Interesting question: who deems what a job is worth to society?
Many things:
First, we all do. As a simplistic example, would you hire me at $50/hour to patrol the front of your house for squirrels? No. No matter how diligent or hard-working I was, that function is not worth $50/hr to you. In fact, it may be worth nothing at all. A little less simplistic: would you keep me on fulltime staff to clean your apartment or house at $100,000 per year? Probably not. If I charged $1,000 per year, you probably would. A clean apartment/home is a good thing (by most people's standards). It has value. How much value? Well, that depends on how much people are willing to part with for it. Maybe you would rather waste your time cleaning. Maybe I would be idle most of the time because your place isn't that big and therefore it doesn't justify fulltime staffing.
Second, alternatives. I touched on this already a little with your substituting your labor for mine, but it goes even further. Can the process be mechanized? In the era before computers, there were still things like directories and it must have been a damn tedious process alphabetizing all those names. The person was, no doubt, hardworking, but as computers came along and could do the job quicker and more accurately, well, that person no longer had function. Yes, the value of sorted data didn't change, but the cost to acquire sorted data did change while that person didn't (or maybe they did and became a valuable computer technician or something).
Third, output. What is its intrinsic value. A car has intrinsic value, but it also varies by person - a car is worth more to the President than it is to me. He's busier, I can take the subway without fear of assassination, etc. The more expensive a car is, the fewer people will have it. For the most part, producers don't get to price discriminate - if Bill Gates goes to the Mazda dealership he'll get a similar price that I get even if the car is worth a lot more to him.
Forth, competition. Are there other people that are willing to do the job for less? I'm guessing beer tasters don't get paid well, but I'd also wager that breweries don't have trouble finding people for the job. Likewise, if competitors are more efficient (either companies or other workers), it makes your labor less valuable. If your company produces 1 car for every 50 hours of labor and another company produces 1 car for every 25 hours of labor, your labor isn't worth as much. If I can automate processes that save time, my labor becomes worth more and yours less.
Fifth, other goods. Economics is about allocating scarcity. Many try and argue that we're not an economy of scarcity anymore and that we have enough for everyone and that it's just a corrupt capitalist system that prevents that from happening. Then they create cost of living calculations for a living wage that consider someone without cable to be in dire poverty. Face it, we like things. If we could all live without things (from TVs to medicines), we'd be fine. So, the question is: on a per dollar basis, how has the automobile fared against other things we can spend our money on? For me, on a per dollar spent basis, my computer is much more valuable. Are people moving a certain percent that they used to spend on cars toward CDs or TVs or computers or cranial piercings? I have no idea, but we all allocate our budgets in ways that we hope will increase our happiness. People's tastes change, society's tastes change. Portable radios do positively affect your happiness and are cheap (say, $20), but people seem to have widely pronounced that MP3 players (at 5-10x the cost) positively affect their happiness at a rate greater than that 5-10x increase. Or they're just idiots that don't know what to do with money.
I could go on, but I think you get the point. It's a truly fascinating topic. In the GM case, there are some neat applications to see.
1. When GM, Ford, and Chrysler were pretty much the only auto makers, the amount of competition was less which meant that consumers would pay more and fewer units would be shipped. If you want to calculate how this works, look up the cournot/nash equilibrium. As the car companies were selling at higher margins and ignoring the poorer people, labor could demand more money since the car companies were making more money per unit of labor used.
2. Other firms with lower labor costs also became more efficient. Toyota makes cars faster combined with a lower cost per hour. That means GM's labor is worth less money.
3. The value of output might be fluctuating. Here is where I'm spouting complete BS. As gas prices rise, the intrinsic value of a vehicle declines. Americans also seem to be having a shift in their perception of public transit and as their view of it becomes more favorable, the value of a car decreases. However, as most people are suburban, a car can still be a lifeline.
It's late. I'm done. Hopefully that was interesting. It wasn't meant to have any view pro or con in it, just more of a view into how prices get set and how we value things.
"If your company produces 1 car for every 50 hours of labor and another company produces 1 car for every 25 hours of labor, your labor isn't worth as much. If I can automate processes that save time, my labor becomes worth more and yours less."
If you automate a process, your labor is worth less. That's the point of automating a manual process--it's necessary to produce competitive advantage. Simultaneously, it allows a manufacturer to produce more goods, while replacing skilled workers who were necessary to produce the commodity manually, with less skilled or unskilled workers.
I should have been more clear: If I can automate a process that saves time, my labor becomes worth more with me as the automator.
Let's say you work at a University in Residence Life. Each year, 5,000 students all pick where they want to live by coming up in person to you and 4 other people who have to coordinate room availability, write everything down, etc. It takes a long time and requires 5 people. The next year, you write an awesome Web 2.0 app that students can log into and just deal with it in an automated fashion. The labor of the 5 of you hand-doing that process declines. However, you're now doing new labor: that web 2.0 app! That Web 2.0 app does the work of 5 people and only requires YOU! That means that your labor on the automation process makes your labor more valuable (roughly 5x more valuable) while the labor of those who don't automate the process becomes less valuable.
Likewise, let's say we both work at investment firms and we're told to get standard investing data on 10,000 stocks each off Google Finance. If I go through an manually type it in and write it down, that will take a long time. If you write a script that does it in minutes, your labor is more valuable than mine. Therefore, if you can automate a process, your labor becomes worth more since you're getting an inanimate object to do your work for you and being more productive because of it.
