Thread by @ArashKolahi

Among the most pervasive lies about capitalism is how capitalism rewards workers.

Capitalism does NOT reward:
• Productivity
• Value
• Hard work, effort, sacrifice or duration of work

As we will prove, these lies are just propaganda with NO basis in reality. (Thread 1/30)

First, let’s start with how wages REALLY work. Like most prices in capitalism, wages (price of labor) are determined by markets. Markets are an allocation system whereby prices are reflective of the relative bargaining power between buyers & sellers of goods and services. 2/30

Markets incentivize both buyers & sellers to each maximize the transactional benefit to themselves.

With markets, buyers want the price to be as low as possible & sellers want the price to be as high as possible. But… 3/30

Below a certain price (floor), a transaction is no longer worth it to the seller (i.e., they’d lose money at that price). And above a certain price (ceiling), a transaction is no longer worth it to the buyer (i.e., can forgo the purchase or find alternatives). 4/30

However, between the floor price & the ceiling price, the actual price of goods & services in market transactions tend towards whoever has the greatest bargaining power. Who can step away from the deal easiest? Who can easily find an alternative? Or who is more desperate? 5/30

In fact, with markets, between the floor & ceiling prices, the lion’s share of the benefit of each transaction goes to the party who already has the highest bargaining power. 6/30

Economists have understood this truth for a long time. The Fair-Trade Movement was largely born as a result of this. Trading with desperate, poverty-stricken trade partners in a market system gives virtually all benefits of the trade to the already powerful. 7/30

Example: say it costs a seller in a poor country $2 to make widget A, the floor is $2. Let’s say rich country buyers would be willing to pay up to up to $10 per Widget A (ceiling). The actual price will be much closer to $2 than $10 because of bargaining power disparities. 8/30

The Fair-Trade Movement understood that in international trade, market prices reflect the relative bargaining power between buyers (i.e., rich countries) & sellers (i.e., poorer countries) & as a result, prices are so low, they give the lion’s share of the benefit to buyers. 9/30

The Fair-Trade Movement showed how & why markets exasperate wealth disparities internationally. Market transactions between radically unequal (bargaining power) trade partners over time *increases* wealth disparities because of how markets work. 10/30

This should be self-evident as we see this every day. People desperate to survive, on the verge of starvation or homelessness, have little bargaining power. People with wealth, who can hold off on transactions with little effect to themselves have greater bargaining power. 11/30

With markets, prices always tend towards benefiting the party with greater bargaining power. Since wages are prices for different types of labor bought & sold on a market system, they follow the same market logic. 12/30

Between the floor price & ceiling price, when sellers are more desperate than buyers, prices go down closer to the floor price. When buyers are more desperate than sellers, prices go up closer to the ceiling price. 13/30

As we have seen, prices in markets are reflective of the relative bargaining power between buyers & sellers. Since wages in capitalism are bought & sold on the labor market, wages too are set by the relative bargaining power between the employer (buyer) & worker (seller). 14/30

Employers know this truth. That’s why they hate labor unions. Unions strengthen workers' bargaining power in numerous ways (collective bargaining power, make workers less dispensable, etc.), resulting in higher wages for union workers. 15/30

In addition to a degree in Economics, I also have a master’s in business. One of the main things taught in top MBA programs is how to lower the bargaining power of employees, thus lowering wages, thus increasing profits.

With markets, bargaining power is EVERYTHING. 16/30

Employers know it, executives know it, MBA’s know it. Economists know it. Yet the propaganda is the opposite. Work hard & you’ll earn more. Be more productive & you’ll earn more. Produce more value for your employer & you’ll earn more. ALL LIES for the masses. 17/30

Now that we know the truth, it’s easy to disprove the lies.

Lie #1: Wages are based on productivity:
Between the 1950s & today worker productivity has increased multiple times over, yet wages remained stagnant. Zero historical correlation between productivity & wages. 18/30

Per worker productivity has skyrocketed, yet virtually none of those gains have benefited workers because worker bargaining power has remained flat. The one-sided war against unions over the past 50 years has contributed greatly to keeping workers’ bargaining power low. 19/30

The only time productivity increase wages, is IF that increased productivity translates into increased bargaining power for workers.

IF you increase your productivity in a way that makes you more indispensable to your employer, that increases your bargaining power & wages. 20/30

So, it’s not the increase in productivity that caused wages to go up; it’s only if workers can capture greater bargaining power as a result of increased productivity that wages would go up.

Lie 1 debunked: No correlation between productivity & wages. 21/30

Lie #2: Wages are based on the value of your labor:

If by ‘value’ we mean ‘valued by society,’ this is obviously not the case as workers in some of the highest societally valued products & services (i.e. teachers) receive the lowest wages. 22/30

If by value we mean value that can translate into profits for employers, this is obviously also not true since workers in some of the most profitable industries (i.e., iPhone factory workers) also receive some of the lowest wages. 23/30

Regardless of profit levels (so long as there is no loss), the STRONGEST correlation is between workers’ wages & worker’s level of bargaining power in that industry, NOT profit levels and NOT the value of labor.

Lie 2 debunked 24/30

And finally, the favorite lie of all. Lie #3: Wages are based on hard work, effort, sacrifice or duration of work.

No one works 100x or 1,000x or 10,000 times longer or harder than anyone else – but some earn 100x or 1,000x or 10,000 times more income than others. 25/30

As I’ve shown in a separate thread, if wages were remotely equitable, the average worker, working the average duration at an average effort, would receive the average income of roughly $130,000 a year!

Obviously this is not the case. 26/30

https://twitter.com/ArashKolahi/status/1207713514569076736?s=20

But what about the duration of work? For many workers there is SOME correlation between duration of work & income.

But that correlation is only because of the minimum wage, not because of market forces. 27/30

And much of the fight for a minimum wage was based on the understanding that if left up to normal market forces, i.e. relative bargaining power between workers & employers, wages would be driven so far down that most workers would earn dire poverty wages (floor) 28/30

Thus, as we have shown, market capitalism rewards bargaining power, NOT productivity, NOT value & certainly NOT hard work, effort, sacrifice, or duration of work. And because market capitalism rewards only bargaining power, it is inherently inequitable. 29/30

The only fair & equitable criteria for wages is rewarding hard work, effort, sacrifice & duration of work.

Capitalists lie about it because it resonates as fair, but capitalism is inherently NOT fair.

It’s socialists who demand fairness & equity 30/30

participatoryeconomics.info/values/

Adding this here to address some anecdotal examples given in the mentions:

https://twitter.com/ArashKolahi/status/1211020106035187713?s=20