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Why would wages ever keep up with productivity? Wages will always be a race to the bottom between employees who have to work to not be homeless. The capitalists

Why would wages ever keep up with productivity? Wages will always be a race to the bottom between employees who have to work to not be homeless. The capitalists can exploit this to make wages as low as possible. Productivity has nothing to do with it.

merpnderp 11y ago
The means of production have never been more accessible. The ability to learn new skills/trades has never been easier. If the average person can't take advantage of them, then it probably has less to do with capitalism and more to do with the government and corporatist conspiring to keep them out of the game.
- zajd 11y ago
  Learning a new skill or trade doesn't give you access to the "means of production", capital does. And inequality is as bad as it's ever been over the past 50 years. A few tech startup darlings doesn't change that.
  - jerf 11y ago
    Learning a new skill or trade is capital. Capital is not just hard equipment. To the extent that was an acceptable approximation in the 20th century, it's less so today. To forstall the next likely objection, no, of course it is not the only form of capital. And "less so" != "completely the opposite of". And further, obviously, learning a trade isn't millions and millions of dollars worth of capital, nor does it instantly catapault you into the leagues of the wealthy, just because you learned how to fix plumbing or write code. And it obviously isn't liquid. But it is a form of capital. If you don't understand this, you can't understand unions. If labor doesn't have this capital, then unions can't work, because if labor really are just interchangable cogs that bring nothing but mere clock time to the equation, then labor has no bargaining position whatsoever. Unions only work because labor has this illiquid capital to bargain with. (There are some obvious further elaborations on this theme, such as the way the capital gets devalued by increasing the supply by globalization, and the continuous importation of cheap labor via illegal immigration. IMHO there's a certain amount of contradiction in being shocked at how labor is devalued in the market place and being pro-"open borders". It may not be the only cause and effect, but it's certainly involved.)
    - zajd 11y ago
      I never said capital was simply hard equipment, but I'd like to hear what your definition of capital is that "learning a new skill" falls under that? I mean, we're talking economics here so there's a level of interpretation for definitions, but I've never heard of someone claiming that skills are capital. It feels like you're going with the "Everything is capital" route, which devalues the word in the first place.
      - matwood 11y ago
        Human capital is a standard economic term. https://en.wikipedia.org/wiki/Human_capital#Background https://en.wikipedia.org/wiki/Human_capital#Background The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor
      - hderms 11y ago
        He's using the notion of "human capital" which I think is clearly different enough from ordinary capital so as to deserve a different term. Human capital can beget ordinary capital if someone works hard for many years, saving their money and reinvesting it, but your average office worker is no more a 'capitalist' than a temporarily homeless man looking for work. Human capital seems differentiated by the fact that it ultimately is traded on the market for wages and generally doesn't translate into any kind of meaningful ownership of the fruits of capital.
        jerf 11y ago
        "He's using the notion of "human capital" which I think is clearly different enough from ordinary capital so as to deserve a different term" Sort of yes, sort of no. It's important to understand that "physical capital" isn't some sort of magic pathway to wealth, either. If by some weird turn of events I suddenly came into possession of a 20-ton press, it isn't going to do me any good, and just about my only avenue to producing money from it is to sell it to some entity that does know what to do with it. A great deal of "capital" in the industrial world is relationships, organization, and the ability to apply human capital. Simplifying that to "physical goods" leads to weak thinking and bad policy.
  - merpnderp 11y ago
    I bought a house from a newly minted millionaire who had decided it was time to spend his new money on a bigger home. He had been an electrician who heard a buddy of his complaining about a new DOT regulation on semi's hauling oil pipe that required pipe restraints that no one had. He looked into it, toyed around with a prototype, went back to votec to machine shop school. Made his prototype and then patented it. Then secured some financing for a tiny machine shop where him and a few buddies started cranking out this bracket for pipe hauling companies. He was lucky in hearing about the need for the bracket at the right time. But he was not lucky in being able to go to votec or to secure a minor loan for the machine shop. Everyone else around him could have done that.
