fd ski: Contributing to economy ?
Large number of children entering the labor market at age of 5 would cause unemplomeny to sore.
Assuming you are talking about early times where there was supply of child labor - due to lack of capitalism, not because of it. You are commiting the typical "limited amount of work fallacy".
With more goods produced the prices would fall - thus driving down the product prices and raising the real wages.
Higher profits would make more money available for investment - driving real interests down.
Lower factor prices and lower interest would make more production viable, so it will expand
Higher real wages would allow to cut nominal wages while still increasing the worker's welfare. With lower salaries, more workers will be hired, not less - in the businesses that suddenly became profitable.
That is simple - if more resources are employed rather than stay idle, the total amount of goods increases while the population stays the same. Everyone benefits, since due to competition the production factors (including labor)necessarily receive their marginal utility. With more capital accumulated and limiter labor amount, it's marginal utility would - and does increase compared to other factors - capital and raw materials. So the workers would receive more compared to capitalists, who's returns - as reflected by the interest rates - would fall.
There is always more demand for more and better goods to be satisfier. And even if there were-not, which is impossible, the people who's demand was totally satisfied would have stopped working, freeing worlplaces for those who needed work.
Persistent unemployment is theoretically impossible in a free-market capitalism - and did not exist in practice.
There was unemployment in the early stages - due to inflow of people from the outside of capitalist environment. Once capitalism spread everywhere, it disappeared - except for immigrants, of course.
In modern times, the percistent unemployment is purely due to restrictive labor laws that do not allow workers to offer the employers the good terms. If a worker would make an employer $4.50 and he is not allowed to accept a job for less tham $5, he will hav no job at all.
Your contention that child labor would have ended by itself, while in economic principal correct has yet to be proven in practice.
In soclieties where capitalism has not yet developed - sure. When most of the population is outside of division-of-labor market economy - in subcistence farming and the numbers are kept steady by starvation of children to death and deseases, there will be desperate families.
They suffer from natural scarcity and the natural scarcity is caused by scarcity of capital.
The last thing you want is discourage capitalists from accumulating the capital.
While I agree with some of your free-market ideas, you are working on the assumption that markets are fully self-correcting. I find that optimistic, or should I say, idealistic.
They are. And I am not idealistic at all. Nowhere in my logic there is a dependence on a good will or charity of anyone involved. Capitalists are forced to pay the marinal utility of labor by competition from other capitalists, not by goodness of their hearts.
There is no moral component here whatsoever. Just like capitalists have to pay market-clearing price for material factors, same for labor factors. True - salaries started low in the ealy times. Since the productivity (production per person) increased due to capital accumulation outpacing the population increase, the minimum wage is naturally getting bigger. If itw as possible to survive on it 200 years ago, it must provide a better level of living now - or would without the government intervention like price support artificially increasing the price of goods and limiting production.
It is based on the assumption that all people think in the rational "profit maximization" fashion, this isn't always a case, numberous studies proved that people are not always clearly profit oriented.
That just means that a capitalist may not go for the biggest monetary gain - thus providing the most value to customers and most employment - but rather for some other cause like preservationof nature, chariry, etc. So what? It's his money.
His failure to invest will make capital scarcer, cause interest rates to raise and that may induce another person to invest more.
The studies are bogus because they only consider monetary profit rather than all subjective valuations - which are impossible to measure, so the empiricists do not bother with them.
Human choice is always a selection of better subjective outcome to the less desirable one - by definition.
Did banning of child labor lower real wages of all ? I think you may be right.
No, I said it lowered nominal wages but increased the real wages. More goods, same number of people - salary buys more.
I'm sure you'd say that businesses would rather pay for more capable adult, however in practice I find that anything walking on two feet will do. This would cause labor markets to shift to ever younger age, while leaving those most capable unemployed - thus brining down the price of thier labor till equalibrium was found. As such everyone's real wages also suffer by child labor.
No - real wages would be increased because a grown-up would not be wasted doing a job that can be done by a child. So the total production would increase - and the consumption per person as well.
At some point the marginal utility of each dollar brough by a child will drop below having that child stay home and go to school - so he earns better return.
Instead of investing a child's time in immediate production to stave off the urdent need - like starvaton, the child labor will be invested into schooling so he/she earns more in the future. What do you think the school is about?
It's labor, all right. One way or another the child's efforts are invested and only the family can determine priorities right.
miko
