Puffer Fish wrote:That's a really complicated (and kind of controversial) question that would deserve its own separate thread.
One way the cost of labor could drop is, for example, if there were mass number of layoffs in some other sector of the economy, and suddenly you had a huge pool of desperate workers who needed jobs.
Another way might be lots of immigration coming in from poorer parts of the world.
The way you crafted the OP seemed to suggest that you think that it is easy to just lower labor costs and then...problem solved! It is not so easy.
Usually lower labor costs are a bad thing for the worker, but that might not always necessarily be the case. For example, perhaps there might be some technological improvement that increases worker efficiency and that sector of the economy doesn't need to employ as many workers. Can be a good thing in the economy, especially if it involves the lowest paid jobs. But that is a separate big issue we could delve into as well.
Automating some processes can reduce the need for labor, however someone has to be around to maintain the machines when they break down and they will break down sometime. When machines are down, efficiency goes down. Nothing is produced during the "down time".
The majority of jobs in the economy would be done for less money if that worker had no other options.
But will living costs be lowered just because people cannot afford to pay? Or if someone has a mortgage on their car and they cannot make a payment on their car. Will the bank say it's ok and not reposeess their car? No. The person signed the contract when they could pay and once they cannot pay, they automatically violate the contract. The bank does not care if a person cannot pay up, they want the money guaranteed in the contract.
Think about what's the minimum amount of money you would be willing to do a job for if all your other possible options were even worse.
Again, living costs are the same. A person usually wants more pay to pay for living costs. Some people are still working past the age of 65 because they cannot afford their lifestyle if they retire....they'd barely be able to afford groceries and rent. If they can still work in their 80s, they will.
When you talk about a plumber doing a job for someone, that's a specific task done for an individual. The plumber has other customers.
If you think about some plumber who lives in a Third World country, he's going to work for much less. There do not exist enough customers that can pay him more, better options do not exist.
Yes, but we are not talking about Third World. In Third World countries, living costs tend to be much lower than in developed First World countries. Pay rate should be more proportional to costs of living.
In the US a plumber will not lower his rate by half. He still needs to pay for fuel, tooling costs, manpower rates, utilities, rent, food...no one will give him a break. The electric company will not halve the electric unit rate if he asks. The industry maintains the rates and actually last summer, there was about a 30% increase for some Eversource customers. As customers, you just pay it or go without electricity.