    - s73v3r 11y ago
      How do you go back to votec when you're working two jobs to make ends meet?
      - enraged_camel 11y ago
        Not only that, but in the service industry, which employs an ever growing number of people every year (especially new grads), hours change very often. You might get a call in the morning from the restaurant manager saying you need to cover for someone else that evening. Can't make it? That's too bad, don't bother coming into work again - you're fired for being "unreliable." I'd go out on a limb and suggest that most people on HN have never been in situations like that, where losing a minimum-wage job meant not being able to pay rent and ending up homeless. That's why success stories like the one parent told are common here.
        kom107 11y ago
        Hello. I have. I had no college degree. I was a drop-out. I worked as a line cook, for $9.70/hr (no tips). No economic help from my family. $9.70/hr. Had my electric turned off a few times. Phone turned off regularly. Water turned off. No gas for a northeast winter. Decided I was sick of it. Went back to school, took out some loans, but worked my ASS off, trying to get as many hours as possible so as to take out as few loans as possible. Kept communication open with my bosses and with my professors: I'm not making shit, I have to keep this job, but I want to make a better life for myself. It was hard. Hardest thing I've ever done. Realized that I couldn't rely on the cook income, so I started a side business JUST IN CASE they decided to fire me (building websites, took one class that had a week long section on HTML in college). Hustled. Replaced my income. Kept the two jobs, took a full course load. Awful. Hated my life, always tired. I graduated with $10,000 in debt from my bachelors and a post-bacc certificate program. Could have been a lot more, but I saw what happened if I went down that route. But you know what? I did it. It is possible. I am not a millionaire, but I have a great job, and am working on launching another company, so that I and my family can have an even better life. Everything we put in front of ourselves is an excuse. It IS possible. If I would have lost my job, I would have found a new one. Kids add difficulty to the situation (trust me, I know), but it is still possible.
- TheCowboy 11y ago
  Another possibility: If the ability to learn new skills and trades has never been easier, and there is a surplus of labor that can absorb these skills, this will help keep wages low for an extended period of time. Global and national population growth numbers can support this view. People point to regional variation, like wage growth in SV, as evidence of real wage growth. But even that isn't so simple when you have high living expenses and the expectation that they will keep going up. Firms need to offer wages that allow a lifestyle competitive with one provided in Anywhere, America. But it's likely a combination of multiple causes than one factor or another.
- angersock 11y ago
  Counterpoint: while the means of production are more accessible, the demand for unfinished products is greatly outstripped by the polish of, say, an iPhone.
- akamaka 11y ago
  You're entirely correct, though another factor to consider is the share of economic value that is captured by industries that have enormous capital requirements (e.g. jet engines, semiconductors, oil refining). Even if all of the monopoly-protecting regulations are eliminated, there will still be many industries where economies of scale favor large-scale capitalism. My guess is that while capital is increasingly more accessible, the proportion of the economy where big investment make winners is also increasing. The question of which is growing faster is not one that I can answer, but there are some promising areas where the tide seems be turning toward favoring small players, like in electricity generation or the alcohol industry.
  - merpnderp 11y ago
    I get what you mean, but look at the car industry. Look at how much other monopolies and government regulations have held back Tesla. How many Teslas would there be in the auto industry if the major players didn't use the government to keep them out?
    - akamaka 11y ago
      Oh yeah, I agree with you 100%! I just wanted to add another dimension to the equation, one which is on my mind a lot. To give an example of my thinking, I predict that Uber, once it defeats the incumbents in a fair fight, will contribute to keeping wages down, by capturing most of the value in the taxi industry. Customers will be satisfied to have just one or two taxi-hailing apps installed on their phone, so that even though anyone can theoretically create a competing app, there will be a single dominatant brand that will have much greater power over drivers than the existing local taxi cartels ever did. Overall I'm optimistic about a future where more and more people are empowered start businesses and break down barriers, but I see a lot of bumps along the way.
      - merpnderp 11y ago
