>The reality is calculating "value created" is extraordinarily difficult, so we use "hours-of-butt-in-seat" because it's the closest proxy.
Some would disagree on this, the Marxian school posits that the employer really is paying for "hours-of-butt-in-seat", technically, labour-time (note, this is not the same as labour, or the value created by the labour). As such, value of the products doesn't come into it at all, but rather only the minimum value required to keep the worker. What is this value equal to? The amount required to sustain the worker - i.e to cater to his survival, to ensure the continued flow of labour (viz. supporting the worker's family), to keep the employee coming to his job, and most importantly the reproduction of his labour-time commodity.
> As such, value of the products doesn't come into it at all, but rather only the minimum value required to keep the worker. What is this value equal to? The amount required to sustain the worker...
Partially. The employee is paid the minimum amount that the employer can pay, but (again in this fantasy no-air-resistance world) if an employee can produce x units of value for either employer a or employer b, they'll go with whichever will pay more, and both employer a and employer b profit while paying up to x-1 units of value in wages.
And thus, over long periods of time and disregarding practical realities, compensation approaches the point at which compensation = value created, despite employers attempting to pay the minimum possible.
How would that work in the case where the employers have the majority of the bargaining power? What motivation is there to keep pushing up the wage? It would seem to work if the employer is choosing only one potential candidate, but in reality employers have an almost constant supply of people who are able and willing to work for almost whatever the employer is asking for. Almost never will two employers go head to head to bid over a candidate.
This is precisely why labour unions exist, because the employer owns the means of production and the employee does not.
In theory there is never an infinite supply of employees, and at a certain point you run out of people that will work for $x.
In practice that's not a question that can be answered in one comment, and right now it depends on who you ask. In my mental model of the world that's where the perfect simulation starts to break down and run into real world constraints.
I mean - if we're talking zero-friction circular cows, then if the unemployment rate is over 0%, there are more employees. The unemployment rate is always well above zero.
But there may not be employees willing to take that job at
That price with that skill set. The unemployment rate now is zero, but if I'm trying to hire a machine learning engineer for $10/hr I'd have a hard time.
>And thus, over long periods of time and disregarding practical realities, compensation approaches the point at which compensation = value created
Compensation is determined by supply and demand, not value created. It doesn't matter if every developer becomes 20% better at their jobs if the market is, at the same time, flooded with new developers. Wages will go down.
Value created (where measurable), puts a ceiling on compensation, not a floor.
I don't know which school of Marx's economics you went to but Marx argued entirely by value created. That is, the value of a worker's labour is the value that they should receive.
Some would disagree on this, the Marxian school posits that the employer really is paying for "hours-of-butt-in-seat", technically, labour-time (note, this is not the same as labour, or the value created by the labour). As such, value of the products doesn't come into it at all, but rather only the minimum value required to keep the worker. What is this value equal to? The amount required to sustain the worker - i.e to cater to his survival, to ensure the continued flow of labour (viz. supporting the worker's family), to keep the employee coming to his job, and most importantly the reproduction of his labour-time commodity.