Post
Topic
Board Economics
Re: Growth, Interest and Wage Inequality - To the austrian economists here
by
cartman
on 14/07/2011, 19:54:04 UTC
Hm. I dont think so. If he would get 750 this would mean, that he has the same purchase power after the growth of the economy and all benefit goes to the employer. In my example, everyone participates in the growth with the same percentage. Joe can buy 25% more goods. The employer earns the same money (5/4 goods * 4/5 price) and pays the same wages, so nominal company profit is the same but has 25% more worth.
A change in the wage implies, that the profit is suddenly differntly distributed between employer and employee. This seems a bit strange because usually we think in the context of inflation or stable prices and not a constant deflation rate. You could also take money out of the equation and just think in goods. First 100 goods are produced, only wage costs, 10% profit: 90 for the workers 10 for the employer, then 120 goods are produced, the 9:1 quota held constant its 108 for the workers, 12 for the employer. Anything else requires changes in the bargaining powers of the two parties.