law (horrible term), but I think you're overstating the claim here. It's only that there a tendency for wages to fall to subsistence. There is a positive feedback in wealth accumulation, so inequality does tend to grow without intervention.
In the last few years, this has been happening due to increasing wealth inequality. The actions you cite (getting skills and education) have been seeing severely diminished returns, to the point that college makes little financial sense for a large portion of people.
This seems easy to disprove simply by the fact that a single labourer can produce far more than is needed to sustain a single life -- at least today. So as long as that's true, people on average won't accept being paid the equivalent of a bag of rice a day if you could always go out and produce several on your own. Obviously this is an over simplification, but you get the idea.
I think there could be some truth in this though. I wouldn't be surprised if wages do trend towards the average productivity of labours, but again, that would be far higher than barely surviving -- at least today in countries with access to productivity boosting technology.
> I wouldn't be surprised if wages do trend towards the average productivity of labours, but again, that would be far higher than barely surviving
The cost of reproduction of labor is more than base subsistence, it's things like base subsistence, cleaning your house, child rearing, and so on.
> at least today in countries with access to productivity boosting technology.
Wages, in the US, largely don't track to productivity gains. For other countries, I wouldn't be too surprised to see similar statistics, but modified according to labor rights, culture around unions, etc etc.
> So as long as that's true, people on average won't accept being paid the equivalent of a bag of rice a day if you could always go out and produce several on your own.
You have to have land to grow rice. This, like yours, is a simplification, but it largely abstracts to the present situation. You can always drive for Uber, but you need a car to drive.
> This seems easy to disprove simply by the fact that a single labourer can produce far more than is needed to sustain a single life -- at least today.
That doesn't disprove it, it disproves that mean income (capital returns + wages) falls to subsistence, not that wages fall to subsistence.
To disprove it from that starting point, you need to also prove that capital does not tend over time to capture all value beyond the subsistence of labor.
> So as long as that's true, people on average won't accept being paid the equivalent of a bag of rice a day if you could always go out and produce several on your own.
But laborers cannot produce at their full capacity without access to capital. It's perfectly consistent for wages to tend to subsistence and capital rents to tend to marginal product of the labor applied to capital minus labor subsistence.
I'd suggest that it depends on the work. Like most things it tends to come down to negotiation, skill, value and how difficult or easy a specific person is to replace. Although that last bit isn't always well understood by MBA types in various cases.
That said, making everyone the same isn't a better solution, just a different one and in many ways much worse.
I don’t think this article was suggesting any solutions, so the second paragraph seems like a straw man argument. (I mean it’s literally a Wikipedia page.)
Doesn't make sense - everyone I know is paid far more than minimum wage necessary to sustain life.
If it were a true law then everyone would be on literal subsistence wages - they aren't. The illusion of this law is that people spend all their money, so their lifestyle costs (typically) exactly match their wage. This is independent of the wage.
Sustaining life is more than paying rent and buying food. It's the ability to pay for medical care, to support yourself if you become disabled, to retire when your body is frail and work is difficult, it's being able to afford the expense of raising a child and being social and bettering yourself. These are all basic human needs and it's virtually impossible to do this on minimum wage.
[+] [-] bognition|5 years ago|reply
Companies don't pay your equal to the value you provide, they pay you as little as possible.
[+] [-] chadash|5 years ago|reply
I think it's a little more subtle than this. The wages are higher because there's more opportunity for employees, who are being poached constantly, and often by companies with essentially limitless budgets. If you hope to retain engineers, you need to pony up in SFO, but less so in Omaha, where there are fewer people competing for talent. Companies say they pay for cost of living, but in reality, there are plenty of expensive cities where salaries are relatively low (e.g. much of Europe) and cheap cities where salaries are relatively high (e.g. Houston, though not necessarily for engineers).
[+] [-] dfxm12|5 years ago|reply
American middle and low wage workers have seen their wages stagnate or decrease, despite being more productive than ever: https://www.epi.org/publication/charting-wage-stagnation/
[+] [-] spacephysics|5 years ago|reply
[+] [-] ac29|5 years ago|reply
[+] [-] routerl|5 years ago|reply
To engineers, of course, this all has a naked emperor vibe, but on the business side our industry is largely about fake it till you make it. And being able to afford engineering offices and staff in SFO signals "we've made it", independently of whether that's true.
