Workers and firms

September 3, 2015

From Alex Tabarrok (edited slightly for continuity):

Many people look at big firms and little workers and they see an imbalance and can’t imagine how the firms are not in control. [But] buyers don’t compete against sellers, buyers compete against other buyers. Firms buy labor and they are competing primarily not against workers but against other firms. When firms are thinking about wages what they are thinking about is the threat from other firms. When a firm is hiring it knows it must pay the worker at least as much as other firms are willing to pay.

Your goal, then, is to have a skill set that someone else values. In our world, the cliche is: Deans don’t set salaries, they simply determine where we work.

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