ECON 103 3.3 Value of Labour Essay

Labour is purposeful activity, whether that be physical, mental or a combination of the two. This purposeful activity may be self-directed and self-satisfying, or externally directed to satisfy the wants and needs of other parties, or self-directed to satisfy other parties. The other parties being direct consumers or businesses, whether one’s own business or a business one works for, or another business that consumes the outputs and products of the first business. In some cases the labour may be purely for one’s own satisfaction, separate and beyond direct material needs, for example a hobby or craft.

Labour is also dynamic, in that various types of labour can compete or collaborate, i.e. some types of mental labour may direct some types of physical labour, and some types of physical labour may support or provide materials that necessitate the employment of some types of mental and/or physical labour, and the utility, potential and output of the labour may increase or decrease, being contingent upon the characteristics, constitution and capabilities of the person performing the labour. Labour may also compete with labour in speed, volume, accuracy, skill, competency, output, reliability, and endurance.

The value of these different types of purposeful activity or labour, is determined by various factors, with the immediate ones being the context of the labour and the utility of the labour in what it is directed towards producing, as well as the dynamic elements mentioned in the first paragraph.

Time is also a major factor, whether that be talking about an instance of time wherein labour is performed and generating a cost - opportunity cost and physiological costs for the labourer, and financial costs for the purchaser of the labour and the owner of the product for which the labour was performed and finally the end user of that product - or historical time, where the cost, outputs and utility of any instance of that labour compares to a previous or future instance as determined by market forces.

The more complex the relationship and context of the labourer with the purchaser of the labour, the more complex the determination of the value of the labour. A person with few wants and needs may be willing to settle for less compensation for their labour than a person say with a family, debts, and various bills. Adding to the mix, government regulation of wages and industry may override the natural dynamic determination and negotiation of value by the market, and in the context of modern government, inflation trumps all of these. In fact, the normative paradigm of inevitable inflation is what changes the value of labour over time in today’s world.

Due to technological advancement and the organisation and specialisation of labour, it is inevitable that most instances of labour will have the capacity to be more productive and hence more valuable over time. We could call this the natural value of labour. Adding the effects of inflation and government interference in the market creates what we could call the artificial value of labour.