I met this older classmate in one of my philosophy classes, and went out to dinner with him once. I thought he was pretty free-market oriented, but then we started speaking of wages. He told me that, although he trusts in the logic of wage formation and how competition and increases in captial investment are the main forces that raise wages over time, his personal experiences have convinced him to believe the opposite; that if no regulation existed, we'd all be stuck working for next to nothing.
I tried to go step by step with him through the standard economic argument. I mentioned that competition over labor ensures that workers tend to be paid according to their productivity, and thus increases in productivity are the only way to increase wages.
He said, although that makes sense, it's not a description of reality, and then he sounded off about people working in horrible conditions for next to nothing, citing certain regulatory agencies that corrected this. He also cited airlines and their supposed deregulation, and how it has resulted in poor conditions and low wages for pilots.
Anybody know any more points I can make to counter him? I think he'll change his mind, but he's very focused on empirics, and I'm not the most knowledgable on the facts of specific industries. And is there any way I can elaborate on the economic argument? I'm going to mention that supply and demand determines wages, and thus no distinction can be made between a "right" or "wrong" wage, but besides that, I'd appreciate help.
..Wow, too long of a post just for this. It's amazing how fallacies like this are so rooted in the average individual's mind.
I would press him on evidence of his claim that regulatory agencies are the cause of better workplace conditions (correlation/causation, and such). And wages too....Of course anyone could show how a law mandating higher wages resulted in higher wages for some, but it also wouldn't be hard to logically prove (although it would be harder to illustrate and make understood) how overall the economy is worse off.
Stossel shows a great graph charting workplace fatalities before and after OSHA...have a look at what we find when you look at the data here. Here's a good discussion on airline deregulation. (as you can see, people don't always have the facts straight).
Also keep your eyes peeled for the release of Edgar the Exploiter.
Other resources that may help:
Do Capitalists Have Superior Bargaining Power?
Markets, Not Unions, Gave us Leisure
Wage Earners and Employers
Wages and Subsistence
Minimum Wage Laws: Economics versus Ideology
Should the Productivity Norm Determine Wages?
The Popular Interpretation of the "Industrial Revolution"
How "Sweatshops" Help the Poor
Does Capitalism Need Adjustment?
A Student's Guide to Economic History
Two Very Fashionable Frauds
What They Won't Tell You About Capitalism
Never-Ending Government Lies About Markets
That outta get you started
That was awesome. Thanks a lot.
Low wages for pilots? Perhaps real salaries for pilots have fallen since the 1970s, but so what? That's kinda the point: monopolies and heavily cartelized industries can charge more for their product.
I'd think your only strategy is to challenge his "focus on empirics," as he seems very focused on correlation and not at all on causation. Can he provide an argument that regulatory agencies "corrected" for poor working conditions, without appealing to post hoc ergo propter hoc?
"and how it has resulted in poor conditions and low wages for pilots."
Relative to the protected monopoly wages that preceded deregulation. What your friend is seeing is an oversupply of pilots competing for a limited number of positions. If there had been a shortage of pilots then your friend would have seen the opposite effect.
He is asking an empirical argument from a world which is flooded with regulations, laws and socialism?
If you ignore minimum wage for a moment there is realy no other regulation in place that ensures higher wages. Minimum wage only affects people that are currently on minimum wage. Take the IT industry, corporate IT support etc. There is nothing in place to prevent workers from receiving a poor wage. Just the age old saying of you get what you pay for. IT workers are high in supply, but to earn more money you have to offer skill. This is the same in every industry. For people that are on minimum wage currently there would be the possibility that their wages would decrease because they might have been kept at an artificial high. But if wages could be below today's minimum wage level then the work would be very unskilled. The more workers that can do the job the less value that will be required to fill that role. Anyone can pick apples, even 8 year old children, with a ladder. But if you want someone to operate machinery that picks apples then you will probably have to pay more.
But the removal of government licensing requirements for some skills could also bring down the wages of some jobs that require skills. But then their skill level would be worth more of a realistic value. Example, the doctor of 5 years degree that is a terrible doctor.