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March 07, 2005
What keeps wages high?
Russell Roberts
What keeps wages higher than a subsistence level? I suspect most people think it's a combination of labor unions and the minimum wage. Yet over 85% of us in the private secter earn more (some of us much more) than the minimum wage and are not in a union. So what's the trick?
The economist's answer is competition. Any one employer would like to exploit me, perhaps, but that employer's ability to do so is eliminated by the fact that I have alternatives—other employers who find my skills attractive. This remarkable phenomenon goes by the name of competition, though as I suggested in my Llosa post, using that word may lead to misunderstanding.
A recent Washington Post article points out the power of alternatives. (Over at Marginal Revolution, they would call this "Markets in Everything." Lobbyists pay people to wait in line in order to get choice seats at Congressional hearings:
The line-standers are out all night on Capitol Hill, looking homeless. "But we're not homeless," one of them says; just trying to keep warm in ski caps and puffy coats.
Waiting 10, 20, 30 hours outside the House or the Senate, holding a place in line so some well-pressed lobbyist can sit upfront at a congressional hearing and bat eyes at all the right people -- this is democracy, or something like it. More importantly, it's a job.
The people who do it appear to be powerless. They appear to be without skill:
"There's no expertise and there's no commodity," says Jay Moglia, a line-stander. He works dayside as a bike courier, as a lot of them do, and he takes pride in that work, which calls for strength, training, bravado.
Not line-standing. In this job, there's only the ability to stand up. There is no such thing as a natural. No mother ever senses her child's innate talent for line-standing.
The line-stander never sees his product. He fries no nuggets and rakes no yards; no shorn hairs fall on the toe of his shoe while someone breathes into the mirror, Beautiful. The world is the same when his job is done, only the sky is lighter and some suit is making the money that some other suit was making last week.
The line-stander is a two-foot-square space on a sidewalk, a cipher, a proxy, a powerless stand-in for a figure of great power.
Surely, these folks must make the minimum wage. Surely, without the minimum wage, they would be exploited ruthlessly by greedy lobbying firms. And yet:
A line-standing company may pay a worker $10 an hour, $15 if he's a manager. He's holding a spot for a lobbyist or lawyer or legislative assistant whose sleep is much more valuable, who wants the luxury of showing up half an hour before the hearing. Some of the clients just want into the hearing room; others are very particular about getting good seats. The closer they are to the action, the more important they feel. They're players, or want to be.
Ah, the power of alternatives.
Posted by Russell Roberts in Work | Permalink
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