5 ms·

The only incentive that will effectively cause companies to pay their employees better is more demand for labor, which is most likely to be caused by increased

by nickff 11y ago

The only incentive that will effectively cause companies to pay their employees better is more demand for labor, which is most likely to be caused by increased economic growth. Most other programs end up being more complicated and costly than earned income tax credits and other methods of redistribution.

toomuchtodo 11y ago
> The only incentive that will effectively cause companies to pay their employees better is more demand for labor Or wage regulations (increasing the minimum wage) Or labor organization (ie Germany) Or tax regulations (shift tax incentives from machinery to labor) > which is most likely to be caused by increased economic growth. Growth is over my friend, at least the growth that would be necessary for wage inflation (ie Japan). EDIT: We can argue this point if you'd like, in a thread about the strongest world economy planning for negative interest rates, while other central banks have already gone (and continue to hold) at negative rates (can't "push the string"!, ie stoke demand with free money).
- nickff 11y ago
  >"Or wage regulations (increasing the minimum wage)" Evidence on this is mixed at least; the majority of the studies go against this being an effective policy. The Card and Krueger findings are somewhat convincing, but do not hold over a longer period of analysis. >"Or labor organization (ie Germany)" Labor organization may help transfer wealth from shareholders, suppliers, or consumers to the workers, unless it kills the host companies or causes them to move away. I have not seen evidence that labor organization helps the average citizen, though there is some evidence that it may help the unionized people; unless labor organization improves productivity, it can only change distribution, and I'm not sure who it really transfers wealth from. >"Or tax regulations (shift tax incentives from machinery to labor)" This may help raise demand for labor, but pay can never go higher than productivity, which usually requires capital investments. >"Growth is over my friend, at least the growth that would be necessary for wage inflation (ie Japan)." I disagree, and it is difficult (if not impossible) to prove which of us is right.
  - toomuchtodo 11y ago
    > Labor organization may help transfer wealth from shareholders, suppliers, or consumers to the workers, unless it kills the host companies or causes them to move away. This is by design. If we can transfer more wealth to workers instead of shareholders, we should. If workers can't receive an appropriate wage from a company, than the business is most likely not viable (see: people complaining their business won't work with a $15/hour minimum wage). >"Growth is over my friend, at least the growth that would be necessary for wage inflation (ie Japan)." > I disagree, and it is difficult (if not impossible) to prove which of us is right. I agree that this will be determined by India, China, and to a lesser extent Africa. I believe these economies are growth-limited now, due to the fundamentals around how their economies are structured. note: I removed a quote child comment responded to, referenced below.
    - nickff 11y ago
      >" If we can transfer more wealth to workers instead of shareholders, we should." This is a normative goal, but you are assuming that unions always transfer wealth from shareholders to workers, and I am not convinced of this. Shareholders will refuse to invest if the returns are not attractive, so it is difficult to retain them. It seems more likely that unions will transfer wealth from consumers or suppliers to the union members, which is a much less appealing prospect. >"Can you explain the rational as to how zero interest rate policies can stoke demand on-par with middle class consumers, versus simply enriching lending institutions? If I'm wrong, I am happy to concede the point." I'm not convinced that the Federal Reserve has much impact on consumer and corporate interest rates. All central banks believe that international bond markets are relatively free. All central banks also believe that they control their national interest rates. These beliefs are not compatible. note: the second quote in this post was edited out of the parent
  - maxxxxx 11y ago
    "This may help raise demand for labor, but pay can never go higher than productivity, which usually requires capital investments." In the last decades pay for the average worker has not kept up with productivity.
maxxxxx 11y ago
I am not an economist but I am pretty sure you could design tax policies that make it more attractive to pay higher salaries for the average worker or maybe give them shares in the company. Can you imagine how much demand there would be if average wage growth would have kept up with productivity? People who make 30000/year would spend much more if they had 40000/year. I don't think a CEO's behavior will change much if he has 30 million or 40 million. Obviously this won't happen but it's a thought that should be brought up from time to time.
- nickff 11y ago
  >"Can you imagine how much demand there would be if average wage growth would have kept up with productivity? People who make 30000/year would spend much more if they had 40000/year. I don't think a CEO's behavior will change much if he has 30 million or 40 million." There might be more demand for the consumer goods popular for low-middle income citizens, but then again, this could reduce capital investments and reduce productivity in the long term, thus reducing wage growth in the future. I suppose my answer is that I can't imagine how much 'demand' there would be if average wage growth kept up with productivity, largely because the economy is a complicated beast, and 'demand' is not a simple thing.
  - maxxxxx 11y ago
    How would more demand reduce capital investment? If anything it should make it more attractive to invest. Supply and demand?
    - nickff 11y ago
      I am assuming that we hold M2 velocity of money constant for the purpose of this analysis; which is to say that I assume richer people and poorer people hold on to money for the same amount of time before re-allocating it (to stocks, bonds, consumables, durable goods, etc.). If this assumption is true, both will create the same total 'demand', but for different goods. Richer people tend to spend much less (as a proportion of their income) on consumables and personal items than poorer people; the rich also tend to invest the vast majority of their money, and that money often goes to capital investments. Supply and demand works the same for industrial buildings, robots, software, and trains as it does for homes, couches, and cars. The primary (economic) difference between these goods is their impact on long-term productivity.

by nickff 11y ago

toomuchtodo 11y ago

> The only incentive that will effectively cause companies to pay their employees better is more demand for labor Or wage regulations (increasing the minimum wage) Or labor organization (ie Germany) Or tax regulations (shift tax incentives from machinery to labor) > which is most likely to be caused by increased economic growth. Growth is over my friend, at least the growth that would be necessary for wage inflation (ie Japan). EDIT: We can argue this point if you'd like, in a thread about the strongest world economy planning for negative interest rates, while other central banks have already gone (and continue to hold) at negative rates (can't "push the string"!, ie stoke demand with free money).

nickff 11y ago
>"Or wage regulations (increasing the minimum wage)" Evidence on this is mixed at least; the majority of the studies go against this being an effective policy. The Card and Krueger findings are somewhat convincing, but do not hold over a longer period of analysis. >"Or labor organization (ie Germany)" Labor organization may help transfer wealth from shareholders, suppliers, or consumers to the workers, unless it kills the host companies or causes them to move away. I have not seen evidence that labor organization helps the average citizen, though there is some evidence that it may help the unionized people; unless labor organization improves productivity, it can only change distribution, and I'm not sure who it really transfers wealth from. >"Or tax regulations (shift tax incentives from machinery to labor)" This may help raise demand for labor, but pay can never go higher than productivity, which usually requires capital investments. >"Growth is over my friend, at least the growth that would be necessary for wage inflation (ie Japan)." I disagree, and it is difficult (if not impossible) to prove which of us is right.
- toomuchtodo 11y ago
  > Labor organization may help transfer wealth from shareholders, suppliers, or consumers to the workers, unless it kills the host companies or causes them to move away. This is by design. If we can transfer more wealth to workers instead of shareholders, we should. If workers can't receive an appropriate wage from a company, than the business is most likely not viable (see: people complaining their business won't work with a $15/hour minimum wage). >"Growth is over my friend, at least the growth that would be necessary for wage inflation (ie Japan)." > I disagree, and it is difficult (if not impossible) to prove which of us is right. I agree that this will be determined by India, China, and to a lesser extent Africa. I believe these economies are growth-limited now, due to the fundamentals around how their economies are structured. note: I removed a quote child comment responded to, referenced below.
  - nickff 11y ago
    >" If we can transfer more wealth to workers instead of shareholders, we should." This is a normative goal, but you are assuming that unions always transfer wealth from shareholders to workers, and I am not convinced of this. Shareholders will refuse to invest if the returns are not attractive, so it is difficult to retain them. It seems more likely that unions will transfer wealth from consumers or suppliers to the union members, which is a much less appealing prospect. >"Can you explain the rational as to how zero interest rate policies can stoke demand on-par with middle class consumers, versus simply enriching lending institutions? If I'm wrong, I am happy to concede the point." I'm not convinced that the Federal Reserve has much impact on consumer and corporate interest rates. All central banks believe that international bond markets are relatively free. All central banks also believe that they control their national interest rates. These beliefs are not compatible. note: the second quote in this post was edited out of the parent
- maxxxxx 11y ago
  "This may help raise demand for labor, but pay can never go higher than productivity, which usually requires capital investments." In the last decades pay for the average worker has not kept up with productivity.

maxxxxx 11y ago

I am not an economist but I am pretty sure you could design tax policies that make it more attractive to pay higher salaries for the average worker or maybe give them shares in the company. Can you imagine how much demand there would be if average wage growth would have kept up with productivity? People who make 30000/year would spend much more if they had 40000/year. I don't think a CEO's behavior will change much if he has 30 million or 40 million. Obviously this won't happen but it's a thought that should be brought up from time to time.

nickff 11y ago
>"Can you imagine how much demand there would be if average wage growth would have kept up with productivity? People who make 30000/year would spend much more if they had 40000/year. I don't think a CEO's behavior will change much if he has 30 million or 40 million." There might be more demand for the consumer goods popular for low-middle income citizens, but then again, this could reduce capital investments and reduce productivity in the long term, thus reducing wage growth in the future. I suppose my answer is that I can't imagine how much 'demand' there would be if average wage growth kept up with productivity, largely because the economy is a complicated beast, and 'demand' is not a simple thing.
- maxxxxx 11y ago
  How would more demand reduce capital investment? If anything it should make it more attractive to invest. Supply and demand?
  - nickff 11y ago
    I am assuming that we hold M2 velocity of money constant for the purpose of this analysis; which is to say that I assume richer people and poorer people hold on to money for the same amount of time before re-allocating it (to stocks, bonds, consumables, durable goods, etc.). If this assumption is true, both will create the same total 'demand', but for different goods. Richer people tend to spend much less (as a proportion of their income) on consumables and personal items than poorer people; the rich also tend to invest the vast majority of their money, and that money often goes to capital investments. Supply and demand works the same for industrial buildings, robots, software, and trains as it does for homes, couches, and cars. The primary (economic) difference between these goods is their impact on long-term productivity.