One of the most difficult and least convincing argument to make to laypeople is how markets determine who earns what income. And this is because for all the formal analysis that we can conduct using the tools of piece theory, it is difficult to explain it more clearly than the fact that scarcity is one of the reasons why ill-educated sportsmen earn more than some people with graduate degrees. A common response that one hears is that how come those who perform important tasks such as teachers, farmers in Africa and child carers are often not paid well in comparison to other people who perform "less essential" tasks .
Having read this article in the NYT, it occurred to me that the market is truly an amoral force and one that has little prejudice. My conclusion is that the situation illustrates how some of the nannies in Brazil are beginning to command proper middle-class wages. And this upward creep in the wages of specific nannies is on account of the additional skills that they have built which make them not only a scarce resource, but creates confidence that makes them able to successfully withdraw their labor and thereby determine its price. And in spite of the fear by a few of their clients that the services of nannies are becoming less affordable, I think that the new wage will lead to an influx of individuals seeking that improved wage. The result is that there will be an increase in supply that will moderate that wage. In my view, it is unlikely that the wages for the nannies making increased investment in their skills will rise as much as the market will be segmented with lower wages for those with the more abundant skills. In all, this is a modest illustration of markets at work.
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