Why do people drive down the price of labor in a given industry for the sake of being employed?

Question

I understand competition. Why should members of an industry drive the price down so low, that services are basically given away. Members of this industry, have made it unprofitable, to even compete.
In a "high volume, low price" market, members of an industry cut each others throat, by undercutting the competitons prices. It is hard to segement consumers into those who prefer "quality and service" and the majority who prefer "price and service".
I'm losing lots of money and I'm wasting lots of time.

Answer 1

I think you answered your own question...for the sake of being employed.

Actually, though, it isn't the laborers who are driving down the price by accepting the jobs so much as it is the fickle market that values the service so little as to necessitate the drop in prices. For the sake of argument I'll assume you are an apple farmer and that you want to pay your pickers a decent living wage. This year there has been a bumper crop and apples abound. There is also a glut of pickers. These two situations combined make both pickers and apples a cheap commodity. Paying your pickers a decent living wage will eat into your profits and make your apples more expensive (read less desirable) than your neighbors' apples. The best you can do is go with the flow and hope to make it up in volume.

Answer 2

It's all about economics.

They say that if the % of unemployment goes up, people are afraid to lose their job so they accept a lower salary. When the opposite happens, people are willing to ask for more money since the employers NEED their labor.

There are many factors to consider in this. The industry (for example, right now, higher salary in the construction/petrolium industry), the region (more money to make in northern regions), the education (more education means higher title, better salaries), technological changes (need more intelligence/specific workers), contracting out (less jobs for us, employers go for cheaper labour in poor countries), Unions (unionized employees get better work conditions)

And the list goes on. It's not all about competition.

Answer 3

Thats capitalism my friend. You should sell out to Walmart, and move on. Unless you have a very unique product that is not substitutable, you are going to get buried by huge conglomerates that youll never be able to compete with on a price level.

In about 20 years, well all be shopping at Walmart, and buying all our computer software from Microsoft. Thats the way it is.