24 ms·

Why Wages Aren’t Growing

240 points by rayuela 9y ago

bb88 9y ago
TL;DR For real growth to happen, paychecks need to be fatter. But not all companies are willing to tie performance with pay.
- rayuela 9y ago
  That's a terrible TL;DR. The article is about wage growth first and foremost not economic growth. The article actually does a pretty decent overview of the many factors affecting wage growth, from the macro factors (cross border labor competition, automation) and micro factors (weaker unions, more unequal distribution of profits within firms).
  - randomdata 9y ago
    > weaker unions In Canada, where we have experienced wage stagnation that mirrors the US quite closely, our unions started to get stronger after that stagnation began. The peak union years in Canada were in the 80s and 90s, more than a decade after the incomes stopped growing. While unionization has declined slightly since that time, unionization remains quite strong, and Canada is named the 6th strongest union country in the world. Despite that, wages have remained stagnant regardless. It seems this one is completely beyond what unions can achieve.
dnautics 9y ago
Why does everyone jump to "demise of unions"? There is a far simpler explanation. For decades official government policy (especially in the us and Japan) has been job creation. Have you ever heard of a politician that hasn't advocated for job growth? The policy tool deployed to create jobs has been to use the central bank (via its mandate to maintain employment) to inflate the currency. Inflation works to goose employment by decreasing the real cost of labor (because, sticky wages). [0] 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-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
- sp332 9y ago
  But inflation has been very low lately.
  - dnautics 9y ago
    So? We're talking about changes over 40 year timespans. Your observation reads: Labor is being screwed slightly less quickly lately.
    - skybrian 9y ago
      The inflation rate has been low for over 30 years, since the early 80's when Volcker killed it by creating a recession. The Fed's loose money policy has only been around since 2008, with very low inflation since then. While critics constantly predict inflation, it hasn't caused inflation in practice. Yes, labor is getting screwed but how it's being done is not that simple.
      - dnautics 9y ago
        what fantasy world do you live in where there hasn't been inflation since the 70s? The minimum wage in 1990, (well after volcker), was 3.80/hr would you be able to live on $3.80/hr today? As for loose money policy, the current loose money policy is just very very extreme. In 1980 my parents bought a house at a 16% interest rate; in 1990, they bought a second house at the same value (side observation: it was of worse construction) at 8%, and then in 2001 they bought a third one at ~5%. It would be hard to argue that the fact that my parents obtained two houses at no extra yearly cost is not a result of a 'loosening' of policy.
        skybrian 9y ago
        I'm going by the official inflation rate. Here's a graph [1]. Where do you get your numbers? How to include housing prices in the consumer price index is apparently controversial. (It's by "imputed rent", what you could theoretically get if you rented it out.) [1] https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi
Mikeb85 9y ago
Everyone should read Piketty. 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.
- mbillie1 9y ago
  > Everyone should read Piketty. Absolutely, unreservedly agree.
- brad0 9y ago
  I'm curious of what you think of Piketty's policy suggestions in Capital.
  - Mikeb85 9y ago
    They'd reduce inequality but will never be fully realised as it'd be too politically unpopular. Perceived fairness is more important to most people than equality.
ue_ 9y ago
This is a problem which has, unsurprisingly been attacked from the angle of Marxian economics rather than only orthodox economics; Andrew Kliman who is particularly famous within Marxian economics for his TSSI solution to the charges of Marx's inconsistency in Vol. III of Capital has addressed it in the context of the operation of capitalism in general in his book The Failure of Capitalist Production[0], though its name spells something already reiterated many times by Marxists, he takes the lens through the panic of 2008 and what has followed it. It's a very good read even for those who aren't looking into Marxian economics. 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%20production.pdf https://libcom.org/files/The%20failure%20of%20capitalist%20p... [1] https://www.marxists.org/archive/mandel/1985/xx/future.html https://www.marxists.org/archive/mandel/1985/xx/future.html
panarky 9y ago
Labor productivity is up. 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?
- faet 9y ago
  Compensation has kept pace with productivity. Source: http://i.imgur.com/5mOQARo.png http://i.imgur.com/5mOQARo.png
  - panarky 9y ago
    I don't think so. Source: https://imgur.com/u6ScCfi https://imgur.com/u6ScCfi
    - methodover 9y ago
      He's saying compensation -- total compensation, not just wages -- has increased. i.e., wages + benefits
      - jandrese 9y ago
        In other words, all of the extra money is going into health insurance premiums.
        alexasmyths 9y ago
