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What exactly (as if anyone can know) caused the wage growth and productivity to split in the 1970s? Was Nixon's complete split from the gold standard a factor

by pknopf 8y ago

What exactly (as if anyone can know) caused the wage growth and productivity to split in the 1970s? Was Nixon's complete split from the gold standard a factor at all?

hfeyhvdtbcdtv 8y ago
credit card debt. corporations gave money to banks to loan to the employees instead of giving them raises.
freddie_mercury 8y ago
> Was Nixon's complete split from the gold standard a factor at all? No, it wasn't.
- vivafrance 8y ago
  Yes, it was.
  - treis 8y ago
    Now this is the high quality debate I come for
adpirz 8y ago
See: https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/ https://www.epi.org/publication/understanding-the-historic-d... TL;DR 3 Things, in increasing order of magnitude: - The increasing share of GDP going from labor to capital - The "terms of trade", ie, how labor's share is measured, FTA: "the same growth in nominal, or current dollar, wages and output yields faster growth in real (inflation-adjusted) output (which is adjusted for changes in the prices of investment goods, exports, and consumer purchases) than in real wages (which is adjusted for changes in consumer purchases only)." - a much bigger slice of the pie: inequality in compensation, ie, average compensation has risen dramatically, but median compensation has stayed flat. Basically executives have gobbled up a healthy portion of the income.
didericis 8y ago
I'd imagine it's a major factor. Inflation makes it very difficult to know when you should demand a higher salary. You might get promotions every now and then and feel like you're moving up when in reality you're at the same relative level.
platz 8y ago
The investor class saw inflation marginalizing their endeavors, and they got us to target price stability as the goal instead of full employment. The controls, liquidity of global capital, and action of the central banks that maintain price stability, end up suppressing wage growth. So we have a world in which rather than the debtor’s paradise we had in the 70s, we have a creditor’s paradise now. https://youtu.be/X5JI0_i_Xik?t=21m44s https://youtu.be/X5JI0_i_Xik?t=21m44s
- lifty 8y ago
  I am not sure I follow your reasoning. Taking into account the low interest environment that we have gone through in the last 10 years how can it be a creditor’s paradise?
  - platz 8y ago
    They don't need super-high interest rates to lock in their returns. They need investment predictability, and can make up the difference with scale and global arbitrage. From the other perspective, if your wages don’t rise, and your debts are there and your debts — particularly the student debts — are guaranteed by God himself that you can never default on them — you’re a debt peon.
maxerickson 8y ago
Computers. Productivity in jobs that are amenable to automation exploded, concentrated in fewer jobs than would exist without automation. Productivity in jobs that are't (or are less) amenable to automation didn't explode but there are plenty of people competing for them.
selectodude 8y ago
>Was Nixon's complete split from the gold standard a factor at all? Caveat: I have a degree in Economics and learned about this stuff, but I am not a historian and could probably do well to be corrected at some points below. Pre-1971, the only way to create more currency was for the president to issue a new gold peg, which caused chaos when people would be trying to exchange USD for gold before the new peg came on. FDR literally made holding gold illegal because of the issues this caused. What you see pre-1971 to post 1971 is a large increase in the money supply, allowing more investment and higher inflation, along with easier exchange with foreign currency (easier for them to invest here, too). Other factors are the advent of technology making human labor less necessary and a transition to a knowledge economy (fewer employees earning more money). On the other end, due to the end of gold convertibility, foreign steel and the oil shocks were also caused by a move toward free trade (the embargo had as much to do with Israel as it did with a change in oil pricing from USD to gold coupled with a surge in inflation of the USD).
knuththetruth 8y ago
The destruction of unions and other forms of organized labor. Without any strong, organized resistance to Capital owners, they were free to redirect more and more of the profits from productivity gains to themselves. The resulting disparity created a kind of feedback loop that further entrenched the power of Capital owners, as some of the excess wealth they now possessed could be put to use subverting the American political system to serve their interests.
- randomdata 8y ago
  Why did Canada's wages stop growing at the same time, even though unions continued to strengthen until the mid-1980s, when it peaked at nearly 40% of the workforce?
  - knuththetruth 8y ago
    Because by the 1970s, Capital was a fully globalized force whose political projects exceeded the power of individual nation state’s ability to resist them. Only transnational labor solidarity has comparable power, which is something that Capital owners had specifically sought to (and succeeded at) undermining in the context of the Cold War.
    - randomdata 8y ago
      By transnational you mean American? There are plenty of countries where unionization and labour solidarity remains strong even today. And, if so, what is special about the American workforce in particular that they have such an effect on the entire world?
      - knuththetruth 8y ago
        It’s not what’s so special about the American workforce, but what’s so special about American Capital. And the answer to that is that standing behind their demands is a massive, belligerent, military empire, with a long history of toppling or refusing to defend countries that don’t play along.
pg_bot 8y ago
I would say the two greatest factors are an increased supply of low skilled labor globally, and the rise of the computer. First world labor competes on productivity to make up for the cost differential of third world labor which wasn't competing in the global marketplace prior to the 70's. Firms "chase the cheapest needle" and as economies develop wages increase for the local population. As wealth accumulates in these countries they transition into innovation based economies and the cycle continues until no more cheap labor in politically stable countries can be found. At that point wages begin to increase along with productivity. A lot of people forget several billion people have been lifted out of extreme poverty over the past 45 years. These people compete against you in the global marketplace and affect the prices we pay for goods and services.

