Challenging Economics – Marginal Productivity Of Labour

Whenever there is a great debate over wages, be it the minimum wage or unions effect on wages, opponents cite the marginal productivity of labour. They argue that this prevents businesses from paying higher wages and if they did, it would only lead to higher unemployment. This theory is unquestionably stated as fact in all textbooks and the impression is given that there is an iron law of economics that fixes wages. Despite its wide use, it is completely false. The vast majority of workers do not have a marginal productivity of labour and those that do are not paid it. It is a theory that has long outlived its day and continuing adherence to it means the wrong decisions are being made. Continue reading “Challenging Economics – Marginal Productivity Of Labour”

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The Advantage Of The Minimum Wage

There is a lot of debate over the minimum wage. An internet search of the topic will return with almost unanimous condemnation of it. It is blamed for unreasonably pushing wages too high and causing unemployment. It is decried as a major cause of economic problems rather than the solution. However, these arguments are based upon over simplified ideas and graphs. Now, most of them look nice and are easy to understand, but they should be judged on how well they describe the real world. The simple fact is they don’t really. Continue reading “The Advantage Of The Minimum Wage”