Uncreative Destruction

by Russ Roberts on January 5, 2007

in Work

In a comment to my recent post on the empirical literature, Spencer writes:

In the dynamic, flexible, very high turnover job market as it exists at
the lower end of the US job market a 1% to 3% job loss from a higher
minimum wage is insignificant and is less then the rounding error. The
data says that in our dynamic economy the individuals displaced by a
higher minimum wage have no trouble finding other employment. The
difference in our assessment is you assume that the displaced employees
become permanently unemployed. But that is just not the case in the US
economy.

I have read many of the articles on the minimum wage, but it was long ago. But yes, my guess is that they do find that the losses in employment of 1%-3% from a minimum wage are permanent. In fact, in the earlier literature, there was a finding that people who lost their job from an increase in the minimum wage would find employment in the "uncovered" sector, the sector that didn’t have a legal requirement to pay a minimum. The main occupation in that sector was crime.

So unlike creative destruction, the normal turnover in businesses and employment that comes from innovation and competition and that is ultimately a healthy part of economic life in America, an increase in the minimum wage that destroys jobs is uncreative destruction—it comes from a mandated legal restriction. Job losses caused by uncreative destruction are not easily replaced. Here’s why.

Suppose the federal government mandated that all instructors at George Mason receive a 40% raise. Should I be happy or sad? Happy, of course, you might think, especially because I have tenure. How about assistant professors without tenure? Some of them would have their contracts not renewed. Others would find their teaching loads increased by their department chairs.

But even some tenured full professors might lost their jobs. How? Their departments would be shut down at the university as being no longer viable in this new world. (I’ve seen it happen, folks, even without a federal mandate.) It is conceivable that the Virginia legislature might decide to close some schools in the state university system as a result of the higher costs. So while some professors might end up with much higher salaries as a result of the mandated increase, many others, of all different levels, would be out of a job. Tuition would certainly rise. These are all the standard effects of the minimum wage.

Of course, the mandate might work more like the minimum wage. It might just require a 40% increase in the salaries of the lowest paid professors. Then surely, they would feel the biggest brunt of the mandate.

You might argue that it won’t be so bad. You might be one of the lucky ones who keeps his or her job. You get a huge raise! And if your contract isn’t renewed? So what? You can always go out and find a new job.

But what if ALL the universities, nation-wide have to pay higher salaries? That dynamic job market isn’t so dynamic any more. There aren’t just going to be fewer opportunities in Virginia. There are going to be fewer opportunities everywhere. Every college is going to be cutting back.

That’s what the minimum wage does to low-skilled people. It reduces the chance of finding a job everywhere.

Do the same experiment with your occupation. If you lost your job today because your employer did a bad job running the company, you’d be distressed and you might struggle to find another job for a while. But you’d find one. It might pay a little more, it might pay a little less, but you could probably find a job with similar pay and benefits.

But suppose you lose your job because the federal government mandates a 40% increase in wages for your type of job and now your employer finds that you’re no longer worth keeping around at that price. Do you think it’s going to be easy finding a new job at a new employer who is also required to pay that 40% premium above your old job. Not only are there going to be fewer jobs open for people with your skills, but you’ll be competing for those jobs with all the other laid-off workers like you whose boss cut them lose or had to close up after the cost increase. And guess what? When you find that new job, you’ll take it even if you have to work more hours than you did before, get less on-the-job training and have to provide your own uniform. And you’ll pretend to like it because you don’t want to get laid off again, knowing how hard it is to find a new job.

Minimum wages are uncreative destruction.

Be Sociable, Share!

Comments

comments

Add a Comment    Share Share    Print    Email

{ 37 comments }

Tim V January 5, 2007 at 1:20 pm

In another post you mentioned the fact that those competing with low-wage labor are the true beneficiaries. Your specific example was unions. They are certainly the most visible, as they lobby for MW increases and somehow manage to avoid having their motives questioned.

Another recourse for employers is to 'hire' capital that can be used to substitute for labor.

I despise the minimum wage and have made my representatives well aware of my economic reasons for that. But since it seems I cannot stem the tide, I figure I may as well benefit from it.

People don't believe me when I tell them who REALLY benefits from minimum wage. Now, through my investment strategy, I'm putting my money where my mouth is. Maybe if I get rich on such laws, they'll believe me. Or at least I'd be rich.

