If in paying 10$ an hour the employee creates production value of 20$...with deflation of 10% the employer would now receive 18$ of productivity. They can adjust cost and keep the same percentage margin (50% cost per retail productivity unit) or keep labor happy and keep their pay higher and get lower margins. Market will adjust and producers will keep pace or go out of business.
-Richard
By adjusting costs do you mean they would lower the hourly rate of the employee?
To me this seems to be a similar problem to inflation and cost of living increases except in reverse. I feel like a cost of living decrease would be a tough sell to employees. "Thanks for doing a great job... now let me reduce your pay so I can make the same amount."
Also, this doesn't seem to promote job security or stability. Would Job stability suffer in a Austrian school economy?
The deflation did not lower their wage. The deflation artificially gave them the more cost for less production value. If deflation was accelerated to 90%, then a person working at the original 10$ would be producing goods worth 2$.
If they understand market pressure then they would also understand that their 1$ paycheck buys as much as 10$ used to before the deflation. They would also understand that if you are selling their retail production at 10% of cost they will very quickly be without work as you will be out of business. It is nice to keep employees, but if they fail to see value in making economically sound decisions, then they will find that I wouldn't see value in continuing to fund their dream world.
Show Posts
