Saturday, May 21, 2016

Worker Exploitation

Standing in line marking time
Waiting for the welfare dime
'Cause they can't buy a job
--Bruce Hornsby & the Range

One of the many myths regarding capitalism is that it exploits workers. As discussed here, Marx's definition of exploitation involved the extraction of surplus value from workers. Because Marx's theory has been refuted over the years, sympathizers have broadened the definition toward the concept of taking unfair advantage of others' vulnerability.

This definition leads many to believe that capitalism is rife with opportunities for exploitation. In particular, powerful capitalists are often proposed to take unfair advantage of workers in order to maximize profit.

The video observes that many capitalists would indeed like to exploit workers in order to maximize profits, but competition with other capitalists prevents them from doing so. Competition forces employers to pay workers close to the value of their productivity whether they want to or not. If a capitalist tries to pay a worker below market wages, then there is incentive for other employers to hire that individual for a greater salary because the employer will profit by doing so. In competitive markets, wages reflect worker productivities.

What the video does not note is that workers would also like to exploit the capitalists. They would like to get paid more than they are worth in order to maximize their incomes. But competition also forces workers to offer their services close to their productivities, lest they would be let go in favor of individuals who offer their services at prices more reflective of realized productivity.

The video does go on to note that changes of exploitative practices in capitalistic systems are reduced because exchanges in unhampered markets are voluntary. No one puts a gun to the head of either employers or workers to contract with each other. Even in examples often presented by interventionists, such as payday loans and child labor, both parties expect to gain more in the exchange than they give up, lest they would not engage in trade.

Mutually beneficial exchanges are how wealth is created in society. The more wealth that is created, the lower the vulnerability for exploitation by those engaged in trade.

The alternative to capitalism, intervention by the state, leaves individuals much more vulnerable to exploitation--exploitation by politically connected interests--than unhampered markets ever could. By definition, forced exchange brought about by the strong arm of the state guarantees that exchanges will not be mutually beneficial.

Exploitation in labor markets is reduced by reducing interventionary forces and freeing people to make more voluntary exchange.

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