Wednesday, May 20, 2009

No worker can ever be underpaid

One of the doctrines dominating the economic "thought" in Bulgaria can be summarized as "Prosperity by starvation wages". Its proponents claim that, because of the lack of natural resources in Bulgaria, the only way we can have a competitive economy is by paying super low wages, far below their market value. Of course, the real result of this policy is bringing labour productivity down to the level of wages, because productive people tend either to become less productive or to emigrate. So Bulgarian economy is anything you like but NOT competitive.
However, our brave employers, both government and private ones, never let facts deter them from logic. And their logic is really impenetrable. If an employee never asks for pay rise, he is apparently happy with his wage and it doesn't need to be increased. If he asks for pay rise, he is arrogant and insolent and so doesn't deserve even a penny more.
Here, I expect some people considering themselves economic experts to ask me how I can determine the market value of a wage. No problem, darlings - like the market value of any other product: by the law of demand and supply. If you want to buy a pair of shoes for (say) EUR 10 and cannot find any shoes costing as little, or if the few shoes you find at that price are of too low quality to be used by any person alive, this means that current market value of shoes is definitely above EUR 10. By analogy, if nobody agrees to work for the wage you are offering, or if the only people who agree are those who cannot really do the job, this is a sure sign that the position is underpaid. I have already mentioned this a year ago in my post University teachers vote with their feet.
In the private sector, I have heard of numerous cases when the employer refuses to increase somebody's salary from (say) 500 to 600 leva, then the worker leaves and the employer has to replace him with two people receiving 700 leva each and combined doing less work than the lost employee. However, the situation in the government sector isn't significantly better, and I strongly suspect that private employers are just following the example of government. The immediate trigger for me to write this post were the obstacles put to my colleagues Victor and Eva (not their real names) to prevent them from receiving higher wages.

Sunday, May 17, 2009

Hazlitt's "Economics in One Lesson" in Bulgarian

It is pleasant to brag and I think there is nothing wrong with a little bragging after having done a good job.
Some time ago I wrote how nice it would be to make Henry Hazlitt's Economics in One Lesson known to the Bulgarian reader. Recently, the book was published in Bulgarian in my translation. The price is 10 leva; more details at the sites of the publishers MaK and Iztok-Zapad.
Economics in One Lesson defends the free market with simple and logical arguments understandable for a broad circle of readers (i.e. no special expertise in economics is needed). I am glad that the book is published in Bulgaria right now, in the midst of the global economic crisis. Unfortunately, market disturbancies mess with people's heads and we are seeing more and more economists who are expected to be in their right mind to insist on stronger government intervention in economy and even for total government control. Here in Bulgaria, we have been there and done this. Let's prefer experience, logic and common sense.

The above text is a literal translation of my May 9 post on the subject on my Bulgarian blog. After that post, I had a discussion with a Bulgarian-American commenter. She expressed disagreement with me and said that every single sane economist is now demanding more government intervention. She also cited a Nobel Prize-winning economist who seriously stated that free market must be abandoned and replaced with another economic system. I didn't quite understand what exactly this new system was supposed to be; it seemed that only the mighty intellect of a Nobel Prize winner could do such a feat. Because my rule is to avoid advertising the enemy for free, I won't give the name of the guy here. I am writing about him just to show that the problem turned out to be much more serious than I was anticipating. Where are the sane and honest economists? Please speak out and try to bring people back to their senses! We lay folks cannot and should not fight your battle. I am too often bashing arrogant ignorant people to risk presenting myself as one of them, a lay person criticizing experts. Anyway, with my translation of Hazlitt's book I have already done my best.
Instant update: I decided, however, to reveal the identity of my renowned in-absentia opponent - Paul Krugman.