4 ms·

Supply and demand does a great job of explaining depressed wages. We had two kinds supply shocks in the recent history in the labor market. One is women enterin

by sprash 9y ago

Supply and demand does a great job of explaining depressed wages. We had two kinds supply shocks in the recent history in the labor market. One is women entering the workforce and the second is mass immigration. Both coincided at the end of the 60s and 70s. Exactly since then wages are not correlated to productivity anymore and are basically stagnating.

TheAdamAndChe 9y ago
Globalization occurred during this time, too, leading to a greater concentration of wealth in the cities.
Frondo 9y ago
You blame women and immigrants, but a much more likely explanation is the decline of union participation in the private American workforce. They've been on the decline since the 1970s, and the more they've declined, the more that productivity has been captured by upper management and shareholders.
- brightball 9y ago
  Sticking to the supply-demand theme...decline in union participation could also come as a result of bad experiences with unions over leveraging their positions causing business to prefer non-union workers. At the same time, as working conditions improved the benefits of participating in a union could be much less pronounced. Meaning that demand for non-union workers increased, which were in ample supply. To truly make a case for union participation you have to also make a case for how hiring union workers benefits a business. If that isn't plainly obvious, then the demand for union workers themselves will go down.
- randomdata 9y ago
  That is still explained by supply and demand though. A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually). Unionized workers are usually able to make more money than they would in a non-unionized market because of that smaller supply of sellers relative to the demand. However, as a Canadian who saw peak unionization in the mid-80s, long after wages also started stagnating in our country, and a country that still has relatively strong unionization even today (especially compared to the significant decline seen in the USA), I'm not sure that this explanation holds.
  - EliRivers 9y ago
    A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually). Closed-shop unions, you say? Do they still exist? I work in the UK, and I've worked in many workplaces where there were active unions, and the very idea that you'd have to be a member of the union to work there was laughable and, if I recall correctly, illegal. In my experience, a union does not work by artificially constraining the labor pool. In every job I've ever had in which I could have joined a union, I only had the opportunity to join the union after I was employed. Before I was employed, I didn't even know there was a union there.
    - randomdata 9y ago
      Closed-shop unions are typical where I live. My mistake on them being typical across the world. However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. The only other supply is those who want to bargain on their own, and even then you're probably not going to find too many who are willing to severely undercut the union, unless the union is on the brink of collapse anyway. The supply is still constrained. Although perhaps not to level it is in a closed shop.
      - EliRivers 9y ago
        However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. Even that is another interesting thing; the idea that one of my employers, past and present, might actively seek out union members to employ, is so strange to me (and completely unworkable; I think it might even be illegal). The supply was in no way affected by the union. In jobs I've had in the past, any benefits or agreement the union negotiates applied to all employees, regardless of union membership status, and were placed into contracts without any reference to unions at all. Collective bargaining by the union for improved conditions and pay existed; every employee benefited, union and non-union alike. I suppose the moral of this is just that unions work very differently where you live to where I live.
- crdoconnor 9y ago
  Also: * Austerity (e.g. leaving pothole fixing in portland to anarchists) - which reduces aggregate demand for labor, and thus reduces overall wages. * Benefits cuts - which increases low wage workers' reliance upon their wage income, and reduces their negotiating leverage. This is why certain politicians are extremely concerned about "fiscal prudence" when it comes to government spending on wages, pensions or benefits, but lose their sense of fiscal prudence as soon as the topic is tax cuts or military spending. They're mainly just trying to inadvertently push corporate wage bills down.
- dang 9y ago
  > You blame women and immigrants That's a noticeable step into flamewar. Could you please not do that to the threads here? It isn't necessary to make your point, and in the long run it destroys the site. Instead, please follow the guidelines at https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html, including this one: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize." (Your comment would be fine without that initial phrase.)
fhood 9y ago
Do you have data on this? Because I looked and couldn't find anything reliable going past ~1964.
- adventured 9y ago
  Take one example. US manufacturing has become radically more productive over time: https://i.imgur.com/exTxW1O.jpg https://i.imgur.com/exTxW1O.jpg The primary reason the US lost so many manufacturing jobs since the peak, wasn't China, it was persistent gains in manufacturing productivity. At the exact same time that is occuring, and while domestic economic growth slows, you import millions of low skill laborers into a declining or stagnant labor demand situation (for that type of labor). What is going to happen? It's obvious: wage suppression due to labor over-supply. It is simple supply and demand. Tech workers have gotten to see this up close & personal, as companies from IBM to Microsoft intentionally imported lower cost foreign engineer labor to undercut higher cost domestic engineers. It's why the Koch brothers are such big fans of unlimited low-skill immigration (and why so many business Republicans love it, that by itself should throw up a red flag), the entire point is to hold wages down and hold down business costs to maximize corporate profitability. This is also why almost no other developed nation allows unlimited or large amounts low-skill immigration, including Canada. Most developed nations use either a ridiculously strict approach to any immigration (eg Japan, and presently Scandinavia), or specifically operate a skill restricted / merit-based immigration system (eg Canada and Australia).
  - fhood 9y ago
    Sure, possibly valid points. But the original comment made an explicit point that I can't verify because I cannot find wage data going back past 1964.
    - abakker 9y ago
      https://slatestarcodex.com/2018/02/19/technological-unemployment-much-more-than-you-wanted-to-know/ https://slatestarcodex.com/2018/02/19/technological-unemploy... Look at the charts on labor force participation rate, and read his analysis. I'd say it is very carefully done.
jopuwep12489 9y ago
A correlation. :|

by sprash 9y ago

TheAdamAndChe 9y ago

Globalization occurred during this time, too, leading to a greater concentration of wealth in the cities.