[+] [-] klaudius|5 years ago|reply
Price has nothing to do with a vague concept of 'value'.
[+] [-] kazen44|5 years ago|reply
this should be rather obvious, extraction of wealth through employment are one of the basics concepts in capitalism.
[+] [-] dwheeler|5 years ago|reply
In fact, laborers have strong incentives to want more than a subsistence wage. So many laborers are going to take actions to counteract this, such as by learning skills and gaining education to differentiate themselves. Then they are in demand with a smaller supply.
There are lots of people who are making more than minimum wage as required by the laws in their country. So this is obviously untrue.
[+] [-] Smaug123|5 years ago|reply
[+] [-] ianleeclark|5 years ago|reply
You're doing a huge sleight of hand here that's clouding your judgement, and it's that you're confining the sample size to a single country. We live in a global economy, thus the cost of reproduction of labor is determined globally. If you have companies A and B living in the same city in California doing roughly the same job, but moving their business to Thailand would increase their profit sufficiently, then one of the companies would relocate, make more profit/beat their competition. In doing this, they have decreased the cost of wages.
[+] [-] mikst|5 years ago|reply
A "law" in Economics is supposed to work over infinite amount of time, over infinite amount of participants and so on. Technically they are not laws, but idealised long time trends.
Obviously they do not work exactly in real world, but that doesn't mean one should dismiss them entirely.
[+] [-] dfxm12|5 years ago|reply
This is a non sequitur since it really doesn't address the facets of the law itself. It is interesting you bring up minimum wage though, because the Federal minimum wage in the US is not even a living wage [0].
0 - https://www.investopedia.com/articles/personal-finance/02261...
[+] [-] cultus|5 years ago|reply
In the last few years, this has been happening due to increasing wealth inequality. The actions you cite (getting skills and education) have been seeing severely diminished returns, to the point that college makes little financial sense for a large portion of people.
[+] [-] kypro|5 years ago|reply
I think there could be some truth in this though. I wouldn't be surprised if wages do trend towards the average productivity of labours, but again, that would be far higher than barely surviving -- at least today in countries with access to productivity boosting technology.
[+] [-] ianleeclark|5 years ago|reply
The cost of reproduction of labor is more than base subsistence, it's things like base subsistence, cleaning your house, child rearing, and so on.
> at least today in countries with access to productivity boosting technology.
Wages, in the US, largely don't track to productivity gains. For other countries, I wouldn't be too surprised to see similar statistics, but modified according to labor rights, culture around unions, etc etc.
> So as long as that's true, people on average won't accept being paid the equivalent of a bag of rice a day if you could always go out and produce several on your own.
You have to have land to grow rice. This, like yours, is a simplification, but it largely abstracts to the present situation. You can always drive for Uber, but you need a car to drive.
[+] [-] dragonwriter|5 years ago|reply
That doesn't disprove it, it disproves that mean income (capital returns + wages) falls to subsistence, not that wages fall to subsistence.
To disprove it from that starting point, you need to also prove that capital does not tend over time to capture all value beyond the subsistence of labor.
> So as long as that's true, people on average won't accept being paid the equivalent of a bag of rice a day if you could always go out and produce several on your own.
But laborers cannot produce at their full capacity without access to capital. It's perfectly consistent for wages to tend to subsistence and capital rents to tend to marginal product of the labor applied to capital minus labor subsistence.
[+] [-] tracker1|5 years ago|reply
That said, making everyone the same isn't a better solution, just a different one and in many ways much worse.
[+] [-] TeaDrunk|5 years ago|reply
[+] [-] roenxi|5 years ago|reply
If it were a true law then everyone would be on literal subsistence wages - they aren't. The illusion of this law is that people spend all their money, so their lifestyle costs (typically) exactly match their wage. This is independent of the wage.
[+] [-] dencodev|5 years ago|reply
[+] [-] dragonwriter|5 years ago|reply
No, it's proposed as a law of movement: the direction wages move toward over time, all other things being equal.
[+] [-] rmrfrmrf|5 years ago|reply
[+] [-] toyg|5 years ago|reply