RE: RE: Re: [Pen-l] The fundamental crisis response. was Ecologicalcreditcrunch

["David B. Shemano" <dshemano@xxxxxxxxxx>]

Michael Perelman writes:

>> Making labor more expensive can spur technological innovation, which can
>> potentially make things better for both classes.  The consequences of
>> making labor cheap are less uncertain: cheap labor means less
>> innovation, less productivity, and, in the long run, fewer potential
>> profits.
>> 
>> Of course, making labor too expensive can make a market economy unable
>> to function. I don't know example where that has happened, although this
>> outcome is often claimed. claim is common.

I think I am asking a different question.  I am not asking whether increasing labor expense will increase unemployment, affect growth, or any macro question,  What I want to know is the allocation of enterpise wealth between labor and the owner with respect to the enterprises that continue to operate after the change in labor costs.  My intuition is that there is, let's call it, a "natural rate of profit" below which owners/entrepeneurs say it is not worth it and they close up shop to retire, become consultants or government employees.  Therefore, assuming that enterprises continue to exist after the labor cost shock, my intuition is that those that survive after the initial shock will ultimately have profit margins that provide a return to the owners that is consistent with the "natural rate of profit" that existed before the shock.  I want to know whether my intuition is right and whether any notion of permanently decreasing the share of enterrpise wealth that goes to the !
 owners is a fool's errand.

David Shemano

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