Mainstream Stories about Wages

On a personal note, I tend to enjoy Jared Bernstein's blog quite a bit.  He writes in an accessible manner, often embedding nerdy whomp-whomp jokes into his posts- something I aspire to.

I also enjoy his posts because they validate the fact that I am not actually a crazy person.  For example, I understand how the marginal product of labor story explains wages but could never understand how it fit in with how wages are actually determined.  In the real world.

Bernstein's post from a week or so ago makes me feel not so crazy. Apparently the MP story doesn't have much applicational usefulness for him either, "In fact, one problem with the MP assumption is that there is no distributional outcome with which it is inconsistent" (Bernstein, 2014).

I love this observation.  It just so happens that textbook way economics explains wages can correlate to any income distribution! In other words, if the top 1% has everything and the bottom 99% has nothing it must be because the bottom 99% contributes no marginal product and the wage distribution is accurate.

Another related mainstream story is the human capital theory of wages.  A worker's education, experience, sex, race, skills, etc. all contribute to their wage.

This is another theory that I believe justifies any income distribution and/or extremely high salaries.

Why are some people's salaries over a million dollars a year? Because they have better education, more experience, and superb skills.

So if white males happen to be the majority of workers earning over a million dollars a year, it has nothing to do with race, sex, or privilege it has to do with their human capital investments.

What seems to make more sense in terms of wage determination is Marx's theory.  The reserve army of the unemployed keeps wages low and extraction of surplus value high no matter if productivity or education improves.