Do Profit Maximizing Employers Exploit Labor? (Source: OER) If you look back at the labor dynamics of supply and demand, you will see that only the firm pays the last worker it hires what they’re worth to the firm. Every other worker brings in more revenue than the firm pays him or her. This has sometimes led to the claim that employers exploit workers because they do not pay workers what they are worth. Let’s think about this claim. The first worker is worth $x to the firm, and the second worker is worth $y, but why are they worth that much? It is because of the capital and technology with which they work. The difference between workers’ worth and their compensation goes to pay for the capital, technology, without which the workers wouldn’t have a job. The difference also goes to the employer’s profit, without which the firm would close and workers wouldn’t have a job. The firm may be earning excessive profits, but that is a different topic of discussion. Explain how workers and employers benefit in a voluntary labor market (a market where both sides may enter and leave at their own discretion). What issues might we run into from the profit maximizing firm?
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Do Profit Maximizing Employers Exploit Labor? (Source: OER)
If you look back at the labor dynamics of supply and
- Explain how workers and employers benefit in a voluntary labor market (a market where both sides may enter and leave at their own discretion).
- What issues might we run into from the profit maximizing firm?
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