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The premise of this article is simply addressing the symptoms and not the cause. Any first year Economics Undergraduate learns that prices rise when quantity d
by icu 8y ago
The premise of this article is simply addressing the symptoms and not the cause. Any first year Economics Undergraduate learns that prices rise when quantity demanded outstrips quantity supplied.
Wages are simply the price of labour. For the price of labour to rise, there must be less workers willing to do work at the market clearing price.
It is just not possible to do this at this time due to societal factors that Economists, and this article, have largely failed to address—due to the sensitive nature of the these factors.
Foremost, the addition of women in the workplace has effectively doubled the labour supply. IMHO quite rightly as well, freedom is a fundamental civil rights issue... but the global economy did not outgrow the additional labour supply and wages have been flat as a result.
Secondly, globalisation has brought about the shifting of jobs from higher cost centres to lower ones. This reduces the demand side for labour in the West, resulting in a lower price equilibrium (but has increased the demand side for labour in the East, where wages have been forced to rise, albeit from a very low place). It's also obvious that this issue has been a political hot potato as most moderate political parties in the West have accelerated globalisation at the same time as they largely ignored its consequences. I think it's fair to say that this has now given rise to extreme political views, and parties, on both the left and the right.
Lastly, it is hard to argue that immigration movements have not also brought about an over supply of labour to the West. Legal or illegal it doesn't really matter, the net effect is an increase in the labour supply which will push down price equilibrium.
And as a bonus, most Economists fail to think about the impact inflation (AKA stealth tax) has on real (AKA inflation-adjusted) wages.
IMHO, productivity and growth are the real only solutions, but I'm afraid that political uncertainty caused by social upheaval will mean that productivity and growth are stymied for years to come.
- seem_2211 8y agoYou should re-read the article. We've seen an increase in productivity, but no matched increase in wages (a 75% increase in worker productivity in America from 1973 to 2016, while average pay rose by less than 50% and median pay by just over 10%). As for the rest of your comment, you should look into the Lump of Labour fallacy[1]. 1: https://en.wikipedia.org/wiki/Lump_of_labour_fallacy https://en.wikipedia.org/wiki/Lump_of_labour_fallacy
- s73v3r_ 8y ago"Any first year Economics Undergraduate learns that prices rise when quantity demanded outstrips quantity supplied." And very quickly after that, if they stay in the program, find out that Econ 101 is highly simplified, and things are much, much more nuanced than that.