        But once Uber has broken down the barriers, won't there be a flood of new entrants all trying to undercut each other with lower prices and better service? Won't the externalities of this benefit society far more than the reduction of wages for the drivers? And won't the companies end up as close to zero profit margins as possible, like we see in nearly all mature competitive markets?
- unprepare 11y ago
  >The ability to learn new skills/trades has never been easier Yes, and as soon as a skill becomes easily attained, it begins to lose value. It only takes a minute to think of a handful of examples: Photography Web design Metalworking Haircutting Journalism Travel agent Receptionist Call center Typist I don't think the ability to learn new skills is as much of an economic advantage as you are assuming. Today it takes becoming an expert in any of these fields to make yourself employable in them, meanwhile wages continue to fall. In fact, just look at the value of a bachelor's degree today vs 30 years ago. As the degree becomes more common/accessible, it is less valued
mikerichards 11y ago
Who are not the capitalists? The North Koreans, the Mozambiqueans, The Cubans, and you?
- teekert 11y ago
  Also the banks, who are deeply socialist, many of them have (had) to rely on state support.
  - mikerichards 11y ago
    yes the crony capitalists, the fascists...
  - imglorp 11y ago
    If you're referring to the bailouts, that was hardly the case. Some of them were negligently overextended and deserved to fail, like any business. If they had failed, their assets would have been picked up by a more conservative bank at bargain rates and everything would have been taken care of automatically. Instead, the crony system demanded a gratuity from the government.
- littletimmy 11y ago
  If you're trying to make an ad-hominem attack here, the argument about labor productivity and wages I'm presenting is straight out of Adam Smith's Wealth of Nations. Would you group him alongside Kim Jong-un and Fidel Castro? To answer your question. No one is a capitalist, really. Everyone makes compromises between socialism and capitalism, including the high priests of capitalism like banks and corporations sucking on the teat of the taxpayer.
  - richmarr 11y ago
    My interpretation of his comment was that it's not just 'capitalists' who are incentivised to keep labour costs as low as possible. Could be wrong though, was pretty vague.
- honest_joe 11y ago
euroclydon 11y ago
Read the longer linked article. It's called the Detroit Treaty. Wages kept up with productivity, because labor and business agreed that they would.
theseatoms 11y ago
Productivity has everything to do with it. Why do people work? To earn wages to buy things that have been produced. And race to the bottom? More like race to equilibrium between supply of labor and demand for it.. albeit, in a market with plenty of inefficiencies and illiquidities.
- littletimmy 11y ago
  Demand and supply does not apply when you are talking about involuntary labor. Given that a lot of labor is forced wage-slavery (the "freedom" to choose between working to death and starving to death / being homeless is not freedom), your point about the equilibrium is false. Labor wages are simply the lowest that labor can be paid.
- lordnacho 11y ago
  A friend of mine has a little dev shop. Some of is customers are private, and some are government agencies. The private customers use modern agile techniques. They have modern clouds with modern provisioning systems. Their managers get back quickly about changes, and their IT guys set up new servers quickly. The pay x per hour. The public agencies have old school bureaucratic management. They are slow to respond with feedback. Their IT guys have a 6 month lead time to install Windows XP (yes in 2015), and when the lead time is up, they still haven't done it so my friend has to show up there and do it for them. They pay 3x per hour. Productivity is not really a factor. Nobody doing the government job could ever in a million years be more productive than the other job, even though any dev could do either job. There's no queue of people for either of these types of jobs.
evanpw 11y ago
The point is that if you can produce more value for an employer than you're currently being paid, then in a competitive market, one greedy capitalist will tend to outbid another greedy capitalist to capture that extra value. So there's also a race to the bottom in the direction of higher wages.
- lhc- 11y ago
  That's the theory, but then you have things like wage-fixing scandals as seen recently in Silicon Valley that conspire to prevent workers from capturing their fair share of the value.
dgreensp 11y ago
My thoughts exactly. Why isn't this obvious? There's no invisible hand making wages match productivity. There's unions, and that's about it. If a new computer system makes my employees deliver twice as much value to me, I don't have to double their salaries.
marcosdumay 11y ago
Capital should also be in a race to the bottom, and has a lower bottom than wages because it has no cost of living. The only thing that does not race is rent.

merpnderp 11y ago

The means of production have never been more accessible. The ability to learn new skills/trades has never been easier. If the average person can't take advantage of them, then it probably has less to do with capitalism and more to do with the government and corporatist conspiring to keep them out of the game.

zajd 11y ago
Learning a new skill or trade doesn't give you access to the "means of production", capital does. And inequality is as bad as it's ever been over the past 50 years. A few tech startup darlings doesn't change that.
- jerf 11y ago
  Learning a new skill or trade is capital. Capital is not just hard equipment. To the extent that was an acceptable approximation in the 20th century, it's less so today. To forstall the next likely objection, no, of course it is not the only form of capital. And "less so" != "completely the opposite of". And further, obviously, learning a trade isn't millions and millions of dollars worth of capital, nor does it instantly catapault you into the leagues of the wealthy, just because you learned how to fix plumbing or write code. And it obviously isn't liquid. But it is a form of capital. If you don't understand this, you can't understand unions. If labor doesn't have this capital, then unions can't work, because if labor really are just interchangable cogs that bring nothing but mere clock time to the equation, then labor has no bargaining position whatsoever. Unions only work because labor has this illiquid capital to bargain with. (There are some obvious further elaborations on this theme, such as the way the capital gets devalued by increasing the supply by globalization, and the continuous importation of cheap labor via illegal immigration. IMHO there's a certain amount of contradiction in being shocked at how labor is devalued in the market place and being pro-"open borders". It may not be the only cause and effect, but it's certainly involved.)
  - zajd 11y ago
    I never said capital was simply hard equipment, but I'd like to hear what your definition of capital is that "learning a new skill" falls under that? I mean, we're talking economics here so there's a level of interpretation for definitions, but I've never heard of someone claiming that skills are capital. It feels like you're going with the "Everything is capital" route, which devalues the word in the first place.
    - matwood 11y ago
      Human capital is a standard economic term. https://en.wikipedia.org/wiki/Human_capital#Background https://en.wikipedia.org/wiki/Human_capital#Background The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor
    - hderms 11y ago
      He's using the notion of "human capital" which I think is clearly different enough from ordinary capital so as to deserve a different term. Human capital can beget ordinary capital if someone works hard for many years, saving their money and reinvesting it, but your average office worker is no more a 'capitalist' than a temporarily homeless man looking for work. Human capital seems differentiated by the fact that it ultimately is traded on the market for wages and generally doesn't translate into any kind of meaningful ownership of the fruits of capital.
      - jerf 11y ago
        "He's using the notion of "human capital" which I think is clearly different enough from ordinary capital so as to deserve a different term" Sort of yes, sort of no. It's important to understand that "physical capital" isn't some sort of magic pathway to wealth, either. If by some weird turn of events I suddenly came into possession of a 20-ton press, it isn't going to do me any good, and just about my only avenue to producing money from it is to sell it to some entity that does know what to do with it. A great deal of "capital" in the industrial world is relationships, organization, and the ability to apply human capital. Simplifying that to "physical goods" leads to weak thinking and bad policy.
- merpnderp 11y ago
  I bought a house from a newly minted millionaire who had decided it was time to spend his new money on a bigger home. He had been an electrician who heard a buddy of his complaining about a new DOT regulation on semi's hauling oil pipe that required pipe restraints that no one had. He looked into it, toyed around with a prototype, went back to votec to machine shop school. Made his prototype and then patented it. Then secured some financing for a tiny machine shop where him and a few buddies started cranking out this bracket for pipe hauling companies. He was lucky in hearing about the need for the bracket at the right time. But he was not lucky in being able to go to votec or to secure a minor loan for the machine shop. Everyone else around him could have done that.
  - s73v3r 11y ago
    How do you go back to votec when you're working two jobs to make ends meet?
    - enraged_camel 11y ago
      Not only that, but in the service industry, which employs an ever growing number of people every year (especially new grads), hours change very often. You might get a call in the morning from the restaurant manager saying you need to cover for someone else that evening. Can't make it? That's too bad, don't bother coming into work again - you're fired for being "unreliable." I'd go out on a limb and suggest that most people on HN have never been in situations like that, where losing a minimum-wage job meant not being able to pay rent and ending up homeless. That's why success stories like the one parent told are common here.
      - kom107 11y ago
        Hello. I have. I had no college degree. I was a drop-out. I worked as a line cook, for $9.70/hr (no tips). No economic help from my family. $9.70/hr. Had my electric turned off a few times. Phone turned off regularly. Water turned off. No gas for a northeast winter. Decided I was sick of it. Went back to school, took out some loans, but worked my ASS off, trying to get as many hours as possible so as to take out as few loans as possible. Kept communication open with my bosses and with my professors: I'm not making shit, I have to keep this job, but I want to make a better life for myself. It was hard. Hardest thing I've ever done. Realized that I couldn't rely on the cook income, so I started a side business JUST IN CASE they decided to fire me (building websites, took one class that had a week long section on HTML in college). Hustled. Replaced my income. Kept the two jobs, took a full course load. Awful. Hated my life, always tired. I graduated with $10,000 in debt from my bachelors and a post-bacc certificate program. Could have been a lot more, but I saw what happened if I went down that route. But you know what? I did it. It is possible. I am not a millionaire, but I have a great job, and am working on launching another company, so that I and my family can have an even better life. Everything we put in front of ourselves is an excuse. It IS possible. If I would have lost my job, I would have found a new one. Kids add difficulty to the situation (trust me, I know), but it is still possible.
TheCowboy 11y ago
Another possibility: If the ability to learn new skills and trades has never been easier, and there is a surplus of labor that can absorb these skills, this will help keep wages low for an extended period of time. Global and national population growth numbers can support this view. People point to regional variation, like wage growth in SV, as evidence of real wage growth. But even that isn't so simple when you have high living expenses and the expectation that they will keep going up. Firms need to offer wages that allow a lifestyle competitive with one provided in Anywhere, America. But it's likely a combination of multiple causes than one factor or another.
angersock 11y ago
Counterpoint: while the means of production are more accessible, the demand for unfinished products is greatly outstripped by the polish of, say, an iPhone.
akamaka 11y ago
You're entirely correct, though another factor to consider is the share of economic value that is captured by industries that have enormous capital requirements (e.g. jet engines, semiconductors, oil refining). Even if all of the monopoly-protecting regulations are eliminated, there will still be many industries where economies of scale favor large-scale capitalism. My guess is that while capital is increasingly more accessible, the proportion of the economy where big investment make winners is also increasing. The question of which is growing faster is not one that I can answer, but there are some promising areas where the tide seems be turning toward favoring small players, like in electricity generation or the alcohol industry.
- merpnderp 11y ago
  I get what you mean, but look at the car industry. Look at how much other monopolies and government regulations have held back Tesla. How many Teslas would there be in the auto industry if the major players didn't use the government to keep them out?
  - akamaka 11y ago
    Oh yeah, I agree with you 100%! I just wanted to add another dimension to the equation, one which is on my mind a lot. To give an example of my thinking, I predict that Uber, once it defeats the incumbents in a fair fight, will contribute to keeping wages down, by capturing most of the value in the taxi industry. Customers will be satisfied to have just one or two taxi-hailing apps installed on their phone, so that even though anyone can theoretically create a competing app, there will be a single dominatant brand that will have much greater power over drivers than the existing local taxi cartels ever did. Overall I'm optimistic about a future where more and more people are empowered start businesses and break down barriers, but I see a lot of bumps along the way.
    - merpnderp 11y ago
      But once Uber has broken down the barriers, won't there be a flood of new entrants all trying to undercut each other with lower prices and better service? Won't the externalities of this benefit society far more than the reduction of wages for the drivers? And won't the companies end up as close to zero profit margins as possible, like we see in nearly all mature competitive markets?
unprepare 11y ago
>The ability to learn new skills/trades has never been easier Yes, and as soon as a skill becomes easily attained, it begins to lose value. It only takes a minute to think of a handful of examples: Photography Web design Metalworking Haircutting Journalism Travel agent Receptionist Call center Typist I don't think the ability to learn new skills is as much of an economic advantage as you are assuming. Today it takes becoming an expert in any of these fields to make yourself employable in them, meanwhile wages continue to fall. In fact, just look at the value of a bachelor's degree today vs 30 years ago. As the degree becomes more common/accessible, it is less valued

