6 ms·

The last sentence is the big problem. I feel like a lot of industries didn't just make the best of the advantageous labour market in the last 10 years, they res

by lainga 8y ago

The last sentence is the big problem. I feel like a lot of industries didn't just make the best of the advantageous labour market in the last 10 years, they reshaped themselves to become dependent on it (i.e., on cheap and easily-replaced human capital). Now that labour's tight again, they're finding that they've worked themselves into a hole they can't get out of.

adventured 8y ago
Business just got a massive tax cut. They can dig themselves out by spending on increasing productivity and paying higher wages. The economy needs to be run very hot for an extended period of time, instead of getting crashed by an obnoxiously over-eager Fed that likes to kick the economy into a recession to dampen wage growth for the benefit of businesses in the guise of controlling inflation. Businesses need to be made to squeal in pain here. Run the economy as hot as we can get it for as long as we can and shove wages through the roof at the cost of business margins (which were just considerably boosted via the tax cuts). If the Republicans and Democrats weren't collectively so stupid, they'd be cooperating on hammering out a massive infrastructure spending plan paid for by a trillion dollars printed by the Fed across 10-15 years (or similarly constructing an infrastructure bank filled courtesy of abusing the global reserve currency while we still have it). And doing that would juice things that much more right now and for the next decade.
- tonyedgecombe 8y ago
  Not much point increasing wages if you are just going to erode them with inflation.
  - cmurf 8y ago
    Avoiding worker revolt is the point. If the inflation is bad enough, workers feel pain, demand wage increases. So far inflation has been low, wage increases low and thus cancel each other out (June wage increase 2.7%, May inflation 2.7%). But from a business standpoint, no point in increasing wages above inflation until workers revolt. So what's needed is a healthy dose of inflation to get workers to revolt, and make business compete for workers by taking the risk, instead of hoarding, and paying more. Businesses and their shareholders have had it really good compared to workers, because workers have been docile and shareholders have been there to scoop of the profits that workers refuse to fight for.
  - saas_co_de 8y ago
    The myth of the link between rising wages and inflation is very common in the media, but there is hardly any connection in reality. Wages will naturally adjust to the equilibrium supply and demand. If the needed increase in wages to increase production pushes prices up such that supply falls then production will be cut to adjust. That is what actual economic theory says. In the real world their is a lot of lag, so some market participants will be increasing wages and producing too much, and then they lose money, and have to overcut on the other side, but in a massive diverse economy this random noise balances out. The market will never over price labor, therefore inflation cannot come from increasing wages. Inflation comes from printing money (or creating it digitally since we don't actually print any more). When the inflation from printing money results in rising wages, then that is a sign to the bankers that they should cut back so that they can keep the poor in line, and keep them from paying off their loans so that they can't get out of debt. Real world economics.
    - tonyedgecombe 8y ago
      Yes, I was thinking about the comment "a trillion dollars printed by the Fed" when I posted my reply.
- HillaryBriss 8y ago
  Run the economy as hot as we can get it for as long as we can and shove wages through the roof at the cost of business margins (which were just considerably boosted via the tax cuts). i gotta say, this idea has some appeal. since businesses tend to use the new tax savings for stock buybacks or paying out dividends instead of hiring and expanding, force their hand a little.
rdlecler1 8y ago
This is one of the most insightful comments I’ve seen for awhile. Perhaps this is why low wages tend to create recessions as inefficient businesses start to fail. One could argue that these system stressors act as a cleansing agent.
- azernik 8y ago
  This is actually a pretty common interpretation; Google "positive effects of recessions". Also, all kinds of stressors can create recessions - from a supply shock (the sudden increase in oil prices in 1979 forcing the US economy to restructure to adapt), to a demand shock (a sudden drop in consumer access to credit in 2008), to sudden shifts in the type of demand (both WWI and WWII ended in steep, short recessions during the switchover from wartime to peacetime production).
HillaryBriss 8y ago
yes. i often think that, too. from the article itself: Yet the experience of towns like Ames and Des Moines show that such “labor shortages” might be due to insufficient wages and crummy working conditions — not an unwillingness of workers to switch industries or improve their skills for a job.
mac01021 8y ago
> they reshaped themselves to become dependent on it What does such a restructuring look like, in concrete terms?
- lainga 8y ago
  Slashing benefits and wages. Making long hours and unpaid overtime the industry norm. Getting rid of whole departments and replacing them with third-party contractors. These all seem uncompetitive for businesses, but it must seem easy to do when your entire industry sector is doing it: truckers can't leave you if every other company is just as bad. The dependent part is where these slashes and cuts are accompanied by lowering prices in a race to the bottom within the industry, to the point where every business in the sector is operating on near-zero margins. Then, when wages overall start to go back up, the first business in the industry to flinch has to raise prices immediately as well, and ends up getting out-competed into oblivion. But if nobody flinches, the entire industry's labour pool dries up, harming everyone.