        That's rational. We are getting older, and more broken. We are currently 'shifting' what we value in life. If we spend more on doctors, it may be that they provide more value to us. If we'd rather invest in new surgical procedures over some new kind of social network, well, that's what we want, apparently. Of course with healthcare it's always more complicated, but it's rational that we spend more on health if that's what society values.
faet 9y ago
Real compensation has been growing. It's just now a larger portion of 'compensation' is benefits rather than just wages. https://fred.stlouisfed.org/series/COMPRNFB 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.pdf https://www.bls.gov/opub/mlr/cwc/compensation-in-the-1970s.p... wages are now 70% of compensation and 63% for public employees. https://www.bls.gov/news.release/pdf/ecec.pdf https://www.bls.gov/news.release/pdf/ecec.pdf
- tyingq 9y ago
  I wonder if there's some skew there where pensions aren't counted as benefits, but 401k company contributions are.
  - majormajor 9y ago
    The employee side contributions seem relevant, too (though neither side exists at all when it comes to lower paging jobs). Those are counted as wages, I'm assuming, so if wages as a proportion has been decreasing and defined-benefit pensions have been lost, so an increasing part of wages goes to retirement savings, that seems like a double-whammy.
- dv_dt 9y ago
  So if healthcare costs are benefits, some portion of the compensation is growing just because healthcare costs are growing. But that doesn't really provide any net gain in positive economic effects (such as through added disposable income).
  - prostoalex 9y ago
    Unless one is employed in healthcare.
    - YeOakAye 9y ago
      One is usually not employed in healthcare......
mhb 9y ago
https://mobile.nytimes.com/2017/09/15/opinion/the-economy-isnt-broken.html https://mobile.nytimes.com/2017/09/15/opinion/the-economy-is... 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. Immigrants’ 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.
- emodendroket 9y ago
  Ok but that doesn't really reverse the decades-long trend.
Animats 9y ago
Wages aren't growing because people aren't worth more. Most job growth is in low-skill jobs. 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.
- ardit33 9y ago
  That doesn't explain it at all. If you look closely, corporate profits have been increasing (example compared to 90), but wages haven't. That means that workers have been more productive, but are getting paid less (they increased output/efficiency, but their wages have been stagnant). That means that corporates have leverage over labour (ie, either importing from cheaper countries, or automation, or guest workers, etc).... My hunch is the increase of globalism (since the 90s) caused this. Communism fell, more skilled people available in the market, more open borders, etc... which gives global companies more leverage. It is very easy to spot: https://cdn.static-economist.com/sites/default/files/imagecache/640-width/images/print-edition/20160326_FBC779_1.png https://cdn.static-economist.com/sites/default/files/imageca...
  - ivl 9y ago
    Because workers being super special is not what has driven productivity gains.
rdlecler1 9y ago
I wonder how much online job marketplaces are driving this. If talent is fluid then the very top talent will iterate through jobs with increasing higher wages as it’s easy to find that talent. For the rest, hiring managers may see you as replaceable limiting your ability as an employee to demand higher wages.
mahyarm 9y ago
Wages don't grow because there isn't a shortage condition for labor. If there was a shortage, the price of labor (wages) would increase. 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&utm_medium=exported-chart&utm_campaign=myfred_referrer https://fred.stlouisfed.org/graph/?g=3uOu&utm_source=direct&...
- randomdata 9y ago
  > If there was a shortage, the price of labor (wages) would increase. If price of labour was increasing, that would suggest that there isn't a shortage[1]. "In economic terminology, a shortage occurs when for some reason (such as government intervention, or decisions by sellers not to raise prices) the price does not rise to reach equilibrium. In this circumstance, buyers want to purchase more at the market price than the quantity of the good or service that is available, and some non-price mechanism (such as "first come, first served" or a lottery) determines which buyers are served." What I believe you are saying is that we have reached equilibrium, so there is no pressure to push prices up or down when measured across the population as a whole (individuals may still see increases and decreases). [1] https://en.wikipedia.org/wiki/Shortage https://en.wikipedia.org/wiki/Shortage
  - mahyarm 9y ago
    I meant it in the more casual sense, of low supply and constant / high demand.
  - deleted 9y ago
    [deleted]
  - krath94 9y ago
jakelarkin 9y ago
the internet + globalization mega-trend unleashed in the 1990s has caused deflationary pressure on wages of any blue-collar labor that has the property of being easily transferable to the developing world. The effect lingers for decades are capital assets are slowly shifted around the world.
dfps 9y ago
Can you have both "creation of lots of jobs" by government policy and at the same time Higher wages for all workers ?
omarforgotpwd 9y ago
I don't really hear anyone talking about this often, but is it possible that there is systemic deflation across the economy as a result of efficiencies and prices falling in the digital age? As companies get squeezed on price due to more efficient competitors and high tech alternatives to their products, they have less money to pass onto workers. When profits are fat, companies can afford to pay workers a lot. This would explain why the inflation rate has been much lower than some people (like the Federal Reserve) had expected.
- mdorazio 9y ago
  Unfortunately, this isn't the case. Corporate profits have been hitting record highs for years now [1]. Companies simply aren't passing along these profits to their workers. [1] http://www.businessinsider.com/corporate-profits-hit-new-record-high-2012-11 http://www.businessinsider.com/corporate-profits-hit-new-rec...
  - a_imho 9y ago
    Companies simply aren't passing along these profits to their workers. Best tldr
- slyfocks 9y ago
  Profits are indeed fat, though (corporate profit-to-GNP ratio is at an all-time high) [1]. Also, there’s no reason to believe corporations would raise wages simply because profit has increased. This holds true especially if labor hasn’t been the impetus for increased profit (I’d argue that efficiency gains due to technology and an increasingly oligopolistic market have led to increased profit for large corporations in the U.S.). [1] http://static3.businessinsider.com/image/531764dbecad04011139bd96-538/jesse-felder-chart.png http://static3.businessinsider.com/image/531764dbecad0401113...
ben_jones 9y ago
Increased population + Increased automation = Huge demand for jobs = Lower wages . In my opinion.
erikb 9y ago
Weird. Nothing in this article seems to relate to reality. I wonder if this is a story to keep people healthy minded, who are too scared to switch to another company or two incompetent. 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.
jstewartmobile 9y ago
- Two-income households: doubled the labor supply without making an equally large increase in demand (NOT A DIG AGAINST FEMINISM, JUST TALKING NUMBERS) - 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-14-people-make-500-000-tons-of-steel-a-year-in-austria https://www.bloomberg.com/news/articles/2017-06-21/how-just-...
- jimmaswell 9y ago
  Why would tax funded make-work result in lower wages across the board?
  - jstewartmobile 9y ago
    Because it's more like alms than a salary. Even on a meager salary, you can still be overpaid.
    - xapata 9y ago
      Yes, but that doesn't answer the question.
      - pasquinelli 9y ago
        i think the idea is that unemployment should be higher. the fact employment numbers are kept high by bs jobs makes demand for labor seem higher than it is.
        walshemj 9y ago
        That's assuming that the governments don't game the unemployment statistics (and they do agressivly) for example if the UK used the older definition of unemployment it would be higher than 4.3.
indubitable 9y ago
I think there's another very simple, yet often overlooked, reason that wages aren't growing: information. 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.
- jsty 9y ago
  > 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 employers would have to get a lot better at measuring the value produced by individuals, which always seems to have a chequered past with knowledge workers. Offering the going rate for an average employee is IMO a way of throwing your hands up and saying "I don't really know what this job entails or how good you'll be at it, but I know it needs doing so I'll offer what everyone else is"
- deleted 9y ago
  [deleted]
- emodendroket 9y ago
  I don't know about that; if anything I'd say the easy availability of salary information tips the scales in favor of job seekers, since an organization doing hiring regularly naturally has more information on how much people are being paid. The information on the Internet is also pretty low quality.
remarkEon 9y ago
>The very first thing any college freshman learns in Economics 101 is the law of supply and demand. I beg to differ. They do not learn this.
WalterBright 9y ago
> That means wages haven’t kept pace with gains in productivity, as economics says they should, 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).
- tryingagainbro 9y ago
  OK, fair enough. But, how are corporate earnings during this time? https://www.nytimes.com/2014/04/05/business/economy/corporate-profits-grow-ever-larger-as-slice-of-economy-as-wages-slide.html https://www.nytimes.com/2014/04/05/business/economy/corporat... "CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years." Maybe via taxes USA should provide an incentive to invest or to pay employees more. There is $250b in Apple's bank accounts, $100B in Google's coffers, $100+ in MSFT's...maybe they should pay more in salaries, invest it or whatever.
  - WalterBright 9y ago
    > Employee compensation The article didn't say total compensation. Most articles only consider the paycheck as compensation, and do not include benefits.
    - lotsofpulp 9y ago
      The significant majority of jobs are not those with considerable non cash benefits, so I don’t think it’s worthy of much discussions. It’s well known there is an increasing income and wealth gap, and it’s the increasing portion of those with non benefit jobs that is problematic.
evolighting 9y ago
The economics are lying. 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.
- samhain 9y ago
  Low effort post? Why don't you provide more context and sources for your opinion.
iovrthoughtthis 9y ago
> overall labor costs aren’t growing nearly as quickly as they did in the years before the 2008 financial crisis, even though Europe is enjoying a surprising revival. 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?
Heraclite 9y ago
As a software developer in EU, sometimes I find it absurd that I'm only paid 2x as much as the average office drone for which the company would see no difference if their department disappeared tomorrow. The only way to be paid according to your real value is to freelance or start your company.
- a_imho 9y ago
  And there are major differences even in the EU. The wage gap for a developer in the V4 compared to e.g. Germany (UK/Switzerland in a broader context) is staggering. https://www.wageunion.eu/ https://www.wageunion.eu/ https://elsajohansson.wordpress.com/2017/09/13/what-does-a-wage-gap-look-like/ https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...
oldpond 9y ago
Search for 'velocity of money'. It's a Fed chart and shows what happens when every citizen, business and government is swimming in debt. You printed all that money and gave it to the banks, but you didn't relieve the debt logjam. Oops.
- barrkel 9y ago
  Velocity of money doesn't have much to do with debt; money is a medium for negotiating the exchange of value between economic actors, the transmission fluid, as it were. If you were happy to get paid in very small increments very regularly, and similarly pay for other products in very small increments at very high speed, the economy could function with a numerically small amount of money, moving very quickly. Since that's not practical, we need lots of slack, buffer as it were, for converting our labour into money, before we in turn consume that money by exchanging it for other goods and services. There's a direct tradeoff between velocity of money and the supply of money; you need less of the latter when the former is high. Debt is about moving around consumption and production relative to one another. It's inherently based on predictions about the future, which is why it's risky. "Printing money and giving it to banks" is not how it works either. Rather, the government prints currency and buys debt with it. The debt represents future money, and is an asset today. But the currency isn't just given away. The relationship, such that it exists, is thus indirect; buying debt increases money supply which makes up for low velocity of money.
  - oldpond 9y ago
    Spoken like a true believer.
lukasm 9y ago
How does the wage growth is calculated? I work remotely so I have to be employed as a contractor. I doubt I'm included. Significant portion of my colleagues are "permtractors" with companies registered in Channel Islands and other places. Another example is a friend that is paid only half legally. I don't think the situation is as bad as press is describing.
dalbasal 9y ago
For much of big picture economics, what we do is define a few fundamnetal concepts with which to narrate the economic story. 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.
fallingfrog 9y ago
I think the author is missing something- when labor productivity goes up due to automation, the increase in profits goes to whoever owns the machines not to the people working them. I mean after all, if you invest money in some equipment, you expect to be the one to get the returns on that investment. Altering that equation could take, as the author suggests, an outside force such as labor unions or government intervention- but the only long term solution is probably for the people who own the machines, and the people who work the machines, to be the same people.
brownbat 9y ago
Wages are growing dramatically, just not near Bloomberg HQ. https://tradingeconomics.com/china/wages https://tradingeconomics.com/china/wages https://tradingeconomics.com/south-africa/wages https://tradingeconomics.com/south-africa/wages
jgalt212 9y ago
Wages aren't growing because ZIRP is artificially increasing demand for plant and equipment (a labor substitute). When Fed Funds get to about 3%, I bet we'll start to see some healthy wage growth.
deleted 9y ago
[deleted]
programminggeek 9y ago
Wages aren't growing because people don't ask for more money. It's not any more complicated than that. 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.
CryptoPunk 9y ago
This is a really poor article. Wages are growing, and at their fastest rate in history. Japan is not the world. Worldwide, labour's share of income has declined modestly, but that can be fully explained by the global decline in the labour participation rate: https://data.worldbank.org/indicator/SL.TLF.CACT.ZS 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).
taw-an 9y ago
"For unions to regain ground, governments will have to give them a nudge. Former U.S. Secretary of Labor Robert Reich recommends Washington make it easier to form unions, impose harsher penalties on companies that fire organizers, and banish “right-to-work” laws in states that allow workers to benefit from unions without paying dues, considered a back door to weakening them." 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?
CryptoPunk 9y ago
This is a really poor article. Wages are growing, and have doubled in the developing world since 1990. China has seen 13% per year wage growth since 2000. Japan is not the world. Worldwide, labour's share of income has declined modestly, but that can be fully explained by the global decline in the labour participation rate: https://data.worldbank.org/indicator/SL.TLF.CACT.ZS 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).

240 points by rayuela 9y ago

bb88 9y ago

TL;DR For real growth to happen, paychecks need to be fatter. But not all companies are willing to tie performance with pay.

rayuela 9y ago
That's a terrible TL;DR. The article is about wage growth first and foremost not economic growth. The article actually does a pretty decent overview of the many factors affecting wage growth, from the macro factors (cross border labor competition, automation) and micro factors (weaker unions, more unequal distribution of profits within firms).
- randomdata 9y ago
  > weaker unions In Canada, where we have experienced wage stagnation that mirrors the US quite closely, our unions started to get stronger after that stagnation began. The peak union years in Canada were in the 80s and 90s, more than a decade after the incomes stopped growing. While unionization has declined slightly since that time, unionization remains quite strong, and Canada is named the 6th strongest union country in the world. Despite that, wages have remained stagnant regardless. It seems this one is completely beyond what unions can achieve.

dnautics 9y ago

Why does everyone jump to "demise of unions"? There is a far simpler explanation. For decades official government policy (especially in the us and Japan) has been job creation. Have you ever heard of a politician that hasn't advocated for job growth? The policy tool deployed to create jobs has been to use the central bank (via its mandate to maintain employment) to inflate the currency. Inflation works to goose employment by decreasing the real cost of labor (because, sticky wages). [0] 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-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

sp332 9y ago
But inflation has been very low lately.
- dnautics 9y ago
  So? We're talking about changes over 40 year timespans. Your observation reads: Labor is being screwed slightly less quickly lately.
  - skybrian 9y ago
    The inflation rate has been low for over 30 years, since the early 80's when Volcker killed it by creating a recession. The Fed's loose money policy has only been around since 2008, with very low inflation since then. While critics constantly predict inflation, it hasn't caused inflation in practice. Yes, labor is getting screwed but how it's being done is not that simple.
    - dnautics 9y ago
      what fantasy world do you live in where there hasn't been inflation since the 70s? The minimum wage in 1990, (well after volcker), was 3.80/hr would you be able to live on $3.80/hr today? As for loose money policy, the current loose money policy is just very very extreme. In 1980 my parents bought a house at a 16% interest rate; in 1990, they bought a second house at the same value (side observation: it was of worse construction) at 8%, and then in 2001 they bought a third one at ~5%. It would be hard to argue that the fact that my parents obtained two houses at no extra yearly cost is not a result of a 'loosening' of policy.
      - skybrian 9y ago
        I'm going by the official inflation rate. Here's a graph [1]. Where do you get your numbers? How to include housing prices in the consumer price index is apparently controversial. (It's by "imputed rent", what you could theoretically get if you rented it out.) [1] https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi

Mikeb85 9y ago

Everyone should read Piketty. 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.

mbillie1 9y ago
> Everyone should read Piketty. Absolutely, unreservedly agree.
brad0 9y ago
I'm curious of what you think of Piketty's policy suggestions in Capital.
- Mikeb85 9y ago
  They'd reduce inequality but will never be fully realised as it'd be too politically unpopular. Perceived fairness is more important to most people than equality.

ue_ 9y ago

This is a problem which has, unsurprisingly been attacked from the angle of Marxian economics rather than only orthodox economics; Andrew Kliman who is particularly famous within Marxian economics for his TSSI solution to the charges of Marx's inconsistency in Vol. III of Capital has addressed it in the context of the operation of capitalism in general in his book The Failure of Capitalist Production[0], though its name spells something already reiterated many times by Marxists, he takes the lens through the panic of 2008 and what has followed it. It's a very good read even for those who aren't looking into Marxian economics. 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%20production.pdf https://libcom.org/files/The%20failure%20of%20capitalist%20p... [1] https://www.marxists.org/archive/mandel/1985/xx/future.html https://www.marxists.org/archive/mandel/1985/xx/future.html

panarky 9y ago

Labor productivity is up. 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?

faet 9y ago
Compensation has kept pace with productivity. Source: http://i.imgur.com/5mOQARo.png http://i.imgur.com/5mOQARo.png
- panarky 9y ago
  I don't think so. Source: https://imgur.com/u6ScCfi https://imgur.com/u6ScCfi
  - methodover 9y ago
    He's saying compensation -- total compensation, not just wages -- has increased. i.e., wages + benefits
    - jandrese 9y ago
      In other words, all of the extra money is going into health insurance premiums.
      - alexasmyths 9y ago
        That's rational. We are getting older, and more broken. We are currently 'shifting' what we value in life. If we spend more on doctors, it may be that they provide more value to us. If we'd rather invest in new surgical procedures over some new kind of social network, well, that's what we want, apparently. Of course with healthcare it's always more complicated, but it's rational that we spend more on health if that's what society values.

faet 9y ago

Real compensation has been growing. It's just now a larger portion of 'compensation' is benefits rather than just wages. https://fred.stlouisfed.org/series/COMPRNFB 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.pdf https://www.bls.gov/opub/mlr/cwc/compensation-in-the-1970s.p... wages are now 70% of compensation and 63% for public employees. https://www.bls.gov/news.release/pdf/ecec.pdf https://www.bls.gov/news.release/pdf/ecec.pdf

tyingq 9y ago
I wonder if there's some skew there where pensions aren't counted as benefits, but 401k company contributions are.
- majormajor 9y ago
  The employee side contributions seem relevant, too (though neither side exists at all when it comes to lower paging jobs). Those are counted as wages, I'm assuming, so if wages as a proportion has been decreasing and defined-benefit pensions have been lost, so an increasing part of wages goes to retirement savings, that seems like a double-whammy.
dv_dt 9y ago
So if healthcare costs are benefits, some portion of the compensation is growing just because healthcare costs are growing. But that doesn't really provide any net gain in positive economic effects (such as through added disposable income).
- prostoalex 9y ago
  Unless one is employed in healthcare.
  - YeOakAye 9y ago
    One is usually not employed in healthcare......

mhb 9y ago

https://mobile.nytimes.com/2017/09/15/opinion/the-economy-isnt-broken.html https://mobile.nytimes.com/2017/09/15/opinion/the-economy-is... 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. Immigrants’ 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.

emodendroket 9y ago
Ok but that doesn't really reverse the decades-long trend.

Animats 9y ago

Wages aren't growing because people aren't worth more. Most job growth is in low-skill jobs. 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.

ardit33 9y ago
That doesn't explain it at all. If you look closely, corporate profits have been increasing (example compared to 90), but wages haven't. That means that workers have been more productive, but are getting paid less (they increased output/efficiency, but their wages have been stagnant). That means that corporates have leverage over labour (ie, either importing from cheaper countries, or automation, or guest workers, etc).... My hunch is the increase of globalism (since the 90s) caused this. Communism fell, more skilled people available in the market, more open borders, etc... which gives global companies more leverage. It is very easy to spot: https://cdn.static-economist.com/sites/default/files/imagecache/640-width/images/print-edition/20160326_FBC779_1.png https://cdn.static-economist.com/sites/default/files/imageca...
- ivl 9y ago
  Because workers being super special is not what has driven productivity gains.

rdlecler1 9y ago

I wonder how much online job marketplaces are driving this. If talent is fluid then the very top talent will iterate through jobs with increasing higher wages as it’s easy to find that talent. For the rest, hiring managers may see you as replaceable limiting your ability as an employee to demand higher wages.

mahyarm 9y ago

Wages don't grow because there isn't a shortage condition for labor. If there was a shortage, the price of labor (wages) would increase. 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&utm_medium=exported-chart&utm_campaign=myfred_referrer https://fred.stlouisfed.org/graph/?g=3uOu&utm_source=direct&...

randomdata 9y ago
> If there was a shortage, the price of labor (wages) would increase. If price of labour was increasing, that would suggest that there isn't a shortage[1]. "In economic terminology, a shortage occurs when for some reason (such as government intervention, or decisions by sellers not to raise prices) the price does not rise to reach equilibrium. In this circumstance, buyers want to purchase more at the market price than the quantity of the good or service that is available, and some non-price mechanism (such as "first come, first served" or a lottery) determines which buyers are served." What I believe you are saying is that we have reached equilibrium, so there is no pressure to push prices up or down when measured across the population as a whole (individuals may still see increases and decreases). [1] https://en.wikipedia.org/wiki/Shortage https://en.wikipedia.org/wiki/Shortage
- mahyarm 9y ago
  I meant it in the more casual sense, of low supply and constant / high demand.
- deleted 9y ago
  [deleted]
- krath94 9y ago

jakelarkin 9y ago

the internet + globalization mega-trend unleashed in the 1990s has caused deflationary pressure on wages of any blue-collar labor that has the property of being easily transferable to the developing world. The effect lingers for decades are capital assets are slowly shifted around the world.

dfps 9y ago

Can you have both "creation of lots of jobs" by government policy and at the same time Higher wages for all workers ?

omarforgotpwd 9y ago

I don't really hear anyone talking about this often, but is it possible that there is systemic deflation across the economy as a result of efficiencies and prices falling in the digital age? As companies get squeezed on price due to more efficient competitors and high tech alternatives to their products, they have less money to pass onto workers. When profits are fat, companies can afford to pay workers a lot. This would explain why the inflation rate has been much lower than some people (like the Federal Reserve) had expected.

mdorazio 9y ago
Unfortunately, this isn't the case. Corporate profits have been hitting record highs for years now [1]. Companies simply aren't passing along these profits to their workers. [1] http://www.businessinsider.com/corporate-profits-hit-new-record-high-2012-11 http://www.businessinsider.com/corporate-profits-hit-new-rec...
- a_imho 9y ago
  Companies simply aren't passing along these profits to their workers. Best tldr
slyfocks 9y ago
Profits are indeed fat, though (corporate profit-to-GNP ratio is at an all-time high) [1]. Also, there’s no reason to believe corporations would raise wages simply because profit has increased. This holds true especially if labor hasn’t been the impetus for increased profit (I’d argue that efficiency gains due to technology and an increasingly oligopolistic market have led to increased profit for large corporations in the U.S.). [1] http://static3.businessinsider.com/image/531764dbecad04011139bd96-538/jesse-felder-chart.png http://static3.businessinsider.com/image/531764dbecad0401113...

ben_jones 9y ago

Increased population + Increased automation = Huge demand for jobs = Lower wages . In my opinion.

erikb 9y ago

Weird. Nothing in this article seems to relate to reality. I wonder if this is a story to keep people healthy minded, who are too scared to switch to another company or two incompetent. 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.

jstewartmobile 9y ago

- Two-income households: doubled the labor supply without making an equally large increase in demand (NOT A DIG AGAINST FEMINISM, JUST TALKING NUMBERS) - 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-14-people-make-500-000-tons-of-steel-a-year-in-austria https://www.bloomberg.com/news/articles/2017-06-21/how-just-...

jimmaswell 9y ago
Why would tax funded make-work result in lower wages across the board?
- jstewartmobile 9y ago
  Because it's more like alms than a salary. Even on a meager salary, you can still be overpaid.
  - xapata 9y ago
    Yes, but that doesn't answer the question.
    - pasquinelli 9y ago
      i think the idea is that unemployment should be higher. the fact employment numbers are kept high by bs jobs makes demand for labor seem higher than it is.
      - walshemj 9y ago
        That's assuming that the governments don't game the unemployment statistics (and they do agressivly) for example if the UK used the older definition of unemployment it would be higher than 4.3.

indubitable 9y ago

I think there's another very simple, yet often overlooked, reason that wages aren't growing: information. 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.

jsty 9y ago
> 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 employers would have to get a lot better at measuring the value produced by individuals, which always seems to have a chequered past with knowledge workers. Offering the going rate for an average employee is IMO a way of throwing your hands up and saying "I don't really know what this job entails or how good you'll be at it, but I know it needs doing so I'll offer what everyone else is"
deleted 9y ago
[deleted]
emodendroket 9y ago
I don't know about that; if anything I'd say the easy availability of salary information tips the scales in favor of job seekers, since an organization doing hiring regularly naturally has more information on how much people are being paid. The information on the Internet is also pretty low quality.

remarkEon 9y ago

>The very first thing any college freshman learns in Economics 101 is the law of supply and demand. I beg to differ. They do not learn this.

WalterBright 9y ago

> That means wages haven’t kept pace with gains in productivity, as economics says they should, 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).

tryingagainbro 9y ago
OK, fair enough. But, how are corporate earnings during this time? https://www.nytimes.com/2014/04/05/business/economy/corporate-profits-grow-ever-larger-as-slice-of-economy-as-wages-slide.html https://www.nytimes.com/2014/04/05/business/economy/corporat... "CORPORATE profits are at their highest level in at least 85 years. Employee compensation is at the lowest level in 65 years." Maybe via taxes USA should provide an incentive to invest or to pay employees more. There is $250b in Apple's bank accounts, $100B in Google's coffers, $100+ in MSFT's...maybe they should pay more in salaries, invest it or whatever.
- WalterBright 9y ago
  > Employee compensation The article didn't say total compensation. Most articles only consider the paycheck as compensation, and do not include benefits.
  - lotsofpulp 9y ago
    The significant majority of jobs are not those with considerable non cash benefits, so I don’t think it’s worthy of much discussions. It’s well known there is an increasing income and wealth gap, and it’s the increasing portion of those with non benefit jobs that is problematic.

evolighting 9y ago

The economics are lying. 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.

samhain 9y ago
Low effort post? Why don't you provide more context and sources for your opinion.

iovrthoughtthis 9y ago

> overall labor costs aren’t growing nearly as quickly as they did in the years before the 2008 financial crisis, even though Europe is enjoying a surprising revival. 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?

Heraclite 9y ago

As a software developer in EU, sometimes I find it absurd that I'm only paid 2x as much as the average office drone for which the company would see no difference if their department disappeared tomorrow. The only way to be paid according to your real value is to freelance or start your company.

a_imho 9y ago
And there are major differences even in the EU. The wage gap for a developer in the V4 compared to e.g. Germany (UK/Switzerland in a broader context) is staggering. https://www.wageunion.eu/ https://www.wageunion.eu/ https://elsajohansson.wordpress.com/2017/09/13/what-does-a-wage-gap-look-like/ https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...

oldpond 9y ago

Search for 'velocity of money'. It's a Fed chart and shows what happens when every citizen, business and government is swimming in debt. You printed all that money and gave it to the banks, but you didn't relieve the debt logjam. Oops.

barrkel 9y ago
Velocity of money doesn't have much to do with debt; money is a medium for negotiating the exchange of value between economic actors, the transmission fluid, as it were. If you were happy to get paid in very small increments very regularly, and similarly pay for other products in very small increments at very high speed, the economy could function with a numerically small amount of money, moving very quickly. Since that's not practical, we need lots of slack, buffer as it were, for converting our labour into money, before we in turn consume that money by exchanging it for other goods and services. There's a direct tradeoff between velocity of money and the supply of money; you need less of the latter when the former is high. Debt is about moving around consumption and production relative to one another. It's inherently based on predictions about the future, which is why it's risky. "Printing money and giving it to banks" is not how it works either. Rather, the government prints currency and buys debt with it. The debt represents future money, and is an asset today. But the currency isn't just given away. The relationship, such that it exists, is thus indirect; buying debt increases money supply which makes up for low velocity of money.
- oldpond 9y ago
  Spoken like a true believer.

lukasm 9y ago

How does the wage growth is calculated? I work remotely so I have to be employed as a contractor. I doubt I'm included. Significant portion of my colleagues are "permtractors" with companies registered in Channel Islands and other places. Another example is a friend that is paid only half legally. I don't think the situation is as bad as press is describing.

dalbasal 9y ago

For much of big picture economics, what we do is define a few fundamnetal concepts with which to narrate the economic story. 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.

fallingfrog 9y ago

I think the author is missing something- when labor productivity goes up due to automation, the increase in profits goes to whoever owns the machines not to the people working them. I mean after all, if you invest money in some equipment, you expect to be the one to get the returns on that investment. Altering that equation could take, as the author suggests, an outside force such as labor unions or government intervention- but the only long term solution is probably for the people who own the machines, and the people who work the machines, to be the same people.

brownbat 9y ago

Wages are growing dramatically, just not near Bloomberg HQ. https://tradingeconomics.com/china/wages https://tradingeconomics.com/china/wages https://tradingeconomics.com/south-africa/wages https://tradingeconomics.com/south-africa/wages

jgalt212 9y ago

Wages aren't growing because ZIRP is artificially increasing demand for plant and equipment (a labor substitute). When Fed Funds get to about 3%, I bet we'll start to see some healthy wage growth.

deleted 9y ago

[deleted]

programminggeek 9y ago

Wages aren't growing because people don't ask for more money. It's not any more complicated than that. 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.

CryptoPunk 9y ago

This is a really poor article. Wages are growing, and at their fastest rate in history. Japan is not the world. Worldwide, labour's share of income has declined modestly, but that can be fully explained by the global decline in the labour participation rate: https://data.worldbank.org/indicator/SL.TLF.CACT.ZS 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).

taw-an 9y ago

"For unions to regain ground, governments will have to give them a nudge. Former U.S. Secretary of Labor Robert Reich recommends Washington make it easier to form unions, impose harsher penalties on companies that fire organizers, and banish “right-to-work” laws in states that allow workers to benefit from unions without paying dues, considered a back door to weakening them." 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?

CryptoPunk 9y ago

This is a really poor article. Wages are growing, and have doubled in the developing world since 1990. China has seen 13% per year wage growth since 2000. Japan is not the world. Worldwide, labour's share of income has declined modestly, but that can be fully explained by the global decline in the labour participation rate: https://data.worldbank.org/indicator/SL.TLF.CACT.ZS 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).