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Both the value of the worker and this situation both ignore the supply side. A $5 bill is worth $50, assuming there is a supply of people willing to pay $50.
by curryst 6y ago
Both the value of the worker and this situation both ignore the supply side. A $5 bill is worth $50, assuming there is a supply of people willing to pay $50. Likewise, a worker is only "worth" $50/hour if there is a supply of people willing to pay them $50/hour. If they're working for $5/hour, there's a good chance the supply of people willing to pay them $50/hour is slim to none. I would argue at that point that they are actually worth $5/hour, and $50/hour is a fiction like saying my shares of Hertz are worth $10,000 a piece.
- CarbyAu 6y agoI think there is a miscommunication in "worth" between some of the posts here. Definition 1. - your version "a worker is only "worth" $50/hour if there is a supply of people willing to pay them $50/hour." Definition 2. "a worker is "worth" $50/hour if they add $50/hour value for the business." (who then goes on to pay the worker as little as possible, maybe only $5/hr) Not sure which definition is "correct".
- lukevdp 6y agoWhen you’re talking about wage prices, definition 1 is the relevant definition. Definition 1 includes both supply and demand. You have a worker willing to work for $50/hr and someone willing to pay them $50/hr. Definition 2 is only taking into account demand. You have a supplier who has set their price, but no buyers at that level.