The Labor Market Is Broken
&gt; [...] Imagine two people, one of whom is given $10 and told to propose a way to split the money with another person—a stranger, let&#x27;s say. The catch is that if the stranger doesn&#x27;t agree to the deal, they both get nothing.<p>&gt; Economists and psychologists alike love this experiment because it captures an interesting facet of human behavior that appears irrational at first glance. Surely the second man should accept any deal offered by the first. So what if he&#x27;s offered just a penny? Free money is free money! Who cares if the other guy gets to keep $9.99? Instead, across all cultures and contexts, people reject offers they perceive to be unfair: The details vary, but human beings turn down money with astonishing consistency if they think they&#x27;re being done dirty.<p>&gt; [...]<p>&gt; &quot;The process of contracting a worker is often close to ultimatum bargaining,&quot; explained Elwyn Davies (then with the University of Oxford) and Stanford University&#x27;s Marcel Fafchamps in a 2016 paper exploring the effects of competition on behavior within the ultimatum game. &quot;The employer specifies a job description and proposes a wage and the worker accepts or rejects.&quot;<p>Elwyn Davies and anyone with an economics degree who read that and thought that was a reasonable idea should have their economics degrees revoked until they&#x27;ve worked a minimum-wage job for a year with no other income, because this is incredibly ignorant of economics.<p>Free money is free money, sure. But labor isn&#x27;t free money. Workers have resources such as ~75-80 years of life, some health, energy, etc., and <i>workers are giving up a portion of those resources</i> to their employer in exchange for money. You don&#x27;t get those back.<p>Those resources have a value to workers. At some point as wages decrease, those resources become more valuable to the worker than the amount being offered for them.<p>I&#x27;m currently in Tennessee. Minimum wage here comes to about $1200&#x2F;mo. That doesn&#x27;t cover rent, let alone expenses of a reasonably enjoyable life. I&#x27;m very grateful that these aren&#x27;t my options, but if my options were work 40 hours&#x2F;week for $1200&#x2F;mo, or have that time, I&#x27;d rather have the time, <i>because that&#x27;s a more enjoyable life</i>. The things that $1200&#x2F;mo buys me are simply not worth as much as being able to go on a hike when I want to. That&#x27;s <i>rational</i>. It&#x27;s not some irrational human sense of fairness thing, or sticking it to the man, <i>it&#x27;s the only reasonable reaction to the situation</i>.