mikerichards 11y ago

Who are not the capitalists? The North Koreans, the Mozambiqueans, The Cubans, and you?

teekert 11y ago
Also the banks, who are deeply socialist, many of them have (had) to rely on state support.
- mikerichards 11y ago
  yes the crony capitalists, the fascists...
- imglorp 11y ago
  If you're referring to the bailouts, that was hardly the case. Some of them were negligently overextended and deserved to fail, like any business. If they had failed, their assets would have been picked up by a more conservative bank at bargain rates and everything would have been taken care of automatically. Instead, the crony system demanded a gratuity from the government.
littletimmy 11y ago
If you're trying to make an ad-hominem attack here, the argument about labor productivity and wages I'm presenting is straight out of Adam Smith's Wealth of Nations. Would you group him alongside Kim Jong-un and Fidel Castro? To answer your question. No one is a capitalist, really. Everyone makes compromises between socialism and capitalism, including the high priests of capitalism like banks and corporations sucking on the teat of the taxpayer.
- richmarr 11y ago
  My interpretation of his comment was that it's not just 'capitalists' who are incentivised to keep labour costs as low as possible. Could be wrong though, was pretty vague.
honest_joe 11y ago

euroclydon 11y ago

Read the longer linked article. It's called the Detroit Treaty. Wages kept up with productivity, because labor and business agreed that they would.

theseatoms 11y ago

Productivity has everything to do with it. Why do people work? To earn wages to buy things that have been produced. And race to the bottom? More like race to equilibrium between supply of labor and demand for it.. albeit, in a market with plenty of inefficiencies and illiquidities.

littletimmy 11y ago
Demand and supply does not apply when you are talking about involuntary labor. Given that a lot of labor is forced wage-slavery (the "freedom" to choose between working to death and starving to death / being homeless is not freedom), your point about the equilibrium is false. Labor wages are simply the lowest that labor can be paid.
lordnacho 11y ago
A friend of mine has a little dev shop. Some of is customers are private, and some are government agencies. The private customers use modern agile techniques. They have modern clouds with modern provisioning systems. Their managers get back quickly about changes, and their IT guys set up new servers quickly. The pay x per hour. The public agencies have old school bureaucratic management. They are slow to respond with feedback. Their IT guys have a 6 month lead time to install Windows XP (yes in 2015), and when the lead time is up, they still haven't done it so my friend has to show up there and do it for them. They pay 3x per hour. Productivity is not really a factor. Nobody doing the government job could ever in a million years be more productive than the other job, even though any dev could do either job. There's no queue of people for either of these types of jobs.

evanpw 11y ago

The point is that if you can produce more value for an employer than you're currently being paid, then in a competitive market, one greedy capitalist will tend to outbid another greedy capitalist to capture that extra value. So there's also a race to the bottom in the direction of higher wages.

lhc- 11y ago
That's the theory, but then you have things like wage-fixing scandals as seen recently in Silicon Valley that conspire to prevent workers from capturing their fair share of the value.

dgreensp 11y ago

My thoughts exactly. Why isn't this obvious? There's no invisible hand making wages match productivity. There's unions, and that's about it. If a new computer system makes my employees deliver twice as much value to me, I don't have to double their salaries.

marcosdumay 11y ago

Capital should also be in a race to the bottom, and has a lower bottom than wages because it has no cost of living. The only thing that does not race is rent.