by pknopf 8y ago

What exactly (as if anyone can know) caused the wage growth and productivity to split in the 1970s? Was Nixon's complete split from the gold standard a factor at all?

hfeyhvdtbcdtv 8y ago

credit card debt. corporations gave money to banks to loan to the employees instead of giving them raises.

freddie_mercury 8y ago

> Was Nixon's complete split from the gold standard a factor at all? No, it wasn't.

vivafrance 8y ago
Yes, it was.
- treis 8y ago
  Now this is the high quality debate I come for

adpirz 8y ago

See: https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/ https://www.epi.org/publication/understanding-the-historic-d... TL;DR 3 Things, in increasing order of magnitude: - The increasing share of GDP going from labor to capital - The "terms of trade", ie, how labor's share is measured, FTA: "the same growth in nominal, or current dollar, wages and output yields faster growth in real (inflation-adjusted) output (which is adjusted for changes in the prices of investment goods, exports, and consumer purchases) than in real wages (which is adjusted for changes in consumer purchases only)." - a much bigger slice of the pie: inequality in compensation, ie, average compensation has risen dramatically, but median compensation has stayed flat. Basically executives have gobbled up a healthy portion of the income.

didericis 8y ago

I'd imagine it's a major factor. Inflation makes it very difficult to know when you should demand a higher salary. You might get promotions every now and then and feel like you're moving up when in reality you're at the same relative level.

platz 8y ago

The investor class saw inflation marginalizing their endeavors, and they got us to target price stability as the goal instead of full employment. The controls, liquidity of global capital, and action of the central banks that maintain price stability, end up suppressing wage growth. So we have a world in which rather than the debtor’s paradise we had in the 70s, we have a creditor’s paradise now. https://youtu.be/X5JI0_i_Xik?t=21m44s https://youtu.be/X5JI0_i_Xik?t=21m44s

lifty 8y ago
I am not sure I follow your reasoning. Taking into account the low interest environment that we have gone through in the last 10 years how can it be a creditor’s paradise?
- platz 8y ago
  They don't need super-high interest rates to lock in their returns. They need investment predictability, and can make up the difference with scale and global arbitrage. From the other perspective, if your wages don’t rise, and your debts are there and your debts — particularly the student debts — are guaranteed by God himself that you can never default on them — you’re a debt peon.

maxerickson 8y ago

Computers. Productivity in jobs that are amenable to automation exploded, concentrated in fewer jobs than would exist without automation. Productivity in jobs that are't (or are less) amenable to automation didn't explode but there are plenty of people competing for them.

selectodude 8y ago

>Was Nixon's complete split from the gold standard a factor at all? Caveat: I have a degree in Economics and learned about this stuff, but I am not a historian and could probably do well to be corrected at some points below. Pre-1971, the only way to create more currency was for the president to issue a new gold peg, which caused chaos when people would be trying to exchange USD for gold before the new peg came on. FDR literally made holding gold illegal because of the issues this caused. What you see pre-1971 to post 1971 is a large increase in the money supply, allowing more investment and higher inflation, along with easier exchange with foreign currency (easier for them to invest here, too). Other factors are the advent of technology making human labor less necessary and a transition to a knowledge economy (fewer employees earning more money). On the other end, due to the end of gold convertibility, foreign steel and the oil shocks were also caused by a move toward free trade (the embargo had as much to do with Israel as it did with a change in oil pricing from USD to gold coupled with a surge in inflation of the USD).

knuththetruth 8y ago

The destruction of unions and other forms of organized labor. Without any strong, organized resistance to Capital owners, they were free to redirect more and more of the profits from productivity gains to themselves. The resulting disparity created a kind of feedback loop that further entrenched the power of Capital owners, as some of the excess wealth they now possessed could be put to use subverting the American political system to serve their interests.

randomdata 8y ago
Why did Canada's wages stop growing at the same time, even though unions continued to strengthen until the mid-1980s, when it peaked at nearly 40% of the workforce?
- knuththetruth 8y ago
  Because by the 1970s, Capital was a fully globalized force whose political projects exceeded the power of individual nation state’s ability to resist them. Only transnational labor solidarity has comparable power, which is something that Capital owners had specifically sought to (and succeeded at) undermining in the context of the Cold War.
  - randomdata 8y ago
    By transnational you mean American? There are plenty of countries where unionization and labour solidarity remains strong even today. And, if so, what is special about the American workforce in particular that they have such an effect on the entire world?
    - knuththetruth 8y ago
      It’s not what’s so special about the American workforce, but what’s so special about American Capital. And the answer to that is that standing behind their demands is a massive, belligerent, military empire, with a long history of toppling or refusing to defend countries that don’t play along.

pg_bot 8y ago

I would say the two greatest factors are an increased supply of low skilled labor globally, and the rise of the computer. First world labor competes on productivity to make up for the cost differential of third world labor which wasn't competing in the global marketplace prior to the 70's. Firms "chase the cheapest needle" and as economies develop wages increase for the local population. As wealth accumulates in these countries they transition into innovation based economies and the cycle continues until no more cheap labor in politically stable countries can be found. At that point wages begin to increase along with productivity. A lot of people forget several billion people have been lifted out of extreme poverty over the past 45 years. These people compete against you in the global marketplace and affect the prices we pay for goods and services.