To start, the first example is moot, as a university is not a competitive entity like a manufacturer. Whether they decide to automate depends on a need to save money where possible, not survive in a marketplace.
Second, you just reaffirmed my point. You are confusing productivity with labor value. By writing a script, you've revolutionized the production of obtaining standard investing data. As such, it requires even less labor. In fact, it now requires no labor, since a machine without any human intervention (save for negligible maintenance costs) can do the job! Why should anyone be paid to--according to what you described above--to do nothing. It's all automated. Now, if investment firm B (my firm) wants to compete, it will have to do the same, since it is spending $X amount to collect the data, while your firm spends $0. This is a pointless cost. As such, it will be forced to do the same to stay in business. Now, firm B no longer requires a warm body to perform the aforementioned task, i.e. it no longer employs someone to enter data. How does not employing someone generate wages for them?
By writing your own script, you cancel out your own employment. While true, that the writing of the "awesome" Web 2.0 app (I love yc news, it's full of this stuff) will absorb a fixed amount of labor, thus keeping you employed for the duration of writing it. Once it is completed though, you will be made obsolete. You essentially, wrote your own death sentence. Now don't this is a misguided Luddite speaking, I am a programmer too, and I can sympathize.
Many things: First, we all do. As a simplistic example, would you hire me at $50/hour to patrol the front of your house for squirrels? No. No matter how diligent or hard-working I was, that function is not worth $50/hr to you. In fact, it may be worth nothing at all. A little less simplistic: would you keep me on fulltime staff to clean your apartment or house at $100,000 per year? Probably not. If I charged $1,000 per year, you probably would. A clean apartment/home is a good thing (by most people's standards). It has value. How much value? Well, that depends on how much people are willing to part with for it. Maybe you would rather waste your time cleaning. Maybe I would be idle most of the time because your place isn't that big and therefore it doesn't justify fulltime staffing.
Second, alternatives. I touched on this already a little with your substituting your labor for mine, but it goes even further. Can the process be mechanized? In the era before computers, there were still things like directories and it must have been a damn tedious process alphabetizing all those names. The person was, no doubt, hardworking, but as computers came along and could do the job quicker and more accurately, well, that person no longer had function. Yes, the value of sorted data didn't change, but the cost to acquire sorted data did change while that person didn't (or maybe they did and became a valuable computer technician or something).
Third, output. What is its intrinsic value. A car has intrinsic value, but it also varies by person - a car is worth more to the President than it is to me. He's busier, I can take the subway without fear of assassination, etc. The more expensive a car is, the fewer people will have it. For the most part, producers don't get to price discriminate - if Bill Gates goes to the Mazda dealership he'll get a similar price that I get even if the car is worth a lot more to him.
Forth, competition. Are there other people that are willing to do the job for less? I'm guessing beer tasters don't get paid well, but I'd also wager that breweries don't have trouble finding people for the job. Likewise, if competitors are more efficient (either companies or other workers), it makes your labor less valuable. If your company produces 1 car for every 50 hours of labor and another company produces 1 car for every 25 hours of labor, your labor isn't worth as much. If I can automate processes that save time, my labor becomes worth more and yours less.
Fifth, other goods. Economics is about allocating scarcity. Many try and argue that we're not an economy of scarcity anymore and that we have enough for everyone and that it's just a corrupt capitalist system that prevents that from happening. Then they create cost of living calculations for a living wage that consider someone without cable to be in dire poverty. Face it, we like things. If we could all live without things (from TVs to medicines), we'd be fine. So, the question is: on a per dollar basis, how has the automobile fared against other things we can spend our money on? For me, on a per dollar spent basis, my computer is much more valuable. Are people moving a certain percent that they used to spend on cars toward CDs or TVs or computers or cranial piercings? I have no idea, but we all allocate our budgets in ways that we hope will increase our happiness. People's tastes change, society's tastes change. Portable radios do positively affect your happiness and are cheap (say, $20), but people seem to have widely pronounced that MP3 players (at 5-10x the cost) positively affect their happiness at a rate greater than that 5-10x increase. Or they're just idiots that don't know what to do with money.
I could go on, but I think you get the point. It's a truly fascinating topic. In the GM case, there are some neat applications to see.
1. When GM, Ford, and Chrysler were pretty much the only auto makers, the amount of competition was less which meant that consumers would pay more and fewer units would be shipped. If you want to calculate how this works, look up the cournot/nash equilibrium. As the car companies were selling at higher margins and ignoring the poorer people, labor could demand more money since the car companies were making more money per unit of labor used.
2. Other firms with lower labor costs also became more efficient. Toyota makes cars faster combined with a lower cost per hour. That means GM's labor is worth less money.
3. The value of output might be fluctuating. Here is where I'm spouting complete BS. As gas prices rise, the intrinsic value of a vehicle declines. Americans also seem to be having a shift in their perception of public transit and as their view of it becomes more favorable, the value of a car decreases. However, as most people are suburban, a car can still be a lifeline.
It's late. I'm done. Hopefully that was interesting. It wasn't meant to have any view pro or con in it, just more of a view into how prices get set and how we value things.