Price Takers' Plenty in a Model of Pure Capitalism.

Scitovsky, Tibor

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Document type:: Collected items

Collection:: Josef Steindl Collection

Title:: Price Takers' Plenty in a Model of Pure Capitalism.

Author:: Scitovsky, Tibor

Scope:: Kopie eines Typoskripts, 27 Blätter, mit handschriftlicher Korrektur und Korrektur mit Korrekturfolie, Paginierung von 5.1-5.20 und von 3.21-3.26

Year of publication:: 1983

Source material date:: [November 1983]

Language:: English

Note:: Draft.

Related work:: Scitovsky, Tibor: Pricetakers' Plenty: A Neglected Benefit of Capitalism. In: Kyklos, Dec 1985, Vol. 38 Issue 4, S. 517-516

JEL Classification:: D41 [Market Structure, Pricing, and Design: Perfect Competition]

Shelfmark:: S/M.33.7

Access:: Free access

5.15 Here again, however, the price maker’s excess demand for labor does not necessarily lead him to create a sellers f market for labor. On the analogy of product markets, one is tempted to argue that just as the price-maker seller can look to foreign markets as an outlet for his excess supply instead of incurring the cost of persuading the domestic public, to buy more from him, so the price-maker employer can also look to importing unemployed low-wage foreign workers and so satisfy his excess demand for labor without the expense of pampering his domestic workforce with fringe benefits. Slavery in America’s past, the toleration of the illegal entry of Mexican workers in America’s present, and the admission of foreign guest workers to just about every advanced industrial country during the postwar period are the obvious examples. I believe, hovrever, that there is also a more general factor that militates against employers’ being motivated to establish pension plans and other fringe benefits for labor by the profit motive (rather than by union pressure) and that is unemployment. As long as the employer can get additional workers for the asking, it is not in his interest.to incur the cost of offering fringe benefits — unless he wants to get and keep the best ^workers and ensure the loyalty and stability of his vrorkforce. For labor is one of the most highly substitutable commodities, which means that the availability of labor in one field soon spills over into other fields in the absence of artificial restraints on entry into those other fields. Accordingly, nonwage competition with its fringe benefits for labor is not likely to be engaged in by isolated price-maker employers in the presence of unemployment in the rest of the economy.

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