(Replying to PARENT post)
- Automation. Not talking AI. Just old-fashioned mechanical engineering and micro-controllers. Not going to name any names, but almost every practical thing you buy is made in only a handful of factories, and those factories don't need very many people to run at full-tilt.[0]
- BS Jobs. Most of the US defense spending is make-work for engineers/welders/managers/subcontractors/etc working on projects of dubious strategic value. It sure as hell doesn't go to the soldiers. 30% of hospital payroll is admin staff. Higher ed is the same story.
[0] https://www.bloomberg.com/news/articles/2017-06-21/how-just-...
(Replying to PARENT post)
https://fred.stlouisfed.org/series/COMPRNFB
edit:
in the 60s/70s wages were 80% of compensation.
https://www.bls.gov/opub/mlr/cwc/compensation-in-the-1970s.p...
wages are now 70% of compensation and 63% for public employees.
(Replying to PARENT post)
How do you decide how much to pay an employee? It's easy. You go online and see what the median wage in your area for the role you're seeking to fill. You then aim a bit lower than that either getting a below market rate hire, or giving them a psychological victory as they negotiate their wage up to the median. That's perfectly reasonable, but it's also in effect engaging in horizontal price fixing without so much as saying another word to another employer. This is an even better in cultures where discussing income and compensation is relatively taboo since workers themselves inhibit their own ability to effectively negotiate. Living abroad I was somewhat stupefied that "How much do you make?" and "How much is your rent"? and other such questions are perfectly normal.
Consider this thought experiment. Imagine employers were not allowed any access to historic or current wage data. They simply had to choose prices they felt appropriate for the work at hand. I think it's safe to say that wages would be much higher than they are now since naturally you would price wages relative to the value of the person being hired. Modern information not only allows but inadvertently encourages employers to engage in mass price fixing.
And in a world where employment is, more than ever, something that's very temporary (a quick search shows the average time of employment is about 4 years) - the price set for new hires is arguably the single biggest factor in long term wage levels.
(Replying to PARENT post)
Wages are not growing because of a policy to screw labor out of its earnings, and the policy is working. No reason to impute other mechanisms or make things unnecessarily complicated.
[0]https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
(Replying to PARENT post)
This is a misreading of economics. Total cost to hire for a job should match the productivity of that job.
Long ago when I worked for Boeing, the benefits package cost the company an additional 40% over one's pay. Add into that the cost of the so-called "employer's contribution" to social security, etc. I recently read that the benefits package these days can approach 100% of the salary. This likely reflects increasing health care costs, increased maternity leave, and all sorts of new benefits mandated by law, and the cost of the HR department needed to monitor compliance with the ever-changing employment laws.
Economically, these all ultimately come out of the workers' paychecks, one way or another. There isn't any free lunch (and if the company does offer a free lunch, it's accounted for as part of your compensation package and ultimately is reflected in a lower paycheck).
(Replying to PARENT post)
In 2015, median household incomes rose by 5.2 percent. That was the fastest surge in percentage terms since the Census Bureau began keeping records in the 1960s. Women living alone saw their incomes rise by 8.7 percent. Median incomes for Hispanics rose by 6.1 percent. Immigrantsβ incomes, excluding naturalized citizens, jumped by over 10 percent.
The news was especially good for the poor. The share of overall income that went to the poorest fifth increased by 3 percent, while the share that went to the affluent groups did not change. In that year, the poverty rate fell by 1.2 percentage points, the steepest decline since 1999.
The numbers for 2016 have just been released by the Census Bureau, and the trends are pretty much the same. Median household income rose another 3.2 percent, after inflation, to its highest level ever. The poverty rate fell some more. The share of national income going to labor is now rising, while the share going to capital is falling.
(Replying to PARENT post)
From what I've read, it became fed policy to make sure this labor shortage condition doesn't happen around the 1980s as a response to the stagflation of the 1970s. It was believed that one of the causes of the inflation was wage growth.
From what I understand, wages tend to go up when the red line is below the blue line in this graph, and you'll notice the red line is under the blue line a lot more before 1980 vs after. You'll also notice interest rate spikes start around the point where the red line meets the blue line, and spikes of unemployment happen soon after.
https://fred.stlouisfed.org/graph/?g=3uOu&utm_source=direct&...
(Replying to PARENT post)
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That means workers are producing more per hour for employers.
Yet wages are flat.
Who captured that extra productivity?
And what changed in the economy to allow them to capture incremental worker productivity instead of the workers themselves?
(Replying to PARENT post)
As for why wages aren't growing, there's many reasons. For one, automation and increases in efficiency undercut wages. In economic terms, income from capital is increasing faster than income from wages.
Second, immigration. For example, in Canada, if you can't fill a job at a certain wage, you can bring in temporary foreign workers or sponsor an immigrant. This means the wage of that job will never go up because if the labour market is tight, you can simply draw from another labour pool. The US and most western countries have been affected by this.
So on one end you have less need for labour and on the other, a limitless labour pool. Low 'unemployment' stats don't necessarily tell the whole picture since low wages drive up employment, but because the demand for that labour is only at that wage, it doesn't put upward pressure on wages.
(Replying to PARENT post)
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The only way to be paid according to your real value is to freelance or start your company.
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https://data.worldbank.org/indicator/SL.TLF.CACT.ZS
And a declining LPR is an expected result of higher incomes (more people can afford to go to school, live on government assistance and retire when per capita income increases).