by lainga 8y ago

adventured 8y ago

Business just got a massive tax cut. They can dig themselves out by spending on increasing productivity and paying higher wages. The economy needs to be run very hot for an extended period of time, instead of getting crashed by an obnoxiously over-eager Fed that likes to kick the economy into a recession to dampen wage growth for the benefit of businesses in the guise of controlling inflation. Businesses need to be made to squeal in pain here. Run the economy as hot as we can get it for as long as we can and shove wages through the roof at the cost of business margins (which were just considerably boosted via the tax cuts). If the Republicans and Democrats weren't collectively so stupid, they'd be cooperating on hammering out a massive infrastructure spending plan paid for by a trillion dollars printed by the Fed across 10-15 years (or similarly constructing an infrastructure bank filled courtesy of abusing the global reserve currency while we still have it). And doing that would juice things that much more right now and for the next decade.

tonyedgecombe 8y ago
Not much point increasing wages if you are just going to erode them with inflation.
- cmurf 8y ago
  Avoiding worker revolt is the point. If the inflation is bad enough, workers feel pain, demand wage increases. So far inflation has been low, wage increases low and thus cancel each other out (June wage increase 2.7%, May inflation 2.7%). But from a business standpoint, no point in increasing wages above inflation until workers revolt. So what's needed is a healthy dose of inflation to get workers to revolt, and make business compete for workers by taking the risk, instead of hoarding, and paying more. Businesses and their shareholders have had it really good compared to workers, because workers have been docile and shareholders have been there to scoop of the profits that workers refuse to fight for.
- saas_co_de 8y ago
  The myth of the link between rising wages and inflation is very common in the media, but there is hardly any connection in reality. Wages will naturally adjust to the equilibrium supply and demand. If the needed increase in wages to increase production pushes prices up such that supply falls then production will be cut to adjust. That is what actual economic theory says. In the real world their is a lot of lag, so some market participants will be increasing wages and producing too much, and then they lose money, and have to overcut on the other side, but in a massive diverse economy this random noise balances out. The market will never over price labor, therefore inflation cannot come from increasing wages. Inflation comes from printing money (or creating it digitally since we don't actually print any more). When the inflation from printing money results in rising wages, then that is a sign to the bankers that they should cut back so that they can keep the poor in line, and keep them from paying off their loans so that they can't get out of debt. Real world economics.
  - tonyedgecombe 8y ago
    Yes, I was thinking about the comment "a trillion dollars printed by the Fed" when I posted my reply.
HillaryBriss 8y ago
Run the economy as hot as we can get it for as long as we can and shove wages through the roof at the cost of business margins (which were just considerably boosted via the tax cuts). i gotta say, this idea has some appeal. since businesses tend to use the new tax savings for stock buybacks or paying out dividends instead of hiring and expanding, force their hand a little.

rdlecler1 8y ago

This is one of the most insightful comments I’ve seen for awhile. Perhaps this is why low wages tend to create recessions as inefficient businesses start to fail. One could argue that these system stressors act as a cleansing agent.

azernik 8y ago
This is actually a pretty common interpretation; Google "positive effects of recessions". Also, all kinds of stressors can create recessions - from a supply shock (the sudden increase in oil prices in 1979 forcing the US economy to restructure to adapt), to a demand shock (a sudden drop in consumer access to credit in 2008), to sudden shifts in the type of demand (both WWI and WWII ended in steep, short recessions during the switchover from wartime to peacetime production).

HillaryBriss 8y ago

yes. i often think that, too. from the article itself: Yet the experience of towns like Ames and Des Moines show that such “labor shortages” might be due to insufficient wages and crummy working conditions — not an unwillingness of workers to switch industries or improve their skills for a job.

mac01021 8y ago

> they reshaped themselves to become dependent on it What does such a restructuring look like, in concrete terms?

lainga 8y ago
Slashing benefits and wages. Making long hours and unpaid overtime the industry norm. Getting rid of whole departments and replacing them with third-party contractors. These all seem uncompetitive for businesses, but it must seem easy to do when your entire industry sector is doing it: truckers can't leave you if every other company is just as bad. The dependent part is where these slashes and cuts are accompanied by lowering prices in a race to the bottom within the industry, to the point where every business in the sector is operating on near-zero margins. Then, when wages overall start to go back up, the first business in the industry to flinch has to raise prices immediately as well, and ends up getting out-competed into oblivion. But if nobody flinches, the entire industry's labour pool dries up, harming everyone.