Joel Morgan wrote:
It seems clear that capital investment in tools will contribute to the -productivity- of workers. (Tools here meaning whatever machinery/ infrastructure is used to get work done.)
Bart Croughs quotes a number of economists who seem to be saying that when capital investment leads to increased productivity (per worker) this also leads to higher wages. I'm not sure I understand -why- this should necessarily be so. It's my impression that in manufacturing industries, the more mechanized production is, the more workers will get paid. Then again, perhaps a more mechanized industry will pay more because more mechanized industries hire workers with higher skills (albeit fewer workers). It's my impression that when a company makes capital investments which increase productivity, the fruits of this increased worker productivity are shared (to some extent) with the workers. I can imagine a number of reasons why this might be done, but it's not absolutely clear to me that this would be a direct result of market forces.< Increased productivity of workers leads to higher wages for workers because of competition between employers. If a worker produces the worth of $3000 per month for his boss, and his boss is only willing to give him $2000 salary, then there are other employers who would be happy to give this man a job at a higher wage. They still profit if they give him a wage of $2100 instead of $2000. This process goes on until the salary of the worker equals his marginal productivity. Bart Croughs