(Replying to PARENT post)
https://data.worldbank.org/indicator/SL.TLF.CACT.ZS
And a declining LPR is an expected result of higher incomes (more people can afford to go to school, live on government assistance and retire when per capita income increases).
(Replying to PARENT post)
Well no duh, we're in this mess because worker's powers have been completely gutted. But does he actually believe this current administration or Congress will give workers an inch?
(Replying to PARENT post)
Go to a store - there is a price on the product. That is not the real price. You can negotiate a different deal, but almost nobody does.
So you have a society of price takers, not price makers.
In that society, the people who set the price are people with the money - business owners/managers and they will set the price as low as they can get.
People need to ask for more money. Then they will get more money. It's not much more complicated than that at the core.
(Replying to PARENT post)
This would explain why the inflation rate has been much lower than some people (like the Federal Reserve) had expected.
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I don't think the situation is as bad as press is describing.
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What if access to cheap debit has allowed people to survive in jobs that don't pay enough, preventing their exit from the workforce (dwindling supply) from pushing the price of labour up?
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and at the same time
Higher wages for all workers
?
(Replying to PARENT post)
The 20s - 80s "theory" that you refered to narrates its story with productivity and bargaining power. It makes sense and is based on microeconomic fundamentals. It makes sense for union-esque bargaining and politics. It also implies a constant relationship between production and wages.
Like any narrative choice, the productivity-bargaining power story works better in some cases than others. For example, productivity (and output generally) is just more abstract in 2017 than 1967^. It's hard to adjust for inflation and its hard to measure productivity of office/info workers.
An alternative set of fundamentals to narrate our stories is now gaining popularity because of the Picketty "family" of economists. It's early to tell if that school of thought will have influence on economics and policy, but for now we have some new terms, new characters for our story.
In this corner of economics, labour & capital are the main protaginists (or antagonists :)
All net income in an economy goes to either labour or capital, our two forms of income. For example, my back-of-the-envelope^^ suggests that about $60bn has been paid by Google to employees in the 10 years since IPO. About 600bn in capital has been created in that time.
Should we define this as high labour productivity or capital productivity? Either way, I think the point illustrated is that economic productivity/growth can go to one or both of these. There's no economic rule ensuring proportions remain constant.
So, what is capital? To dip a toe into Marxist grand history, capital was mostly land. Then it was mostly factories. Today, it is more ethereal. The only way to define it is financial terms: discounted future income. $600bn in capital is a $40bn annuity.^^^
Anyway... I don't have any big profound conclusions to share. I just think labour-capital aggregates will continue to be adopted in these discussions.
For example, if the post work automated future happens, I think these terms will be more useful. If Elon Musk automates the machine that makes the machine, making driverless cars,then what is he creating? It will be a bundle of capital requiring very little labour inputs to generate value. You could try to describe it in labour productivity terms, but it starts to get ridiculous and totally unlreated to wages.
^ I ws starting to write in examples, but stopped. This needs its own thread.
^^Just assumed 150k global average salary, I could be way off.
(Replying to PARENT post)
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I beg to differ. They do not learn this.
(Replying to PARENT post)
He finds, contraray to mainstream Left accounts of the economy that "U.S workers are not being paid less in real terms than decades ago; their real pay has risen and their share in the nation's income has not fallen. It is higher now than it was in 1960 and it has been stable since 1970." nevertheless he pursues a Marxist analysis throughout the book even bearing this seemingly fatal attack to claims of worker exploitation in mind.
For a more theoretical investigation into the roots and effects of automiton on employment, I must recommend Ernest Mandel's short work "Marx, the Present Crisis and the Future of Labour"[1] from 1985 which marshalls statistics, with examples from Japan, for the validity of Marx's claims.
[0] https://libcom.org/files/The%20failure%20of%20capitalist%20p...
[1] https://www.marxists.org/archive/mandel/1985/xx/future.html
(Replying to PARENT post)
YES, I mean all the economic things together is a big fraud.
With more and more tools help us track money.There are more clear that they are wrong.
We are slaved by money.
(Replying to PARENT post)
For real growth to happen, paychecks need to be fatter.
But not all companies are willing to tie performance with pay.
(Replying to PARENT post)
I mean, we know for about a decade now that the way to get raises is by switching the company every 3 years. That's just how it is. And there are even people that go corpA->corpB->corpA to make more money.
It would be reasonable to assume though that this kind of growth is shared unequally. Some people just can't make that step to accept that this is the system now. Some people really wouldn't get a job at the next company no matter how hard they try. And some people are just shy.
But I don't think that the average here on HN is from the second group. It should be common practice for people here to get their raises by getting new jobs.
(Replying to PARENT post)
For wages to grow, people have to be paid more than they're worth as an economic unit. That's what unions are about. "More", as Samuel Gompers would answer when asked what he wanted.
This was a well understood concept in the 1950s, and was accepted by both management and labor in the major US manufacturing industries. The UAW - auto company contracts of that era explicitly tied wages to increased manufacturing productivity. It still is somewhat accepted in Germany, but is dead in the US.
Part of what killed wage growth was the demise of Communism. Communism was once a serious ideological threat to capitalism. From the 1920s to the early 1980s, there was real fear in the business community that communism might work. It might deliver a better life to workers. There was competition in ideology, and capitalism had to provide an increasing standard of living or risk countries going communist. Communism never did deliver a better standard of living, but the presence of a competing system which more or less worked kept capitalism honest.
With the demise of the USSR, and China moving away from its strict communist roots, the competition disappeared. Capitalism became a monopoly. Then it started acting like one. There was no longer any need to deliver a better life to workers.
That's how we got here.