> but surely everyone knows that people at the start of their career tend to be significantly underpaid). both the graduate and the employer just don't perceive their work to be as valuable.
If everyone knows this, then why isn’t there an employer taking advantage of this arbitrage opportunity to pay the new graduates more and use their “valuable” labor to generate valuable products for sale?
The answer is that no one knows the exact numerical value of the “value” of someone’s labor. Hence we rely on the buyers and sellers’ making offers to each other and coming to an agreement. As long as there are many buyers and many sellers, working independently, the market value should become evident.
Sometimes the buyer pays a little extra, sometimes the seller pays a little extra. It’s when there is no price transparency and insufficient number of buyers and sellers that the signal gets noisy.
If everyone knows this, then why isn’t there an employer taking advantage of this arbitrage opportunity to pay the new graduates more and use their “valuable” labor to generate valuable products for sale?
The answer is that no one knows the exact numerical value of the “value” of someone’s labor. Hence we rely on the buyers and sellers’ making offers to each other and coming to an agreement. As long as there are many buyers and many sellers, working independently, the market value should become evident.
Sometimes the buyer pays a little extra, sometimes the seller pays a little extra. It’s when there is no price transparency and insufficient number of buyers and sellers that the signal gets noisy.