Frequently Asked Questions

Isn't the "value of 1 work hour" just the average hourly wage?

No. It's the average value added to production outputs by a worker in one hour of their work. This is estimated in monetary terms by considering outputs sold in the market for the products in a given industry, minus the portion that can be attributed to inputs bought from other industries, placed in the context of the amount of work time expended in the process. Salaries and wages don't necessarily have anything to do with this quantity.

Ok, so why aren't I paid the full "value" for my work?

Under generous idealized conditions, it's theoretically possible for all workers to be paid a wage equal to the work time value of their work. In this scenario all work would be performed in the same amounts as before, but profit and interest rates would be 0%. That is, all loans would carry zero interest, and your savings and investment accounts would neither yield returns nor incur losses. Moreover every sector would experience neither growth nor contraction.

However, by law, employee wages and salaries are currently negotiated rather than tied to an economic indicator by common agreement. Salaries and wages are determined entirely by the balance of negotiating power of the employer and the employee. For the same reason that wages don't need to correspond to work value, prices for mass market consumer goods--those purchased, taken out of commodity market circulation, and consumed by final consumers--don't need to correspond to the prices they would fetch on the open market between industrial buyers and sellers of essentially equal bargaining power.

Any proposal for real-value-based wages, i.e. everyone getting paid the full value of their work, presupposes a non-adversarial replacement for the employment negotiation process mentioned above. In particular, union-led negotiations for higher wages and minimum wage campaigns do not qualify as non-adversarial replacements. Rather, they represent direct attempts to equalize the balance of power in the employment negotiation process, this process otherwise taking place in the normal way.

Is that why the Ithaca Hours, Cincinnati Time Store, National Equitable Labour Exchange, and other utopian experiments in labor-time-based currencies always failed to be adopted?

Yes. They failed to confront the root cause of the large discrepancy between wages and work value, and proceeded as though the value of money were established by an arbitrary mutual convention which they sought to correct.

On the flip side, direct confrontation of this root cause is the reason that union bargaining and minimum wage campaigns have been comparatively successful at achieving their aims.

Actually, I am paid a lot more than the value of my work time ...

If your current salary is more than $118.1k / year, you may be said to belong to the working upper class. That means that the balance of negotiating power with respect to your employment contract, or with respect to the market for your services, is in your favor.

The working upper class should not be confused with investor/owners. For example, if you are a "small business owner", but you need to work full-time for your business in order to turn a profit, then the amount of investment capital you own is zero. It is often effectively negative, when investors' and lenders' share of ownership of the business sufficiently exceeds your own.

Similarly, investor/owners who do not need to work, but do so for pleasure or social status, ought not to be confused with the working upper class.

What does it take for a person to qualify as an "investor/owner" rather than as a worker?

It doesn't matter how much their salary is, if any. What matters is how much capital investment ownership they have. A reasonable threshold of capital ownership is: Enough for the annual profits with respect to a standard annualized return rate to equal to the standard work year of $118.1k. That is, the amount of capital that entirely replaces a person's work from the owner's point of view. In case of an annualized interest rate of 5.730%, this quantity of capital is $2.06m = 17.45 work years.

An alternative threshold, similar but distinct, is the amount of capital that entirely replaces a person's work from the worker's point of view. For example, for profits to be equal to the U.S. federal minimum wage of 0.128 work hours per hour, the amount of capital ownership required is $263.88k = 2.23 work years.

Shouldn't we aspire for everyone to be an equal investor/owner in the economy?

Actually, no. Because it's logically impossible.

Unlike in the theoretical thought experiment above, where every worker is paid wages equal to the time value of their work, it is not even theoretically possible for everyone to be an investor/owner as defined above. For every investor/owner, under the simplifying assumption that every worker works full-time, there must be at least one full-time worker doing the work represented by the profits appropriated by that investor. This fact caps the number of possible investor/owners at 50% of the population of potential workers.