Academy Home | Student Dashboard

ECON103: Unit 3 Essay - Value of Labor

Here is my ~500 word essay for another course member to comment on, thank you in advance.

Overall the value of labor has increased and continues to trend up over time.

Since we perform labor to gain more leisure time, we seek to increase the value of our labor so that we can spend more of our lives in leisure time. (Conversely, if we were to seek to decrease the value of our labor then we would either have to work for more time, or forgo certain leisure activities as they would become less affordable).

One positive effect on the value of labor is that labor can be directed to have ever greater “action” upon our world, due partly to both technological advances and increased capital. For example a farmer driving a tractor may plough an acre in an hour, versus a team of oxen perhaps requiring two days, versus a man with a spade requiring a month. Assuming the value of a ploughed acre is relatively constant, the fact it can now be done in an hour versus a month increases the labor value of the farmer with the tractor over the other options.

Another positive effect on labor value is an increase in quality and speed of communication. Whereas in the past we may have communicated using written notes handed from messenger to messenger, nowadays anyone with an internet connected device can communicate instantly with virtually anyone. This results in more accurate demand and supply signals between employers and laborers more quickly, which means laborers can choose higher value opportunities. As an example a seasonal fruit worker may use modern weather forecasting to plan their travel to fruit production areas, and further to this they could select employers offering a higher pay rate.

Negative effects on the value of labor could occur when the labor marketplace becomes saturated. One way this may occur is if centralised power directly causes misallocation of labor. For example in response to an historic labor shortage in skills required to manufacture Widget X, a government may decide to subsidise training of Widget X manufacturing skills. As a result the market may be flooded with Widget X laborers causing a reduction in scarcity of this form of labor surplus. This results in a consequent loss of value of this type of labor.

Another negative effect could be the obsolescence of an industry. A factory worker performing a simple job may find their particular labor skills become devalued with the entry of a new competitor with access to significantly cheaper production costs. One scenario in which the factory worker’s skills are devalued could be because their employer suffers from competing with new entrants, leading them to cut back their workforce, creating a surplus of labor in the local market.

One ramification of labor increasing in value is that as more specialists emerge, we could see a growing difficulty in obtaining access to the scarce labor. For example if a small number of oncologists are able to treat cancers, but their life-saving labor is valued highly at the margin by the wealthy, then the average person may simply not be able to even consider having this type of ailment cured due to unaffordability.

A ramification of labor decreasing in value is that certain governments, for whatever reason, may step in and try to “save jobs” by, say, artificially propping up a labor market. A real risk here is prolonged labor misallocation, which amplifies distortions in the marketplace which in turn cause a greater aggregate negative impact overall than the cost of “saving the jobs” in the first place.


I like your take on the dangers of central planning and government meddling. Bad indeed and regretfully a sign of our times.


Amazing example of ONCOLOGISTS. I agree with you on this misallocation of labour and resources. This is what has also been discussed in Saifedean’s book “the bitcoin standard”. He termed the Austrian perspective of these misallocations as “MALINVESTMENTS”.

1 Like