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Economics Is Chiefly About Asking Probing Questions

This gentleman is so irked by Liya Palagashvili’s and my most-recent article the Wall Street Journal that he left a long, scolding voicemail for me.  Coincidentally (or perhaps not), Liya and I are already planning to do a research paper on this very topic.

Mr. Chuck Coleman

Mr. Coleman:

Thanks for your voicemail message.

You say about Liya Palagashvili’s and my article in yesterday’s Wall Street Journal that we “probably are fooled or paid off by business” because we “ignore” businesses’ “power over labor.”  As evidence of this power you point to two alleged “actualities.”  The first is “rising job insecurity [with] workers becoming more and more expendable to employers.”  The second is the “breakdown of wages and salaries keeping up with the rising productivity of workers.”

As it happens, the first essay that Ms. Palagashvili and I co-authored for the Wall Street Journal (in March 2014) was on the myth that worker pay has failed to keep pace with worker productivity.  But let me not here press that point.  Let me instead ask how you reconcile your two claims.  If it’s true, as you assert, that employers are making increasingly large profits off of their workers, why are jobs becoming less, rather than more, secure?  If employers in recent decades, as you say, “wring” more and more from workers, wouldn’t employers become more and more eager to cling to these sources of swelling profits?

Asked differently, wouldn’t the rising profits that employers allegedly “wring” from their workers cause employers to reduce worker layoffs and discharges?  Alternatively, wouldn’t an increase in worker layoffs and discharges be powerful evidence against the claim that worker pay is failing to keep pace with rising worker productivity?

While it’s possible (although I think it’s unlikely) that one or the other of your claims is true, it’s practically impossible for both of your claims to be true.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030


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