or as she so eloquently titled it, Ramblings from Someone who May or May Not Understand Econ (and citing Naked Economics by Charles Wheelan):
"The argument that capitalism requires people to be poor so as to fill up the "distasteful" jobs of modern society is very appealing, but fundamentally wrong from an economic perspective.
It comes down to the idea of opportunity cost. Opportunity cost is the foregone benefits of alternative choices. For example, you have to decide whether or not to stay home and study or go and watch a movie. If you study, the opportunity cost is watching the movie, and vice versa.
In the real world, salary is a reflection of opportunity cost. The opportunity cost of working at one job is the potential earnings of another job. So, in order to attract people to work for you, you must offer them a salary that is greater than their potential salary in another job.
Currently, there is a lot of inequality in education, which could be broadly categorized as human capital. Those with low human capital work jobs that require less of it, such as janitors and so forth. These janitors and people who do other “dirty” work are not paid very much because their opportunity cost is low. They do not command skills that would get them paid more in another job, and their current salary reflects that. But the question comes when everyone is a millionaire or everyone has high human capital (e.g. everyone has a PhD), then who will clean our toilets?!
The answer is actually really simple. You pay the toilet cleaner relative to his or her opportunity cost. If he or she can easily command a high paying job with his/her skill set, then just pay him/her a higher salary (to make up for the opportunity cost and maybe a little extra to get over his/her reservation about cleaning toilets) and he/she will clean the toilet (assuming this person is a completely rational actor that only cares about maximizing budget). In this world where everyone is a millionaire, the toilet cleaner might be the one commanding the highest wage!
This sounds ridiculous, but a lot of jobs work this way. Plumbers and other people who have dirty jobs command a higher salary than you imagine. This is because plumbing requires skill, but also because not a lot of people wish to be plumbers and thus the salary needs to be high to attract people to the profession. This goes into another concept of reservation wage, which we will not cover today.
In short, capitalism does not need a “lower class” of people to do the “distasteful” jobs. If wage is flexible, it will adjust itself so that all demands of the market are met. There will always be people willing to work if the price is right, and these people do not need to be the lower class.”
(this is in response to this post)