Before I start, I want to specify that I only wish to discuss Free Market theory, not government involvement.
The theory of free market supply and demand works in many instances in the economy. If you make hammers and people buy them, the market balances itself out. If too few hammers are made prices go up and competitors enter the market, which puts more hammers out and brings the price back down. If too many hammers are made, the factories cannot cover the cost of production and some close down, lowering the number of hammers and boosting the price. Thus not only does supply dictate the price, but price keeps the supply in check.
But when it comes to unskilled labor, it doesn't abide by the same rules. If there are too many unskilled or unemployed skilled workers, the price will be pushed down. Like everything else the price is determined by supply and demand. However, it is immune from the other side of the balancing practice. Unskilled laborers don't stop being produced, and never will. If there's too many hammers then hammers stop getting made. If there are too many workers, workers still keep getting added. With technology lowering the number of needed workers, and outsourcing increasing the supply, it has simply made the process faster. Even with 13 million surplus workers, more are added each year.
I feel it is a cancer in the theory, in that it doesn't function within the system. It's much like a tumor that continues to grow when other body cells shut off. Pointing to it claiming supply and demand works is like pointing to the tumor saying cells are supposed to divide. It's only half of the story, and eventually it breaks the system.
The theory of free market supply and demand works in many instances in the economy. If you make hammers and people buy them, the market balances itself out. If too few hammers are made prices go up and competitors enter the market, which puts more hammers out and brings the price back down. If too many hammers are made, the factories cannot cover the cost of production and some close down, lowering the number of hammers and boosting the price. Thus not only does supply dictate the price, but price keeps the supply in check.
But when it comes to unskilled labor, it doesn't abide by the same rules. If there are too many unskilled or unemployed skilled workers, the price will be pushed down. Like everything else the price is determined by supply and demand. However, it is immune from the other side of the balancing practice. Unskilled laborers don't stop being produced, and never will. If there's too many hammers then hammers stop getting made. If there are too many workers, workers still keep getting added. With technology lowering the number of needed workers, and outsourcing increasing the supply, it has simply made the process faster. Even with 13 million surplus workers, more are added each year.
I feel it is a cancer in the theory, in that it doesn't function within the system. It's much like a tumor that continues to grow when other body cells shut off. Pointing to it claiming supply and demand works is like pointing to the tumor saying cells are supposed to divide. It's only half of the story, and eventually it breaks the system.