I'd be interested in seeing your response to the quiz.
I'm glad I read the comments before replying, and I'm struggling to come up with a really good answer. I think it might be a chicken/egg thing. Because of benefits, workers are able to get by with lower wages, and because workers can get by with lower wages, employers are happy to pay less. The more I think about it the more it becomes using wages as a basic minium income. McDonald's makes use of cheap labor because the labor is cheap. The workers want to work. I did fast food in high school and it's terrible. Nobody would do that just because. It's work of last resort. Maybe the question becomes "should labor be cheap?" Does society answer that or employers? Probably both should.
Heh, I was going to suggest responding before reading the comments, but I didn't want to be bossy. This sounds very reasonable to me, but I think it's the wrong way of thinking. The question is not what workers are able to do (what is financially possible), it is what workers actually do (how they respond to their incentives in different situations). Suppose you unexpectedly inherit an annuity equal to half your salary. Financially, you are now able to have the same lifestyle even if your employer cuts pay by 50% the same day. But I doubt you would be okay with that! In practice, what happens is that the inheritance makes you more financially comfortable, so you are less inclined to work for money (ignoring factors like prestige or job satisfaction). If the inheritance were 100% of your salary, you might even consider retiring early. New outside income tends to make workers less willing to work for money, so if employers want to retain staff they would have to increase compensation, or at least not reduce it. As Caplan expressed it, "higher unemployment benefits make it easier to not apply for a job at Walmart." There are plenty of wealthy retirees who can get by with no wages, and employers would be happy to pay them nothing to work as volunteers, but in practice people only agree to work when they consider it better than any alternative, including enjoying more leisure.Because of benefits, workers are able to get by with lower wages
because workers can get by with lower wages, employers are happy to pay less.