-The aspiring next David Ricardo

Half Sigma January 5, 2007 at 1:26 pm

Based on the salaries you guys make, the 40% pay increase for professors has already happened.

This hasn't decreased the demand for professors, because prices are passed on as higher tuition (which year after year goes up at a rate hither than that of inflation). The professor/education cartel can get away with this because the demand for education actually increases as tuition goes up:

http://www.halfsigma.com/2006/12/increase_demand.html

But the high prices for professor labor has increased the supply a lot, which is why there are a whole bunch of unemployed PhDs running around.

The solution to this market inefficiency is to lower the salaries of professors until the number of PhDs equals the available jobs.

Tim V January 5, 2007 at 1:28 pm

Question: could an employer skirt minimum wage legislation (for Don and Hayek's discussion, I did not use 'law') by paying employees per piece (in manufacturing), or by something other than time?

JohnDewey January 5, 2007 at 2:11 pm

half sigma: "But the high prices for professor labor has increased the supply a lot, which is why there are a whole bunch of unemployed PhDs running around."

Anyone with enough intelligence to acquire a PhD should be able to find a job doing something. Not all PhD's work as professors, and many work in fields very different from their educational training. If there are unemployed PhDs, it must be their choice to remain unemployed.

python January 5, 2007 at 2:13 pm

Spencer,

You say:
1) Some workers will be displaced due to higher minimum wages.
2) It is not that difficult for the displaced worker to find new employment elsewhere.

But the new job must also pay at or above the new higher minimum wage.
So, why can't workers easily find those higher paying jobs now? If they can do it now, why do we need legislation?

So I think I would need an explanation from you as to why current minimum wage employees can't find slightly higher paying jobs now, but they will be able to when minimum wages go up.

ben January 5, 2007 at 3:02 pm

Half Sigma

You say high salaries is the product of a cartel, then say this is a market inefficiency, which I take to be a reference to the free market. Which is it?

Matt C January 5, 2007 at 3:05 pm

Half Sigma-
There is a problem with your argument about universities. That problem is Federal Subsidies increase tuition. There is no reason for colleges/universities to keep prices, aka tuition, low.

Adam Malone January 5, 2007 at 3:24 pm

Half Sigma-

You referenced one university's experience to conclude that the law of demand does not apply to a fairly large industry.

Yet what "your" analysis ignores is that this experience is not true across the industry. Mercededes-Benz vehicles cost a lot more than many Chrysler products. However the Benz also make much better profit margins than the other Chrysler products. The increased price is actually part of the marketing that Mercedes-Benz uses to appeal to customers (higher price=more exclusive product). However it is not true that increased prices across the auto industry have similiar effects, rather the auto industry is facing ever decreasing sale prices for their vehicles in effort to increase demand (actually QUANTITY demanded, but let's not be picky).

To say that across the board education is some special industry in which increased prices increase the quantity demanded is extremely blindsighted, ignoring things besides tuition that effect demand, especially opportunity costs.

spencer January 5, 2007 at 4:13 pm

All I am doing is reporting what the data says.

I do not make up data to support my arguments. Show me an actual case of someone raising professors salaries by 40%
and it caused professors to lose their job then I will pay attention to your speculation.

I assume you can show me the data that shows that during the 1960s and 1970s when the US regularly raised the minimum wage they was an always growing reserve army of the unemployeed because of the minimum wage.

the only reaon I disagree with you on this topic is that there is absolutely no evidence that your theories are valid.

Show me the data!!!

Half Sigma January 5, 2007 at 4:29 pm

Adam Malone: "To say that across the board education is some special industry in which increased prices increase the quantity demanded is extremely blindsighted,"

Actually, for decades, the cost of tuition has been rising faster than inflation, yet more students attend college than ever before.

Matt C, above, mentioned one of several factors which cause education to have inelastic demand.

Ryan January 5, 2007 at 4:48 pm

Spencer, your demands for data are foolish. There are so many factors that affect employment, and minimum wage affects such a comparatively small percentage of the population that the impact of it would be impossible to determine.

If you throw a pebble into a wave as it crashes on the beach you won't see any impact, but that doesn't mean that nothing happens. The theory behind minimum wage increases and unemployment is very simple, very straightforward, and obviously true. Raising the price of something decreases the amount of that thing that people demand.

"Actually, for decades, the cost of tuition has been rising faster than inflation, yet more students attend college than ever before."

You're putting the cart before the horse. The increased demand for education drives the price of education up, not the other way around.

spencer January 5, 2007 at 4:59 pm

Ryan — thank you for making my case.

python January 5, 2007 at 5:16 pm

Spencer,

Please answer my query to you above.

Secondly, no one here is suggesting that raising minimum wages always leads to an increase in unemployment in an absolute sense. What they are suggesting is that it creates more unemployment than otherwise would be without the raise. So, you can have it both ways, you can have raised minimum wages without higher unemployment. It's just that we here would suggest that unemployment could have been even lower if you hadn't raised the minimum wage.

Looking for data to prove this is very difficult and I believe the citations from the professor are more then enough for most people.

When I have money to spend, I can make foolish decisions and get away with it. If someone says I am "wasting" money, I can give the response "show me where I have wasted money, because look, I still have plenty of it."

Data is data, not meaning or cause.

You can also think of it this way: if it's hard to prove your way of thinking, and hard to prove mine, why would we legislate something? Should we pass laws out of suspicions and opinions? Shouldn't laws and regulations be used when we are certain that they are for the greater good of society?

Mikie V January 5, 2007 at 5:41 pm

Not to get off track into the theoretical…

This is part of the problem I have with some if not most economic empirical studies. To me this "minimum-wage-has-no-sum-of-negative-effects" is akin to walking a very large prime gap between arbitrarily large numbers and concluding that there is not an infinite set of prime numbers.

Michael Sullivan January 5, 2007 at 5:58 pm

But Russ, if employers as a whole enjoy an oligopsony power or an information advantage in the market for low/un-skilled labor and use it to drive the prevailing lowest wage under a competitive market clearing wage, then a minimum wage hike (to no more than what the market clearing wage would be) will have little or no effect on employment in that market sector and might even be a good idea.

I believe that employers in general do enjoy and exploit such an information and bargaining power advantage. The question needing to be resolved around minimum wage policy is the extent of that advantage, and whether (and what) government policy is an appropriate remedy.

This idea that raising the minimum wage *must* increase unemployment in any significant way is a fantasy based on sterile models, not the real world. Of course it will decrease employment significantly if we set a minimum wage above a competitive market clearing unskilled wage, but you'd need to argue that current proposals do that.

I don't think the answer is all that clear, and I haven't seen particularly good arguments about that presented by either side, largely because the debate is sullied by simplistic model-based (on the right) and emotion-based (on the left) rhetoric.

spencer January 5, 2007 at 6:00 pm

Don — I am still waiting for your comments on the Card interview where he discussed different models of the labor market that I refered you to earlier.

steep January 5, 2007 at 6:03 pm

I would also like to see the data.
Perhaps we could set up an experiment where some places have a minimum wage and others don't. We could maybe let states decide on the minimum wage with various hourly rates and some of them having no minimum. THEN we could get real data on U.S. labor markets with and without price controls. I imagine some states would have greater unemployment levels THAN other states.
Wouldn't that be an interesting experiment?

spencer January 5, 2007 at 6:08 pm

while you are at it here is another link you should check out:

http://www.epi.org/content.cfm/bp178

python January 5, 2007 at 6:31 pm

Spencer,

From the document you linked to:

"'A more plausible interpretation is that economic growth has simply overwhelmed any employment effect caused by increases in the minimum wage in California' (Galpern 1999)." Sounds a lot like what I wrote earlier that you have failed to address, even while you continue to ask the professor to respond to you.

That document is so far from the majority of economists that they bend over backwards to get people to think they are in the mainstream. The economics to politics ratio in that paper is far lower than what I consider acceptable in a real economics discussion.

"7.3 million children would see their parents income rise" – can't you feel the heart yearning for children?

How about we had a policy that said all parents get a 5% raise. Then my policy would have 45 million children would see their parents income rise. Give me a break!!

Steve Miller January 5, 2007 at 6:58 pm

HS said: "Based on the salaries you guys make, the 40% pay increase for professors has already happened.

This hasn't decreased the demand for professors, because prices are passed on as higher tuition (which year after year goes up at a rate hither than that of inflation)."

Two things have happened in higher education.

First, you are absolutely right, academics has high barriers to entry. You seem to think this is a functional cartel, which it is in an indirect way. A PhD is required in most fields, not because there's a National Academic Association that requires a PhD to obtain a higher ed teaching license, etc., but because schools that hire too many instructors without PhDs risk losing their accreditation. So the supply of professors is restricted.

Second, the demand has risen greatly over time. Partly because of subsidized loans, etc., but also because the returns to higher education are so high.

So we have restricted supply and ever-rising demand. *That* is the source of the wage increase. The effects of that increase are very different from the effects of a minimum wage for professors, which most certainly would cause the unemployment and other effects Russ described in his post. Why are the effects so different? The answer requires just a basic understanding of supply and demand, but that is the answer. It is one thing to restrict supply or increase demand through policy mechanisms. For all the flaws such policies might have, they allow markets to find stable prices. A (binding) minimum wage actively prevents the market from reaching a stable price.

Mesa EconoGuy January 5, 2007 at 7:28 pm

The above link to EPI is not credible economics. EPI is a left-leaning advocacy group who lobbies on behalf of labor unions, a major beneficiary of minimum wage legislation.

I believe they have also been actively cited in the “growing wealth gap” farce (see Professor Roberts’ comments on why that argument is wrong, too). It appears they start with a conclusion (like many think tanks), then work backwards. The wealth gap “studies” are particularly bad statistics, as they do not track economic mobility of cohorts over time.

This reference is similarly flawed.

tkc January 5, 2007 at 8:50 pm

From the first point of the EPI:
14.9 million workers would receive a raise
…or they will get laid off.
80% of those affected are adults age 20 or over
…and more than half are under 25.
7.3 million children would see their parents income rise.
…see point 1 and "Most of the working poor earn more than the minimum wage, and most of the 0.6 percent (479,000 in 2005) of America's wage workers earning the minimum wage are not poor. Only one in five workers earning the federal minimum lives in families with earnings below the poverty line. Sixty percent work part time, and their average household income is well over $40,000. (The average and median household incomes are $63,344 and $46,326, respectively.)"

Source:
http://www.washingtonpost.com/wp-dyn/content/article/2007/01/03/AR2007010301619.html

Mesa EconoGuy January 5, 2007 at 9:16 pm

And not to wade too deep into the weeds here, all of the EPI data (and nearly the entire roster of minimum-wage/growing wealth gap endorsers) ignores the obvious income disparity caused by single-wage (single parent) families: around 8% of families in their first marriage are at or below the poverty line, compared to 33% in families headed by a divorced or separated single parent, and almost 60% of families from a never-married single parent.

Unless you wish to discuss these socio-economic factors, you have no business spitting out minimum wage/wealth disparity “data.”

Mesa EconoGuy January 6, 2007 at 2:03 am
Mike E. January 6, 2007 at 10:45 am

I'm really enjoying this site and I'm trying to remain constructive in my commentary. But I would love to see more posts from business owners and managers affected by such economic (socialistic) meddling.
In reading many of these comments on something as basic as “government-regulated wages” (akin to price-fixing) I am distressed at the narrow channel that folks tend to embed themselves in – I'm speaking of the inevitable sink into the "statistical data" crevasse that allows you to be distracted away from the actual effect of a thing on the system. I realize it easy to go there because many in this discussion have little actual empirical data (gained from life experience) in the market place upon which to base their belief and understanding. It’s not their fault, but they should be intelligent enough to consider that limited viewpoint as a bias that is pulling their focus off the real effect.
The simple fact is that minimum wage laws are imposed on business owners – significantly impacting small business. Despite popular belief that business has some moral responsibility to employ the masses, business enterprises exist purely to make a profit. I realize that is a dirty word to some people (albeit, mostly liberals and socialists) but profit IS the fuel of our economic engine, like it or not. I'm no economist but I know that every business manager/owner has an obligation to the shareholders of the enterprise (no matter how small the enterprise) to show gain for their investment. That said, when you artificially raise wages (labor), you raise the cost of production (labor, capital, land, or technology) and if you try to maintain the price of your goods or service it will ultimately force a corresponding change in some other resource – you pick it. If that change preserves your margin of profit and does not make you less competitive in the market place, you have dodged the bullet and get to stay in business (i.e., you get to continue to employ others) and be profitable. If, on the other hand, the change weakens your ability to sell your product or service then it inevitably results in reducing or even destroying your profit. When that happens, you are out of business and you employ no one. Everyone still with me? I'm confident there are flaws in my thinking that some will use to attack this argument but anyone who has ever had to be competitive, bid a job, staff a labor force, make a payroll, and (hopefully) calculate raises to compensation for his/her employees inherently knows these things.

Lee January 6, 2007 at 11:34 am

anyone,

It's really very simple. A piece of minimum wage *legislation* will limit the number of choices available to an individual. In effect, it says that people are not competent enough to decide how much their labour is worth to them, but must have an authority to decide. The individual is no longer able to make particular choices regarding the use of his own time and energy, so should his optimal preference fall into that range of choices forbidden by the legislation, he will be worse off.

Worst of all, those who find their optimum preference forbidden are likely to be most in need of a job, with the fewest skills and bargaining power. That is even if we see a net increase in wages, some will suffer simply because they have fewer choices available to them.

The first rule of economics is that you can't get something for nothing. The first rule of politics is to discard the first rule of economics.

Mike E. January 6, 2007 at 11:44 am

Continued (verbose) commentary:
That said, when you artificially raise wages (labor), you raise the cost of production (labor, capital, land, or technology) and if you try to maintain the price of your goods or service it will ultimately force a corresponding change in some other resource – you pick it. If that change preserves your margin of profit and does not make you less competitive in the market place, you have dodged the bullet and get to stay in business (i.e., you get to continue to employ others) and be profitable. If, on the other hand, the change weakens your ability to sell your product or service then it inevitably results in reducing or even destroying your profit. When that happens, you are out of business and you employ no one. Everyone still with me? I'm confident there are flaws in my thinking that some will use to attack this argument but anyone who has ever had to be competitive, bid a job, staff a labor force, make a payroll, and (hopefully) calculate raises to compensation for his/her employees inherently knows these things.

Randy January 6, 2007 at 2:05 pm

Mike E,

For what its worth, its not that we don't understand your points, but rather that we take them for granted. Those in favor of a minimum wage don't care that small business is hurt by it, in fact, many seem to believe that said harm is a feature rather than a bug. My case therefore is alway focused on the damage done to the very people that the proponents claim to want to help. I see it as the only possibility of getting through.

Sam January 6, 2007 at 7:57 pm

I was discussing the issue with a friend.
He was supportive of minimum wage, so I asked him if I was willing to work for him for $3 per hour, who else's businiss was it.
Seeing his own potential benefit, he replied: "No one."

Many people support government interventions because it's the only way they see to evade the moral consequences of interfering with the rights of others for their own benefit.

Half Sigma January 6, 2007 at 11:46 pm

No one WANTS to work for $3/hr, they would do so if it's the only job they can get and they are really really desperate for money.

Some might decide that selling drugs or mooching off their girlfriend's welfare money is a better alternative to a $3/hr wage.

Python January 7, 2007 at 5:08 am

Half Sigma,

Sam used the words "willing to work" not "WANTS to work". And your turn of the phrase makes me wonder if you think minimum wage should be at a rate that everyone WANTS. Because if a newer higher minimum wage still doesn't fulfill this then what is your point in twisting Sam's phrase regarding $3.

And then there is your not so subtle attempt at making us feel that if we don't raise the minimum wage there will be more drug dealers on the scene or moochers. That's it, let's just raise the minimum wage and there will be fewer drug dealers.

"I was thinking about dealing drugs, but when they raised the minimum wage to $8.25 I decided to stay at McDonald's. God Bless Nancy Pelosi!!"

One of your arguments for encouraging us to raise the minimum wage is that if we don't people will turn to professions where there is no minimum wage. Not much of an argument.

triticale January 7, 2007 at 9:24 am

Actual studies show that street-level drug dealers make less than the minimum wage. I believe the numbers for white powdery substances are a little more attractive, but most of the retailers of marijuana I've known over the last 40 years barely supported their own consumption.

As for anecdotal evidence regarding the impact of the minimum wage on the aboveboard economy, the only effect I ever noticed was that when I was selling labor-saving devices to industry, an increase was good for business.

Russ Roberts January 7, 2007 at 12:06 pm

Spencer,

You keep saying "show me the data."

In the previous post I tried to summarize the studies that have been done to measure the impact of the minimum wage. DOZENS of peer-reviewed studies find that the minimum wage reduces employment among low-skilled workers. Read a few if you feel like it. Or don't. But please stop suggesting that those of us who oppose the minimum wage do so without any evidence. You can critique the evidence. You can say it's not reliable. You can say that the handful of studies that have challenged the evidence are more reliable. But don't say that there's no evidence.

