That’s not what OP said. They said it was a case of exploitation and they are correct. People just don’t like to hear it phrased that way because it brings up negative connotations.
Now, while the agreement may be exploitive that doesn’t mean it isn’t mutually beneficial or that the situation be zero sum, at least viewed at a small scale. It’s perfectly possible to be exploited by someone and still end up in a better situation regardless. The level and terms of exploitation are what matters.
As a member of the labor force you ideally want to minimize that exploitation and be charging as close to your value add as the market will bear. In an idealized situation, you pull more than the market rate in some way shape or form (higher pay, less work, etc.) because in a capitalistic system you should be doing your due diligence to help the labor market optimize the way the employer market is optimizing.
Only in a non-capitalist society. You are naively missing company profit as the reward for company risk: capitalism 101.
In an imaginary world you have built a business that brings in $x. You now employ $people to run the business and you leave the business in their capable hands. The amount of value produced by $people is $x. No capitalist owner would then share the total of $x out to the $people according to the value each person is producing in the business. Whether $x is profits or revenue, most capitalist businesses won't be kept alive for $0 profit.
0: I took risk to mean the risk of employing someone - your definition is totally unclear (I admit I'm an engineer not an economist). Please point me to a good reference that defines your equation.
1: Risk is not profit.
2: Profit is only related to risk in some perfect (edit) economist model of markets. Or if you use a tautological definition between the risk and the profit. In the practical world, risk and profits often diverge. Businesses cannot have perfect knowledge so opportunities always exist.
3: you are also ignoring the bigger issue: why would a capitalist company pay more for an employee than they have to? An employee usually can't even know how much their work is worth - they don't have access to the financial records - (edit) a company uses that information asymmetry to their advantage. If two fungible employees bid their required salary for a job, the company will pay as little as possible and choose the cheaper person. Where does that fit into your equation?
> The value produced by a particular "someone" surely varies wildly among Apple employees.
Obviously. This margin is too small to write a detailed example to fit your needs! Argue the point.
Edit: at least say whether you think "value produced" is revenue produced or profit produced. Kind of an important difference between the two and it isn't clear what you mean at all. When you do that, I'll try and construct a marginal employee argument edit2: I was trying to point the Apple example towards an argument based on marginal value - I should have been clearer, sorry.
0. risk is the risk all businesses take when they invest. It's why low-risk bonds pay low interest, and high risk stocks (potentially) give high returns. No savvy business is going to invest in a high risk endeavor with poor expected returns. You don't need a book to tell you that.
1+2. the higher the risk a business takes, the more profit it needs to justify the risk
3. Note how I said if the business underpaid the employee, the employee can leave and get a better offer elsewhere. That's how markets work. That's what drives compensation up to fit the equation. Or the employees can quit and start a competitor. Unusually profitable businesses draw competitors like flies to honey. Every businessman is looking for a high margin business to get in to.
Let's put it another way. If you started a business that made $100 per widget, and the employee that made the widget cost you $10, that would be a great business. Until your competitors caught wind of it and enticed away your employee for $20. You entice him back for $30. Until it reaches equilibrium that matches the equation.
Your argument is based on a perfectly spherical economy. Edit: is that the Austrian or Chicago economics?
In the real world, there are asymmetries, and that shows because in the real world we have businesses making profits in excess of their risks.
If I have a business that makes $100 per widget but it depends on a secret that only I know, how does the competitor learn my secret? Where does that secret knowledge fit into your equation?
And clearly your argument is flawed since most employees are not paid anywhere near the value they produce. Your examples are based on an idealistic perfect market - which we clearly don't have a perfect equilibrium.
Also I added marked (edits) to previous comment before I realised you had already answered
The equation I gave is the equilibrium point. Market forces are always pushing things towards that equilibrium. If a business is operating far away from it, competitors will inevitably emulate it and drive it back to the equilibrium.
> how does the competitor learn my secret?
The more valuable the secret is, the more effort competitors will expend to learn it. The reason we have a patent system is competitors are pretty good at finding out secrets.
The only trade secret I know of that has lasted a long time is Coca-Cola's formula. And yet Pepsi competes successfully with them anyway.
Do you have an example of a trade secret that is enabling unusually high profit margins with poorly paid employees?
> in the real world we have businesses making profits in excess of their risks
A lot of risks do not seem so risky in hindsight. Like Musk's creation of Tesla and SpaceX. I bet risk will look very different to you if you're faced with risking your own money on a venture.
> clearly your argument is flawed since most employees are not paid anywhere near the value they produce
Okay we've gone off track here. I just find your "equation" makes no sense.
Firstly, the types of your variables don't match. Risk and $/year can't be added together. And adding per employee variables to a per company variable (risk) is yet another typing/dimension issue.
Secondly, adding "opportunity cost" is meaningless. Adding a dependency on the next best employment choice makes no sense. Also an opportunity cost only exists in a non-equilibrium market - I can't see why you argue for equilibrium while having opportunity cost. Why would an employer care what the opportunity cost was - and you can't argue that it is an equilibrium due to employees demand - because there isn't an equilibrium (see your previous wage example).
Finally, if there is a marginal change in revenue, your equation says that is reflected in employee wages. Imagine a low-risk company where profits are fairly static (say close to risk-free rate of return). If revenues go up, your assumption is that employees are perfectly fungible between businesses and that employees will demand higher wages to capture the revenues (assuming transaction costs are zero so no spread). But employees don't know their value, so there is a distribution of bids. If employees are perfectly fungible then a business will buy the employee that underbids, and the business will make an "excess" profit.
> No evidence presented for that.
That's a diversion. Anecdotally I've experienced it many times as an employee and as a business owner.
The real world has too many counter-examples of disequilibrium - and you are trying to make micro-economic arguments that depend on perfect market equilibrium.
As a business owner, I'm surprised you don't know the term opportunity cost. What it is is the investment returns you can get by doing something simple and safe, like investing in bonds. There's no reason to be in business if you can't do better than that.
> But employees don't know their value
Your assumption that employees are stupid and ignorant is false.
> Anecdotally
I.e. you don't really have the data.
> that depend on perfect market equilibrium
Nope. I said that market forces push it in that direction.
> I'm surprised you don't know the term opportunity cost.
Assumptions. I know it. I'm saying that it makes zero sense to put it in your equation as you have. Your equation appears to be per employee (but you are not talking about the employee opportunity cost). You are adding in the business opportunity cost of money to your equation - a per business cost not a per employee cost. Again you are mixing implicit types which makes your equation meaningless.
> Your assumption that employees are stupid and ignorant
You are making the assumption. I never said that and I certainly don't think it.
The key word in the definition of exploit is "full" use. To simply use something and derive a profit from it is not necessarily exploitative, as the noted comment suggests.
In the context of this thread, the original claim put forth is that being "used" for 80 hours is in fact exploitative; by one calculation, this amounts to 100% of your waking time in a standard 5 day work week, assuming a typical 8 hour daily sleep period. On the other hand, being used for a 40 hour work week is not exploitative; you still have 50% of your time remaining for non-work life. The math here is used for illustrative purposes, but a reasonable interpretation of "full" would tend towards 100%, not 50%.
Workers are truly exploited in some cases. To label a 40 hour work week as exploitation, in most cases, is simply hyperbole that diminishes the real suffering and ethical issues of actual worker exploitation.
The usual counterargument is that the worker agreed to exchange their labor for a price so it's "fair" and therefore not exploitation, which is obviously juvenile. I appreciate that you at least go beyond that simplistic platitude, but it seems equally shortsighted if not ridiculous to get caught up about what qualifies as "full use" of a human being, which is probably why most people just stop before going there. You didn't even mention the wage! I have to ask: would a slave that never works beyond 40 hours/week be considered exploited?
Now, while the agreement may be exploitive that doesn’t mean it isn’t mutually beneficial or that the situation be zero sum, at least viewed at a small scale. It’s perfectly possible to be exploited by someone and still end up in a better situation regardless. The level and terms of exploitation are what matters.
As a member of the labor force you ideally want to minimize that exploitation and be charging as close to your value add as the market will bear. In an idealized situation, you pull more than the market rate in some way shape or form (higher pay, less work, etc.) because in a capitalistic system you should be doing your due diligence to help the labor market optimize the way the employer market is optimizing.