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I hear classic economic thinking is that productivity gains lead to higher wages. But could the causation be reversed? Cheap labor tends to disincentivize inno

I hear classic economic thinking is that productivity gains lead to higher wages. But could the causation be reversed? Cheap labor tends to disincentivize innovations that can lead to productivity gains. Perhaps we're entering a period where there are simply too many people for too few jobs. This keeps unemployment high, wages flat, and removes the incentive for companies to invest in automation.

barrkel 10y ago
I don't buy it. For labour intensive jobs, the more people you have, the more jobs you create: there is no fixed pool of jobs that gets consumed by labour. The labour itself needs servicing. Jobs that aren't labour-intensive are typically higher and higher skilled. IMO there are too few highly skilled people in many skilled professions, especially in countries like the UK, which no longer have a robust apprenticeship system. Shoddy work is the order of the day. If there were more people competing for the jobs, I'd expect lower prices and higher quality. And tech? It's almost impossible to hire really good people.
dredmorbius 10y ago
That argument has in fact been made for why, e.g., the Romans didn't exploit coal, which they had (from England) rather than human and muscle power. Slaves were far too cheap. A developing thought: the industrial revolution, writ large -- starting with the Medieval industrial revolution of increased use of wind and water power, was in many was a continuously ramping-up circumstance of living close to (but not immediately at) the thresholds of subsistence, having available opportunities for improvement, and having a gradually increasing degree of technical complexity in tapping into those opportunities, which developed as the challenges and opportunities increased. If you're not testing your limits, you've got no incentive to improve. If you've pursued some improvement, but are then contented with the results, you'll continue in a "fat and happy" existence. This has occurred in several places and times through human history. If you're pushing at limits, and are aware of the concept of technological advance, but the resources aren't available, you'll tend to slide into decline. Arguably this happened to the UK following WWI. England had steamed into modernity on the basis of its coal reserves, but switching to oil, without (then-known) reserves, she stumbled and the United States picked up the slack. (Why the Middle East didn't exploit its own oil reserves earlier is a tremendously interesting question -- whether for want of technology, industrial capacity, or other reasons. I'm planning on looking into this.) Another possibility is that the technological leaps are simply too great. The Middle East question may have been a case of this, and the West (and world at large) may face that conundrum in switching to renewable or sustainable energy options.
imtringued 10y ago
Just like the cheap oil results in people not paying attention to how much their car consumes.

barrkel 10y ago

I don't buy it. For labour intensive jobs, the more people you have, the more jobs you create: there is no fixed pool of jobs that gets consumed by labour. The labour itself needs servicing. Jobs that aren't labour-intensive are typically higher and higher skilled. IMO there are too few highly skilled people in many skilled professions, especially in countries like the UK, which no longer have a robust apprenticeship system. Shoddy work is the order of the day. If there were more people competing for the jobs, I'd expect lower prices and higher quality. And tech? It's almost impossible to hire really good people.

dredmorbius 10y ago

That argument has in fact been made for why, e.g., the Romans didn't exploit coal, which they had (from England) rather than human and muscle power. Slaves were far too cheap. A developing thought: the industrial revolution, writ large -- starting with the Medieval industrial revolution of increased use of wind and water power, was in many was a continuously ramping-up circumstance of living close to (but not immediately at) the thresholds of subsistence, having available opportunities for improvement, and having a gradually increasing degree of technical complexity in tapping into those opportunities, which developed as the challenges and opportunities increased. If you're not testing your limits, you've got no incentive to improve. If you've pursued some improvement, but are then contented with the results, you'll continue in a "fat and happy" existence. This has occurred in several places and times through human history. If you're pushing at limits, and are aware of the concept of technological advance, but the resources aren't available, you'll tend to slide into decline. Arguably this happened to the UK following WWI. England had steamed into modernity on the basis of its coal reserves, but switching to oil, without (then-known) reserves, she stumbled and the United States picked up the slack. (Why the Middle East didn't exploit its own oil reserves earlier is a tremendously interesting question -- whether for want of technology, industrial capacity, or other reasons. I'm planning on looking into this.) Another possibility is that the technological leaps are simply too great. The Middle East question may have been a case of this, and the West (and world at large) may face that conundrum in switching to renewable or sustainable energy options.

imtringued 10y ago

Just like the cheap oil results in people not paying attention to how much their car consumes.