A fair wage is $34 per hour.

Today (7/16/15), I noticed something interesting. One of the dorms at PEA is undergoing what looks like major renovation. On Main St., outside the building, about fifteen people in orange shirts were shouting. The only phrase I could hear is “UNION POWER.” I took a photo.

As I continued into town, I happen to pass another orange shirt. I asked him what was going on. He said that he was protesting on behalf of the workers on the project. (He and his union were not hired for the job...) He said that they want for their non-union counterparts to earn a "fair wage" with health insurance, which is not offered.

I asked the orange shirt what a fair wage was.
He said that he’s not from around here (!), but where he works in Boston, he gets $34/hr, whereas the people here get, probably, $12/hr. Note, he wasn’t quite sure, which makes me wonder how he could so confidently protest in the first place. Regardless, to paraphrase: a “fair wage” is $34/hr. As he left, I noticed a package of cigars cradled in his arm. Evidently, they are to boost spirits, but it wasn't clear if the workers' spirits or the protestors' spirits were to be boosted.

The economic (mis)understanding is disastrous. What determines wages? Answer: wages tend toward one’s discounted marginal value productivity, i.e., how much value a person contributes to goods in production. A person cannot earn more than this, because it represents a loss. And, if he earns less, competitors can easily attract the worker by bidding up the wage. Next question: what increases productivity? Answer: capital goods. An employee is more productive with a broom than with his bare hands. Capital goods raise wages.

Unions do not raise wages. To be more precise, unions can raise wages for union members, but only at the expense of non-union people. Historically, all the benefits that union works claim to have created are a result of market competition and capital accumulation. More on that here, here, and here. Additionally, the quick video below is informative and easy to understand. This is important.

Even practically, suppose that there is a “fair wage.” What is it? How is it determined? Is it $34? Would accepting a higher wage be unfair?  Does a short commute discount the fair wage? What about benefits? Does the type of labor matter? Naturally, there are no answers to these questions. Proponents of a fair wage just mean a higher wage given to them. Yet, even 1500 years ago, people recognized that a fair wage is the market wage, which is determined through bargaining (see, e.g., the Theodosian Code). That the $12/hr workers voluntarily accepted this payment de facto makes it fair.