I was arguing with a friend and stated that the wage is equal to the marginal productivity of labor. He attempted to deny that argument by showing statistics that a computer programmer in nashville earned only 70k while a computer programmer in california earned arround 100k. If the wage is equal to the mp of labor, then why would there be differences in the two areas in wages?
The fast answer to your last question is that theres a different mp in the different areas. However, I disagree with your claim too - I'd say that in a free market, the wage would tend towards the marginal product. But we don't have a free market, and even if we did, it wouldn't follow that they'd be equal.
That's a terrible disproof. It ignores differences that may exist between the two markets (e.g. supply of/demand for labour, productivity etc.)
1. Wage, just like anything else, is determined by supply and demand. The marginal productivity of a computer programmer is not necessarily a commodity item . . . there is a huge subjective component, determined by both the employer and the employee.
2. $70k in Nashville is not the same thing as $70k in California. In fact, $70k can probably make a better living in Nashville than $100k can provide in San Francisco. When inflations make everything go up 10 times in price in the next decade, the programmer's living standard won't have improved by 10x despite his wage going up to nearly a million dollars. Places like NY and California just happen to be further along the inflation curve than the middle of the country (which are in turn further along than the rest of the world on dollar standard) because they are closer to the sources of money.
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