In common theory labor is often treated like a normal commodity. This point of view is represented by neo-classical economists. Resulting in their general statement that markets – including the labor market – are driven only by supply and demand thus regulating themselves. Hence there is no space for any external interventions which due to the neo-classical opinion always have a negative effect. This provoking statement leads to the question whether this scenario can be observed in real world.
Based on the book "Debunking Economics" by Steve Keen the following research paper wants to provide a differentiated view concerning labor and how it can be treated in the economy. The first part of the dissemination paper reviews the neo-classical perspectives on the labor market followed by a reproduction of Keen’s critical review concerning the neo-classical theory and his own elaboration of the labor market.
The principle part concentrates on the treatment of labor force in the labor market and the possible outcome of several policies such as introducing or altering minimum wages, unemployment insurance (UI) and trade unions. Regarding to the research question whether an impact of the government has positive or negative impact on the labor market, the aim is to establish a link between labor market regulations, economic policies and theory. In this context the analysis shows what theory suggests and which outcomes can be observed by implementing regulations derived from theory.
Finally the paper sums up the most important results and points out unanswered aspects which could be further discussed and analyzed to evaluate the impacts of external interventions on the labor market more precisely.
Table of Contents
1 Introduction
2 How does the labor market behave?
2.1 The labor market from a neo-classical perspective
2.2 The individual supply of work
2.3 Criticism of the neo-classical model according to Steve Keen
3 Unemployment Insurance
3.1 The effects of implementing an UI from a neo-classical perspective
3.2 Review of the neo-classical assumptions concerning UI systems
3.3 Scientific points of view
4 Minimum Wages
4.1 Definiton minimum wage
4.2 Minimum wages from a neo-classical perspective
4.3 Arguments in favor of a minimum wage:
4.4 Arguments against a minimum wage:
4.5 Scientific points of view:
5 Trade Unions
5.1 Comparison of the liberal and coordinated market economy
5.2 Comparison of the German and American institutional framework
5.3 Trade Unions in Germany
5.4 Trade Unions in the US
6 Incentive Wages
6.1 USA
6.2 Germany
6.3 Germany vs. USA
6.4 Do interventions have a negative impact?
7 Conclusion
Research Objectives and Core Topics
The primary research objective is to examine the impact of state and industrial interventions on the labor market, specifically challenging the neo-classical assertion that such interventions are inherently detrimental. By comparing theoretical frameworks with empirical evidence from Germany and the USA, the paper investigates whether regulations—such as unemployment insurance, minimum wages, and trade union activities—can effectively support economic stability and social fairness.
- Theoretical critique of the neo-classical labor market model.
- Evaluation of unemployment insurance and its impact on labor supply.
- Analysis of the economic consequences of minimum wage legislation.
- Comparison of German and American industrial relations and market systems.
- Examination of performance-based remuneration and manager compensation.
Excerpt from the Book
2.2 The individual supply of work
In the book ‘Debunking Economics’ the author Steve Keen makes it quite clear that from his point of view, labor is something extraordinary. Whereas, in a market for regular goods the consumer demands commodities and the firms supply those. In the real world, there is no market for labor meaning there is no firm producing workers. As a result, the roles of the market participants switch and the consumer becomes the supplier. Meaning the workers supply labor and the firms ‘consume’ labor. This implies that wages do not reflect the workers contribution to production (marginal productivity). It is rather that each worker has his individual preference to balance hours of work and leisure time. Since work is in general seen as a burden for the worker, the wage provided for each hour worked must be high enough, so that the worker is willing to substitute leisure time for working time.
Summary of Chapters
1 Introduction: Provides an overview of the neo-classical perspective on labor as a commodity and outlines the paper's goal to critically examine government interventions.
2 How does the labor market behave?: Analyzes neo-classical assumptions regarding supply and demand curves and introduces Steve Keen's critique concerning individual labor supply.
3 Unemployment Insurance: Discusses the theoretical effects of UI on employment levels and evaluates the practical shortcomings of neo-classical assumptions in real-world systems.
4 Minimum Wages: Examines the definition and impact of minimum wages, contrasting neo-classical negative predictions with empirical findings in the US.
5 Trade Unions: Compares the institutional frameworks of liberal and coordinated market economies, focusing on the role of trade unions in Germany versus the US.
6 Incentive Wages: Reviews performance-based compensation systems and explores the stark differences in manager salary structures between the US and Germany.
7 Conclusion: Summarizes findings, asserting that external interventions are not necessarily harmful and can contribute to a more balanced distribution of social welfare.
Keywords
Labor market, Neo-classical economics, State intervention, Unemployment insurance, Minimum wage, Trade unions, Performance-based compensation, Incentive wages, Market economy, Social welfare, Collective bargaining, Marginal productivity, Wage dumping, Comparative institutional analysis, Shareholder value.
Frequently Asked Questions
What is the core argument of this seminar paper?
The paper argues against the neo-classical assumption that state and industrial interventions always negatively affect the labor market. It suggests that such regulations are often necessary to ensure social fairness and economic stability.
Which economic school of thought is primarily criticized?
The work primarily critiques the neo-classical economic school, which treats labor as a standard commodity driven solely by self-regulating supply and demand forces.
What is the primary research question?
The research question asks whether state interventions in the labor market always have a negative impact, investigating the link between regulation, economic policy, and theory.
Which scientific methods or sources are utilized?
The paper relies on a literature-based analysis, utilizing works such as Steve Keen's "Debunking Economics," Hall & Soskice’s "Varieties of Capitalism," and various empirical studies from the US and Germany.
What is covered in the main body of the text?
The main body examines three specific areas: the implementation of unemployment insurance, the introduction of minimum wages, and the role of trade unions in liberal versus coordinated market economies.
Which key terms characterize this research?
Key terms include labor market regulations, neo-classical theory, minimum wage, trade union bargaining power, incentive wages, and comparative market economy systems.
How do US and German incentive wages differ?
US firms frequently use high performance-based bonuses for top management, whereas German firms, influenced by coordinated market structures and labor codetermination, rely less on variable pay for their workforces.
How does the author view the "backward bending" supply curve?
The author uses the extreme salary levels of US managers to confirm Keen’s theory, noting that higher wages do not motivate these individuals to work more, but rather allow them to work less for more leisure.
- Arbeit zitieren
- M. Sc. Bahadir Düsendi (Autor:in), Ali Salman (Autor:in), Dominik Norbert Nösner (Autor:in), Stephanie Knauer (Autor:in), Sari Fawzi Mohamed Shokr (Autor:in), Rui Yang (Autor:in), 2014, To each according to his contribution. Do state interventions always have a negative impact on the labor market?, München, GRIN Verlag, https://www.grin.com/document/320730
