Jon,
I deliberately ignored Gil's response so that I could focus on
responding to Becker. Now let's see what Gil said.
Gil Skillman wrote:
> FWIW, I think Becker's story leaves crucial dots unconnected. I see why
> you're asking about the connection between OCC variations and the wage-VLP
> disproportionalities Becker speaks of, but Becker does not show--and it
> doesn't follow--that the wage disparities highlighted in the passage you
> cite below have anything to do with the sort of disparities he's talking
> about.
exactly! Becker didn't connect the dots.
> Probably not, and Becker does not in fact engage even the
> then-contemporary *Marxian* analysis of such disparities (labor market
> segmentation, e.g.), let alone relevant mainstream treatments (of which he
> seems completely unaware). ...
his reference to John Cairnes' theory of non-competing groups seems an
imperfect substitute for invoking then-contemporary theories of
labor-power market segmentation. The big difference is that the modern
theories (such as that of Doeringer & Piore) have more
"microfoundations" (i.e., microeconomic explanations), whereas Cairnes
(if I understand him correctly) simply made an assertion, one that fit
the actual operations of labor-power markets during his time.
Anyway, for Becker's purposes of seeing how labor-power market
segmentation ("social discrimination") meshes with Becker's theory of
unequal exchange, Cairnes' theory was adequate to the task. That is,
if he were alive today, Becker could just as well discuss modern
theories of labor-power market segmentation and how they mesh with his
own theory of unequal exchange.
> Start with the passage from Becker that prompts your question about the
> role of OCC variations:
>
> "In the production of the various divisions of social labor, we are well
> aware that different ratios of C to V are utilized. As a rule, the value
> composition of the productive capitals varies directly with the level of
> training and skill of the laborer being produced" (p. 173).
>
> Fine, but as you suggested in an earlier e-mail, these OCC variations don't
> translate into wage-VLP disproportionality unless there is a positive rate
> of profit for the production processes generating these skills (as, e.g.,
> when commercial firms offer training courses).
right.
> And note further that such wage-VLP disproportionalities are still
> consistent with a "cost of producing labor power" theory of wage
> determination. Even though wages and VLPs aren't proportional for different
> levels of social labor, it can still be the case that wages just cover the
> market cost of producing given types of labor power, including costs of
> skill acquisition.
right. The actual skilled workers may not gain at all from the unequal
exchange posited. Instead, the sellers of skills would gain. This, I
think, is the major hole in Becker's story.
> Second, though, Becker seems to misrepresent the mainstream theory of
> (competitive) wage determination when he says:
>
> "In the view of conventional economics the differential wages received by
> social labor in its different grades reflect above all the differential
> costs of producing these grades of labor; some of them being more and some
> less expensive, the structure of wages will disperse itself accordingly..."
> (p. 172).
>
> Unless "conventional" means "classical" (doubtful, since the passage goes
> on to speak of the "neoclassical" theory of wages"), this statement is
> false: mainstream economics doesn't have a "cost of production" theory of
> (competitive) wage determination; as mentioned earlier, it has a
> "compensating wage differential" theory augmented by human capital theory,
> which introduces psychic considerations (workers' aversion to job risks,
> e.g.) on the supply side.
>
> In sum: mainstream economics doesn't feature a "cost of production" theory
> of competitive wage determination, but even if it did, wage-VLP disparities
> do not contradict that theory.
the compensating wage differential (CWD) theory doesn't seem relevant
to Becker's topic and task here. Instead, it's differential skill
levels that are relevant. The neoclassical theory does not simply use
CWD theory. It also uses the human capital theory. In the Chicago
variant, skilled workers are paid more than "unskilled" ones[*]
because in a [mythical] competitive labor market, the marginal product
of skilled workers is higher (the Demand side); and the cost of
producing and thus hiring skilled workers is also higher (the Supply
side). It's a supply & demand theory, not a cost-of-production theory.
In the long run with competitive labor-power markets, however, the
supply side of the story should be dominant and in turn should be
dominated by the cost of production: if skilled workers are paid more
than the cost of production of skilled workers, workers will invest in
increasing their skills. So the long-run supply curve of skilled
workers should be horizontal. In that case, the demand side only
determines _which kinds_ of skilled workers are able to get jobs.
(Of course, because it's expensive to escape "unskilled" jobs and
because people with such jobs tend to lack the cash, this mechanism
doesn't work very well at all for the lower-waged workers. I'll ignore
that fact here, since I'm talking extremely hypothetically, about
nonexistent perfect labor markets in a long run that never can be
reached. The latter is true since the process of movement repeatedly
changes the nature of the long-term equilibrium, as do normal
exogenous shocks.)
Further, all else constant, if the cost of hiring skilled labor-power
is higher than the cost of its production, the capitalists would
encourage this outcome, by encouraging the government to subsidize
education and in-migration of skilled labor-power (H1-B visas). Ways
to substitute "unskilled" labor for skilled would also be sought. If
the supply impediments cannot be broken down, then there would be
disinvestment in the sectors suffering from them, reducing demand
until the wage equals the cost of producing the labor-power.
Thus, the orthodox theory is equivalent to the cost-of-production
theory in the long run.
I generally agree with what Gil has to say after that, so I'll stop.
[*] why the scare quotes? there is no such thing as "unskilled" labor.
Rather, there are workers with socially-defined minimum amounts of
skills. They also may be very skilled, but their skills are not needed
by capitalists.
--
Jim Devine / "The test of courage comes when we are in the minority.
The test of tolerance comes when we are in the majority. -- Ralph W.
Sockman. (he's a deceased preacher.)
