Why Wages Rise
F. A. HARPER
THE FOUNDATION FOR ECONOMIC EDUCATION, INC.
IRVINGTON-ON-HUDSON, N E W YORK 1957
Copyright 1957 by F. A. HARPER Permission to reproduce from this book, without special request, is hereby granted by both the author and publisher. Information about uses will be appreciated. Library of Congress Catalogue Card No.: 57-6929. PRINTED IN U.S.A.
INTRODUCTION 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. LABOR UNIONS PRODUCTIVITY DIVIDING T H E P I E TOOLS T O HARNESS ENERGY DOING WHAT YOU CAN D O BEST T H E LUBRICANT FOR EXCHANGE CONTRACTING F O R PROGRESS . . . . . . . . . . . . . 5 9 14 19 28 35 43 53 63 72 84 95 . . . 107 120
THE COST OFBEING GOVERNED .
LOSING PAY THROUGH FRINGE BENEFITS . LEISURE AND THE B E T T E R L I F E . PRICING AN HOUR OF WORK RIDING THE WAVES O F BUSINESS . . .
Charts and Tables
WAGES AND UNION MEMBERSHIP CHANGES IN PRODUCTIVITY AND WAGE RATES ENERGY OUTPUT REAL AND UNREAL WAGE RATES 11 16 34 57
WAGE TRENDS: BUYING POWER BEFORE AND AFTER TAXES 68 LEISURE AND BETTER LIVING EFFECTS OF PRICE FREEDOM WAGE LEVEL AND UNEMPLOYMENT UNEMPLOYMENT; SHARES OF NATIONAL INCOME INSTABILITY OF BUSINESS 90 97 104 110 115
are of prime importance in any advanced economy such as ours. They affect us all far more than seems evidenced in our concern about them. Everyone buys wages, in a sense, with every purchase he makes. And three-fourths of all incomes in the United States represent pay for work done in the employ of another. So nearly every one of us is on both sides of the wage exchange, in one way or another. We all know in a general way that wages have been rising for a long time in this country, but there is evidence aplenty that the economic principles which apply to wage problems are not well understood. Probably they are no better understood now than in the early thirties when measures adopted to combat the depression proved to be such colossal failures. Fearing another depression like that which followed World War I, we now seem enmeshed in chronic and progressive inflation, which Lenin once said was a sure and simple way to destroy the capitalist system. Our "prosperity" now seems to be riding on the horns of a dilemma that will surely end in the destruction of capitalism unless we can resolve this problem which in large measure is a wage problem. I shall deal with the wage problem in a manner that may seem oversimplified. Basic principles always have a way of seeming simple. Yet if they be principles, they can no more AGES
be oversimplified than can the law of gravity or the listing of chemical elements be oversimplified. What is needed in our complex society of millions of products sold by millions of business units to over a hundred million traders through billions of transactions each year is to get back to simple economic principles. These are working tools for solving problems that seem more complex than they really are. Two Roadblocks In helping another person to resolve this wage problem, it seems to me that two roadblocks to his understanding may first have to be removed. They obstruct a thorough insight into the wage problem. One roadblock is the difference between money wages and real wages, which results in serious misconceptions. In a period of inflation such as we have long been enduring, or of deflation, a comparison of money wages in two separate years tells you no more about their relative worth than would a comparison of a daily wage in the United States with that of Chile — $10 as compared with 5,000 pesos, for instance. Money wages must first be converted into real wages before we can see their patterns of change. The other roadblock has to do with the effect of unions on wages. If you were to describe an elephant to a person who has never seen one and who had never even seen a picture of one, you probably would not describe a flea and then say that an elephant doesn't look like that. This would...
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