Frondo 9y ago

You blame women and immigrants, but a much more likely explanation is the decline of union participation in the private American workforce. They've been on the decline since the 1970s, and the more they've declined, the more that productivity has been captured by upper management and shareholders.

brightball 9y ago
Sticking to the supply-demand theme...decline in union participation could also come as a result of bad experiences with unions over leveraging their positions causing business to prefer non-union workers. At the same time, as working conditions improved the benefits of participating in a union could be much less pronounced. Meaning that demand for non-union workers increased, which were in ample supply. To truly make a case for union participation you have to also make a case for how hiring union workers benefits a business. If that isn't plainly obvious, then the demand for union workers themselves will go down.
randomdata 9y ago
That is still explained by supply and demand though. A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually). Unionized workers are usually able to make more money than they would in a non-unionized market because of that smaller supply of sellers relative to the demand. However, as a Canadian who saw peak unionization in the mid-80s, long after wages also started stagnating in our country, and a country that still has relatively strong unionization even today (especially compared to the significant decline seen in the USA), I'm not sure that this explanation holds.
- EliRivers 9y ago
  A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually). Closed-shop unions, you say? Do they still exist? I work in the UK, and I've worked in many workplaces where there were active unions, and the very idea that you'd have to be a member of the union to work there was laughable and, if I recall correctly, illegal. In my experience, a union does not work by artificially constraining the labor pool. In every job I've ever had in which I could have joined a union, I only had the opportunity to join the union after I was employed. Before I was employed, I didn't even know there was a union there.
  - randomdata 9y ago
    Closed-shop unions are typical where I live. My mistake on them being typical across the world. However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. The only other supply is those who want to bargain on their own, and even then you're probably not going to find too many who are willing to severely undercut the union, unless the union is on the brink of collapse anyway. The supply is still constrained. Although perhaps not to level it is in a closed shop.
    - EliRivers 9y ago
      However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. Even that is another interesting thing; the idea that one of my employers, past and present, might actively seek out union members to employ, is so strange to me (and completely unworkable; I think it might even be illegal). The supply was in no way affected by the union. In jobs I've had in the past, any benefits or agreement the union negotiates applied to all employees, regardless of union membership status, and were placed into contracts without any reference to unions at all. Collective bargaining by the union for improved conditions and pay existed; every employee benefited, union and non-union alike. I suppose the moral of this is just that unions work very differently where you live to where I live.
crdoconnor 9y ago
Also: * Austerity (e.g. leaving pothole fixing in portland to anarchists) - which reduces aggregate demand for labor, and thus reduces overall wages. * Benefits cuts - which increases low wage workers' reliance upon their wage income, and reduces their negotiating leverage. This is why certain politicians are extremely concerned about "fiscal prudence" when it comes to government spending on wages, pensions or benefits, but lose their sense of fiscal prudence as soon as the topic is tax cuts or military spending. They're mainly just trying to inadvertently push corporate wage bills down.
dang 9y ago
> You blame women and immigrants That's a noticeable step into flamewar. Could you please not do that to the threads here? It isn't necessary to make your point, and in the long run it destroys the site. Instead, please follow the guidelines at https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html, including this one: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize." (Your comment would be fine without that initial phrase.)

fhood 9y ago

Do you have data on this? Because I looked and couldn't find anything reliable going past ~1964.

adventured 9y ago
Take one example. US manufacturing has become radically more productive over time: https://i.imgur.com/exTxW1O.jpg https://i.imgur.com/exTxW1O.jpg The primary reason the US lost so many manufacturing jobs since the peak, wasn't China, it was persistent gains in manufacturing productivity. At the exact same time that is occuring, and while domestic economic growth slows, you import millions of low skill laborers into a declining or stagnant labor demand situation (for that type of labor). What is going to happen? It's obvious: wage suppression due to labor over-supply. It is simple supply and demand. Tech workers have gotten to see this up close & personal, as companies from IBM to Microsoft intentionally imported lower cost foreign engineer labor to undercut higher cost domestic engineers. It's why the Koch brothers are such big fans of unlimited low-skill immigration (and why so many business Republicans love it, that by itself should throw up a red flag), the entire point is to hold wages down and hold down business costs to maximize corporate profitability. This is also why almost no other developed nation allows unlimited or large amounts low-skill immigration, including Canada. Most developed nations use either a ridiculously strict approach to any immigration (eg Japan, and presently Scandinavia), or specifically operate a skill restricted / merit-based immigration system (eg Canada and Australia).
- fhood 9y ago
  Sure, possibly valid points. But the original comment made an explicit point that I can't verify because I cannot find wage data going back past 1964.
  - abakker 9y ago
    https://slatestarcodex.com/2018/02/19/technological-unemployment-much-more-than-you-wanted-to-know/ https://slatestarcodex.com/2018/02/19/technological-unemploy... Look at the charts on labor force participation rate, and read his analysis. I'd say it is very carefully done.

jopuwep12489 9y ago

A correlation. :|