Excessive Wages Can Cost Jobs

In the Great Depression, and in the stagflationary predicament of the 1970’s and 80’s which threatens to recur as a result of the US credit crisis and the run-up in the cost of resources and food, the work could have been available to employ everyone if the money had been available to pay them.

In the Great Depression, the money needed to come from the pile of inert money resulting from chronic excessive flow through savings and profit channels. In a stagflationary situation it needed to come from excessive wages paid to those working.

There is greater scope for this at the lower end of the wage scales. For reasons of social idealism and political advantage the lowest wages underwent the greatest proportional increases during the 1970’s and 80’s. Pressure for this also arose in more perfluent nations from the policy which became established by the governments of those nations, and continues today, that everyone must have their own car for all travel, to work or otherwise. The car’s usual function is to carry just one person, yet a car has seating for four to six, weighs one to three tonnes, and has often well in excess of one hundred kilowatts of motive power. Clearly the minimum wage must allow for this unnecessary extravagance as well as food, clothes and shelter. The next post will be a brief Digression on the private motor car.

The result is that many jobs, useful and having some economic value, have been eliminated or reduced as the wage required to be paid for them has leapt ahead of the money value of the goods and services made available by the performance of these jobs.

A positive stimulus to technological improvement is one result, as automation of work is introduced at a faster rate than would otherwise have been the case, to enable fewer workers to achieve the same level of structuring of goods and services or, in current terms, to increase productivity.

Another result is that many jobs are simply not done.

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