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This is what people somehow don't get. If cost of living goes down, so do the salaries. How do you think those decreases are paid for? For most any business

This is what people somehow don't get. If cost of living goes down, so do the salaries. How do you think those decreases are paid for? For most any business you can name the biggest item in the budget will be human resources. If you want to cut prices this is where you have to cut to have any real effect.

tome 16y ago
How do you think those decreases are paid for? I would have thought they would have been paid for by increases in efficiency (largely due to new technology).
- loewenskind 16y ago
  There are efficiency explosions now and again that create huge shifts, but mostly you just get little tweaks here and there (e.g. increase factory output by 5% or even 50%). Not numbers that can touch sacking half your staff or replacing all of them with a production provider in e.g. China.
  - eru 16y ago
    You know why the Chinese have lower wages at the moment? Because they are less productive. As they become more productive, their wages are going up, too.
    - loewenskind 16y ago
      Completely wrong. If that were the case then the cost of developing 10k cheap electronic gadgets would be the same in the US vs. China. The US workers would cost more but make more in the same time. This is not the case at all. The Chinese can produce vastly more items than the US can for the same price/time. Do you have any examples where some US company can produce things as such an improved production speed compared to China?
      - eru 16y ago
        You are right that richer countries are not more productive in all sectors. E.g. a Swiss hair cut won't be as superior to a Somalian one, as the differences in wages suggest. My guts tell me that the US is more productive than China in, say, software development and probably finance. But don't trust my guts. Do some research yourself. A quick search for "productivity US china" turned up "U.S. Leads Productivity Ranking; China Gains" (http://www.nytimes.com/2007/09/04/business/worldbusiness/04output.html?_r=1 http://www.nytimes.com/2007/09/04/business/worldbusiness/04o...).
        loewenskind 16y ago
        One has to be careful how one measures these things. It's easy to get into tautology land ("Who is more productive? The more expensive one. How do you know they're more productive? Because they're more expensive").
        eru 16y ago
        Indeed. Though if you can compete on the world market and be more expensive, there's got to be something to justify that.
roel_v 16y ago
In absolute terms the cost of living (when comparing with a constant standard of living though!) has decreased significantly vis-a-vis median salaries over the last 30 years. Most of the gains were made in increased production efficiencies. I think you severely underestimate the amount of gains that have been made there over that time. Total food budget is 5 to 10% of middle class household income in most of the West; it was a multiple of that only 100 years ago! What I'm saying is that (inflation-adjusted) cost of living has been going down for the last couple of decades, and that salaries have gone up in absolute inflation-adjusted terms. You can argue that this trend won't hold for the future for a myriad of reasons but I wouldn't support such a view.
- loewenskind 16y ago
  I think that's a little trickier to pin down than that. Yes food costs less. Housing? Maybe. But now things you didn't have 100 years ago are requirements. For example, if you don't have a phone today you're going to have a hard time finding and keeping a job. Keeping someone from 100 years ago alive would certainly cost less than it did then but you have to also consider if they could function in today's society on that money, otherwise it's not a realistic comparison.
  - roel_v 16y ago
    Yes this is true, but only to a certain extent. It's why I put in the "when comparing with a constant standard of living though", but that is trickier than just that one line of course, as you correctly point out. Still many of the factors that are considered 'requirements' today aren't in my book, but of course this can be subject to discussion. To take your telephone example, here in the Netherlands (an advanced Western country by all measures) I don't know of many jobs that one wouldn't be able to get or keep without a phone. For those where you're on-call, you are provided with one. Similarly, cost of living statistics by our national statistics institute changed their household budgets a few years ago - the tv has been a 'basic necessity' for decades (in these statistics), but the budget was upped several hundred euros because now LCD tv's are the norm. Still I think it's stupid to budget 800 euros every 5 years for a TV into a 'basic necessity' budget. I remain convinced that even after accounting for an adjusted lifestyle to the level of a 'basic lifestyle', and where 'basic needs' have evolved to match societal progress, the increase in income has outpaced the rise of cost of living.

tome 16y ago

How do you think those decreases are paid for? I would have thought they would have been paid for by increases in efficiency (largely due to new technology).

loewenskind 16y ago
There are efficiency explosions now and again that create huge shifts, but mostly you just get little tweaks here and there (e.g. increase factory output by 5% or even 50%). Not numbers that can touch sacking half your staff or replacing all of them with a production provider in e.g. China.
- eru 16y ago
  You know why the Chinese have lower wages at the moment? Because they are less productive. As they become more productive, their wages are going up, too.
  - loewenskind 16y ago
    Completely wrong. If that were the case then the cost of developing 10k cheap electronic gadgets would be the same in the US vs. China. The US workers would cost more but make more in the same time. This is not the case at all. The Chinese can produce vastly more items than the US can for the same price/time. Do you have any examples where some US company can produce things as such an improved production speed compared to China?
    - eru 16y ago
      You are right that richer countries are not more productive in all sectors. E.g. a Swiss hair cut won't be as superior to a Somalian one, as the differences in wages suggest. My guts tell me that the US is more productive than China in, say, software development and probably finance. But don't trust my guts. Do some research yourself. A quick search for "productivity US china" turned up "U.S. Leads Productivity Ranking; China Gains" (http://www.nytimes.com/2007/09/04/business/worldbusiness/04output.html?_r=1 http://www.nytimes.com/2007/09/04/business/worldbusiness/04o...).
      - loewenskind 16y ago
        One has to be careful how one measures these things. It's easy to get into tautology land ("Who is more productive? The more expensive one. How do you know they're more productive? Because they're more expensive").
        eru 16y ago
        Indeed. Though if you can compete on the world market and be more expensive, there's got to be something to justify that.

roel_v 16y ago

In absolute terms the cost of living (when comparing with a constant standard of living though!) has decreased significantly vis-a-vis median salaries over the last 30 years. Most of the gains were made in increased production efficiencies. I think you severely underestimate the amount of gains that have been made there over that time. Total food budget is 5 to 10% of middle class household income in most of the West; it was a multiple of that only 100 years ago! What I'm saying is that (inflation-adjusted) cost of living has been going down for the last couple of decades, and that salaries have gone up in absolute inflation-adjusted terms. You can argue that this trend won't hold for the future for a myriad of reasons but I wouldn't support such a view.

loewenskind 16y ago
I think that's a little trickier to pin down than that. Yes food costs less. Housing? Maybe. But now things you didn't have 100 years ago are requirements. For example, if you don't have a phone today you're going to have a hard time finding and keeping a job. Keeping someone from 100 years ago alive would certainly cost less than it did then but you have to also consider if they could function in today's society on that money, otherwise it's not a realistic comparison.
- roel_v 16y ago
  Yes this is true, but only to a certain extent. It's why I put in the "when comparing with a constant standard of living though", but that is trickier than just that one line of course, as you correctly point out. Still many of the factors that are considered 'requirements' today aren't in my book, but of course this can be subject to discussion. To take your telephone example, here in the Netherlands (an advanced Western country by all measures) I don't know of many jobs that one wouldn't be able to get or keep without a phone. For those where you're on-call, you are provided with one. Similarly, cost of living statistics by our national statistics institute changed their household budgets a few years ago - the tv has been a 'basic necessity' for decades (in these statistics), but the budget was upped several hundred euros because now LCD tv's are the norm. Still I think it's stupid to budget 800 euros every 5 years for a TV into a 'basic necessity' budget. I remain convinced that even after accounting for an adjusted lifestyle to the level of a 'basic lifestyle', and where 'basic needs' have evolved to match societal progress, the increase in income has outpaced the rise of cost of living.