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Thursday, April 17, 2008


Why are wages declining?

In thinking about Economic Policy Analysis, I found an interesting link.


Considering CEPA stands for Center for Economic Policy Analysis, I think I've struck gold!

In reading through some of the abstracts, I found an article:

Increasing Earnings Inequality and Unemployment in Developed Countries: Markets, Institutions and the ‘Unified Theory’
by David R. Howell (CEPA)

“Fundamentally, the demand for less-skilled workers appears to be declining faster than the number of less-skilled workers, and their wages are therefore drawn downward.”

OECD, OECD Jobs Study, Evidence and Explanations, Part I: (Paris:OECD, 1994), 30.

So what does this mean? Well, it's a question that will lead to my exploration and thus final paper, writing an actual policy analysis, but what I think it implies at this point is simply this. One side of the argument might argue that unskilled labor ought to be protected through policy and justified by this policy analysis. The other side might argue that through specialization, markets may emerge, causing shifts of those who are unskilled labor to actually develop a skill that would allow them to attain better prosperity.

Though aggregation is a dangerous thing to do, the logic of collective action suggests that people will voluntarily align with others to form a group, thus making aggregation justified. In this vein, if those in a position to emphasize certain points of agenda decide to move towards unskilled labor industries, then they may actually be causing harm; whereas if they were to offer incentives to the 'group' to specialize and work as skilled labor, they may actually prevent harm from occurring.

We've spoken of roving and stationary bandits in terms of government and power and prosperity, but what about in terms of international power and prosperity? Considering that we won't move to one single over-seeing power in the world, we have economics to help us understand that power and prosperity is a dynamic phenomenon and that through paying attention to trends, we might understand what policy to implement. If "demand for unskilled labor" is going down, then wouldn't it make sense to get involved in some sort of specialized skill so as to avoid the repurcussions of declining demand? At individual levels, this makes perfect sense and it is assumed (by many) that this is how economics are applied on the small scale. But at larger levels, where collective action occurs, where government policy is influenced by special interest, then how could the argument to protect unskilled labor prevail in lue of this analysis?

Perhaps this has something to do with predatory governments and limited liberties of the governed.

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