Slocum January 7, 2007 at 12:21 pm

"No one WANTS to work for $3/hr, they would do so if it's the only job they can get and they are really really desperate for money."

That's actually not true at all. In fact, there are millions of people who work for less than that. They're called 'volunteers' where the job satisfaction makes up for the lack of wages.

But why should somebody who isn't self-supporting (a teenager, a retiree, a person whose spouse is the main breadwinner) be allowed to work for $0/hr or $7/hr but nothing in between?

Last summer my 15-year-old son worked as a volunteer 'junior counselor' at a summer camp, and he'll likely do so again this summer (hoping that in 2008 he'll be hired for an actual job). $3/hr would be a whole lot better than $0/hr, but the camp isn't allowed to pay him that. They can pay him nothing — but not $3/hr. And his chances of getting that real paying job in 2008 have been reduced by the rise in the minimum wage here (in MI) to $7.40/hr.

The best real-world account of why some people want to work for low wages and the problems raising the minimum wage can cause is this one:

http://www.coyoteblog.com/coyote_blog/2005/03/case_studies_on.html

Matt C January 8, 2007 at 8:59 am

Let's assume for just a moment that Spencer and half sigma are correct. The fact still remains that it is morally reprehensible for the government to interfere with the right to contract. NO ONE, I will repeat this, NO ONE is forced to work for a wage that they believe is less than they "deserve" No one is held at this country at point of the gun to take a job that they do not want. The idea of asymmetric information does not last long. Even as an immature high schooler working at Mickey D's I knew that I could go somewhere else and they would pay me a higher wage. If an employee feels they are not being paid market wages they can leave and find a job where they are paid market wages. But, if you force a wage to be artificially high you will end up with fewer options. The problem is that individuals and groups, like union, make it sound as though you are forced work for an employer, that you have no other choices. It is they who have forced a more static labor market than otherwise would be allowed.

Mike January 8, 2007 at 10:52 am

There is an enormous amount of data that can be used to support the arguments of both proponents and opponents. There is less econometric evidence for the proponents to use.

For example, the left-leaning EPI when talking about who will be affected by a minwgae increase (some 15 million workers) includes not only all workers earning the current minimum, and not only all workers earning up to the new proposed minimum, but also workers earning MORE than the minimum (they cite "spillover effects"). This is done to inflate the apparent impact of the minwage. Right leaning think tanks like the EmPI will tend to only cite the data for people who are currently making the minwage, and ignore those that make between the current minimum and the new proposed minimum.

On the empirical side of the things, even if proponents are correct that employment elasticities are small, there is still a dearth of research of how higher costs affect low-wage workers on other margins. And it is useful here to perform a though experiment. You are a small business ownwer with 5 minwage workers and their wages increase by $2.10 per hour. What do you do? I do not think firing them is at the top of the list.

By the way, George Stigler said it early and often – there is a tenouos link between poverty and wages – and therefore policies that focus on wages will not likely be very good at addressing poverty.

But we all know that, the minimum wage issue has never been, nor ever will be about economics. It's about political power and sanctimonious central planning. Or symbolism. But that is weak.

By the way, you would think that the Boston Globe could do better than this (http://www.boston.com/news/local/massachusetts/articles/2007/01/01/states_minimum_wage_hike_kicks_in/)* when demonstrating the need for a minimum wage.

For those that do not want to log in, it's a picture of a teenager in a mall cafeteria with the money quote of year thusfar, "It definitely adds up. . . . My parents still pay for my stuff, but it’s good for other employees who are on their own."

As Don says, I guess now that anecdote passes for science.

Half Sigma January 8, 2007 at 11:08 am

"In fact, there are millions of people who work for less than that. They're called 'volunteers' where the job satisfaction makes up for the lack of wages."

There are rich people who "work" as a hobby. But they aren't working at the dry cleaners or cleaning dishes at a restaurant.

But this does bring up an interesting point about labor pricing. One component of the cost of labor is how much people NEED. Rich people don't need any money at all, so in some cases their wages fall to zero.

You may want to read my post about the natural price of labor:

http://www.halfsigma.com/2006/07/the_iron_law_of.html

Previous post:

Next post: