>In this case, a prospective employer can essentially offer you any wage they like - will that be a truly "voluntary" contract, even though you have no choice other than to accept it?
"Bargaining power" is misleading because that is not how a market works. It's not two party's haggling over what they think a "fair price" is, it's a lot of parties and prices tend towards supply and demand. Unlike the bargaining model, supply and demand still works even if one party doesn't have a choice.
For example, you have no choice but to buy food. But farmers can't force you to pay extreme prices because you have no choice. They have to compete amongst each other and the price of food falls towards what it costs to produce.
Messing with the supply and demand price can create problems like unemployment. It's too expensive to hire new workers at the minimum wage, or there is a much higher incentive to outsource and automate work, or just not do it at all. To continue the food analogy, if you set a maximum food price, farmers would just stop producing if it cost more than the maximum price.
Your argument seems compelling, but there are several problems I find with it. The first is that it rests on the usual assumptions of a competitive market, and we are discussing situations where this isn't the case: people are looking for work where there is none, or very little - there is no competition for their labour.
The second problem is that your analogy is imperfect, because it switches round to the demand side rather than the supply side. A better analogy, I think, would be if you were a farmer who had produced a sufficient supply of food, but you had to sell it because it was going to spoil. In this case buyers, assuming that they don't strictly need your food, could apply pressure to you to lower your price fairly indiscriminately. This is a much better analogy to the original case: companies (often, and in the case we are talking about) don't need your labour, they will simply be less productive without it, but you do need a wage, or you will starve to death.
>The first is that it rests on the usual assumptions of a competitive market, and we are discussing situations where this isn't the case: people are looking for work where there is none, or very little - there is no competition for their labour.
And this is the root of the problem I am trying to get at. The demand for labor is pretty low. Blaming the few companies that are hiring workers isn't fair, and forcing them to raise wages doesn't fix the problem.
>The second problem is that your analogy is imperfect, because it switches round to the demand side rather than the supply side.
I think that people thinking of supply and demand sides separately is where a lot of people get confused, especially when discussing labor markets. There really isn't any difference and the same economic principles apply to both sides.
>companies (often, and in the case we are talking about) don't need your labour, they will simply be less productive without it, but you do need a wage, or you will starve to death.
Another good point and what I am trying to get at. The problem I think is that people depend on the value of their labor for their income. That's hardly fair to begin with (some people are simply worth more economically than others), but it's especially problematic if some people's labor becomes almost worthless due to automation or whatever. A basic income would be an ideal solution.
> And this is the root of the problem I am trying to get at. The demand for labor is pretty low. Blaming the few companies that are hiring workers isn't fair, and forcing them to raise wages doesn't fix the problem.
I essentially agree with that.
> I think that people thinking of supply and demand sides separately is where a lot of people get confused, especially when discussing labor markets. There really isn't any difference and the same economic principles apply to both sides.
I think that there genuinely is an asymmetry between supply and demand, indeed especially when discussing labour markets. If labour demand is higher than labour supply, then very crudely we can say that wages will go up to the maximum that the wage-payers can afford - but it won't go higher than that, because if it did they would run out of money, go out of business, and demand would go down. For the converse case, when labour demand is lower than labour supply, then, again very crudely, we can say that wages will fall, but there is essentially no lower limit, because there is no feedback (in pricing terms) until so many people have died of starvation that supply starts going down. Obviously both of those 'end game' scenarios are ridiculous, but it demonstrates the asymmetry - excess demand provides a rapid natural cap on price, whereas excess supply doesn't.
> Another good point and what I am trying to get at. The problem I think is that people depend on the value of their labor for their income. That's hardly fair to begin with (some people are simply worth more economically than others), but it's especially problematic if some people's labor becomes almost worthless due to automation or whatever. A basic income would be an ideal solution.
I absolutely agree with this part, and your proposed solution.
"Bargaining power" is misleading because that is not how a market works. It's not two party's haggling over what they think a "fair price" is, it's a lot of parties and prices tend towards supply and demand. Unlike the bargaining model, supply and demand still works even if one party doesn't have a choice.
For example, you have no choice but to buy food. But farmers can't force you to pay extreme prices because you have no choice. They have to compete amongst each other and the price of food falls towards what it costs to produce.
Messing with the supply and demand price can create problems like unemployment. It's too expensive to hire new workers at the minimum wage, or there is a much higher incentive to outsource and automate work, or just not do it at all. To continue the food analogy, if you set a maximum food price, farmers would just stop producing if it cost more than the maximum price.