6 ms·

Linked elsewhere in the comments, but this is an interesting read regarding the increasing gap between productivity and labor: https://www.epi.org/publication/u

by adpirz 8y ago

Linked elsewhere in the comments, but this is an interesting read regarding the increasing gap between productivity and labor: 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.... The interesting fact is that the loss of labor's share of GDP to capital is less than you'd imagine, and a much bigger reason for stagnant real wage growth has to do with inequality regarding compensation. Automation is real and is taking jobs, but it's executives that have been soaking up the financial gains from productivity.

Nokinside 8y ago
When you are really rich, consumption becomes tedious. If someone has $100M income after taxes, they might invest $50M reducing the ROI of the capital in economy during the economic boom when there is enough capital and cheap credit already. What to do with the remaining $50 million? It's hard to eat, travel or use services to spend $50 million per year. It's possible, but it takes some real effort. Helicopter ride every day barely registers. You can always buy a bigger house. $50 gets you a nice one. If you put $150 million you get even better. Property prices increase.
- walshemj 8y ago
  They are tanking about the rich middle class west (ie you and me) not euro trash millionaires and trustafarians on made in Chelsea :-) Also if you did suddenly get 50mil say you invest for the long term 50% the balance gives you an income < 1,000,000 a year And that's not assuming you don't spend 10-15 mill or so on a really nice house or two one in London and one in the country.
  - jessaustin 8y ago
    Those houses wouldn't be your worst investments...
    - walshemj 8y ago
      If I had done that 15 /20 years ago yes :-) the post Brexit / Trump stock market crash maybe not.
door3 8y ago
Sounds like this should bring up discussion around a maximum wage/relative earnings limit.
EliRivers 8y ago
That's certainly part of it. I worked at a company a few years ago in which, come Christmas, the MD (British company) told everyone that it had been a good year and that he'd rather see the profits go to the workers than the shareholders, so here's a nice bonus (over a month's pay as a bonus). I genuinely believe some would see that as heresy, and some will think that is (or should be) illegal. I'm sure there was a time when a principal point of a company was for the people in it to band together and earn money.
- idontpost 8y ago
  Illegal's an overstatement (ie it's not criminal), but it could certainly have generated a shareholder lawsuit.
cperciva 8y ago
It's important to not confused the distribution of income between labour and capital with the rates of return on labour and capital. Right now we have an unprecedented amount of capital sloshing around. When you increase the supply of capital, two things happen: The total income returned to capital goes up, and the rate of return goes down. If you care about wage growth, look at wage growth. Looking at labour's share of GDP is going to give you a wildly misleading view in the context of large capital flows.
dnautics 8y ago
you don't suppose it's because low interest rates, QE, and stimulus are policies designed to decrease the cost of labor? 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... "even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts"

by adpirz 8y ago

Nokinside 8y ago

When you are really rich, consumption becomes tedious. If someone has $100M income after taxes, they might invest $50M reducing the ROI of the capital in economy during the economic boom when there is enough capital and cheap credit already. What to do with the remaining $50 million? It's hard to eat, travel or use services to spend $50 million per year. It's possible, but it takes some real effort. Helicopter ride every day barely registers. You can always buy a bigger house. $50 gets you a nice one. If you put $150 million you get even better. Property prices increase.

walshemj 8y ago
They are tanking about the rich middle class west (ie you and me) not euro trash millionaires and trustafarians on made in Chelsea :-) Also if you did suddenly get 50mil say you invest for the long term 50% the balance gives you an income < 1,000,000 a year And that's not assuming you don't spend 10-15 mill or so on a really nice house or two one in London and one in the country.
- jessaustin 8y ago
  Those houses wouldn't be your worst investments...
  - walshemj 8y ago
    If I had done that 15 /20 years ago yes :-) the post Brexit / Trump stock market crash maybe not.

door3 8y ago

Sounds like this should bring up discussion around a maximum wage/relative earnings limit.

EliRivers 8y ago

That's certainly part of it. I worked at a company a few years ago in which, come Christmas, the MD (British company) told everyone that it had been a good year and that he'd rather see the profits go to the workers than the shareholders, so here's a nice bonus (over a month's pay as a bonus). I genuinely believe some would see that as heresy, and some will think that is (or should be) illegal. I'm sure there was a time when a principal point of a company was for the people in it to band together and earn money.

idontpost 8y ago
Illegal's an overstatement (ie it's not criminal), but it could certainly have generated a shareholder lawsuit.

cperciva 8y ago

It's important to not confused the distribution of income between labour and capital with the rates of return on labour and capital. Right now we have an unprecedented amount of capital sloshing around. When you increase the supply of capital, two things happen: The total income returned to capital goes up, and the rate of return goes down. If you care about wage growth, look at wage growth. Looking at labour's share of GDP is going to give you a wildly misleading view in the context of large capital flows.

dnautics 8y ago

you don't suppose it's because low interest rates, QE, and stimulus are policies designed to decrease the cost of labor? 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... "even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts"