8 ms·

It’s interesting how much momentum there is in these processes. After several decades of big wage gains, during the 1940s, 1950s, and 1960s, the nominal increas

It’s interesting how much momentum there is in these processes. After several decades of big wage gains, during the 1940s, 1950s, and 1960s, the nominal increases could not be stopped, even as the economy weakened in the 1970s and 1980s. Back then all the wage cuts had to done through inflation. Nowadays there is no inflation, and no momentum to restart wage increases. This part of the article says it right: “””The underlying cause of the “labor shortage” is hiding in plain sight. It’s the long-term trend of funneling the gains from labor productivity not to the workforce, but to shareholders. As with any addiction, this process produces short-term euphoria, reflected in share prices, but long-term pathology, reflected in income inequality, poverty and social unrest.“””

crankylinuxuser 8y ago
Well, yeah. This is fully intended. It keeps the proletariat in tatters. With threats to food and lodging, they won't protest and won't rise up. It's a very effective means of control. Bread and circuses, people.
- sharemywin 8y ago
  I thought Bread and circuses refers to the opposite. give the people just enough bread and circuses to keep them from rising up.
  - CamTin 8y ago
    Right, the bread and circuses are the bit that keep us distracted from the important bit, which is our disenfranchisement as citizens. Now it takes the place of shareholders/bankers/pension fund managers seizing all the power in society by buying politicians, setting themselves up as monopolists (and, for labor, monopsonists), and generally being in charge of every decision that citizens (as consumers and producers) might conceivably make in a way adverse to those in power. The great thing about our system is that the ruling class even make money on the bread (farm subsidies, school lunch programs designed mainly as more farm subsidies rather than as a way to feed schoolkids healthy food, more farm subsidies) and the circus (monopolistic ISPs, cable companies, media holding companies, and content aggregators, now seemingly in the process of all merging into one by gobbling each other up) parts too!
  - Mikhail_Edoshin 8y ago
    As far as I remember it was more about the moral decline of the people who do not want anything besides bread and circuses :) Just checked Wikipedia: "People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses." (Juvenal).
- dang 8y ago
  Please don't post ideological rants to HN. We're looking for substantive comments here. That means comments that contain information rather than rhetoric. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
baxtr 8y ago
Which is somewhat great because if they don’t pay well startups can exploit opportunities that open up as a consequence. However, my experience lately from Germany is that large companies are becoming more and more popular for developers. This was also reflected in a recent HN discussion https://news.ycombinator.com/item?id=17286939 https://news.ycombinator.com/item?id=17286939
- m3rc 8y ago
  Haha, something that should theoretically help small players actually only helps huge corps? That's CRAZY. I bet that's never happened before.
- jimbofisher1 8y ago
  It seems like a very poor financial decision to turn down 300k from Google to make 150k + fairy dust money from a Startup. Even if the 300k is lower than what Google ought to be paying.
  - baxtr 8y ago
    Financially, I’d agree. But what about your lifetime?
    - jimbofisher1 8y ago
      Lifetime? Not sure what you mean. Given that the vast majority of Startups fail and any equity you were granted would be worthless and even those that do payout are usually just getting you to parity to people who were at a FAANG over the same time frame I fail to see how a Startup would benefit. Even Resume wise, recruiters won't care that you worked at a startup that had a $100M exit but they definitely will if you worked at Google for 5 years.
rohitb91 8y ago
If profits don't grow or profits don't reach or surpass expectations, board members get fired. If board members are threatened, management is threatened. If management is threatened, workers are threatened. Profits change by increasing revenue and/or decreasing costs. Wages are an obvious way of optimizing wages further.
mistermann 8y ago
> Nowadays there is no inflation If you ignore most people's largest expense: housing costs, the price increases of which are "adjusted" away in inflation calculations.
- guelo 8y ago
  That is incorrect. Here you can see that the US CPI-U includes shelter which is running at 3.5% inflation https://www.bls.gov/news.release/cpi.htm https://www.bls.gov/news.release/cpi.htm
  - mistermann 8y ago
    > That is incorrect. Maybe, show me your math proving that number is correct. I can't speak for the US, but in Canada the housing component of the CPI has utterly no connection to actual observed costs of owning or renting, at the national level as well as the municipal level. You don't have to take this as a fact (I can't really prove it if the government doesn't share their data or calculations, can I), but moreso something to think about in the formation of your world view.
    - nradov 8y ago
      Don't be lazy. The BLS publishes their methodology in detail. What specific part of it do you disagree with?
      - mistermann 8y ago
        "I can't speak for the US..."
      - mistermann 8y ago
        https://www.bls.gov/cpi/factsheets/common-misconceptions-about-cpi.htm https://www.bls.gov/cpi/factsheets/common-misconceptions-abo... "The CPI used to include the value of a house in calculating inflation and now they use an estimate of what each house would rent for -- doesn't this switch simply lower the official inflation rate?" "No. Until 1983, the CPI measure of homeowner cost was based largely on house prices. The long-recognized flaw of that approach was that owner-occupied housing combines both consumption and investment elements, and the CPI is designed to exclude investment items. The approach now used in the CPI, called rental equivalence, measures the value of shelter to owner-occupants as the amount they forgo by not renting out their homes. The rental equivalence approach is grounded in economic theory, receives broad support from academic economists and each of the prominent panels, and agencies that have reviewed the CPI, and is the most commonly used method by countries in the Organization for Economic Cooperation and Development (OECD). Critics often assume that the BLS adopted rental equivalence in order to lower the measured rate of inflation. It is certainly true that an index based on home prices would be more volatile, and might move differently from other CPI indexes over any given time period. However, when it was first introduced, rental equivalence actually increased the rate of change of the CPI shelter index, and in the long run there is no evidence that the CPI method yields lower inflation rates than some other alternatives. For example, according to the National Association of Realtors, between 1983 and 2007 the monthly principal and interest payment required to purchase a median-priced existing home in the United States rose by 79 percent, much less than the rental equivalence increase of 140 percent over that same period." Now, one can certainly make a reasoned argument that this is a reasonable change to tracking shelter costs in the CPI, but it is a fact that housing purchase prices are not included in CPI calculations for shelter, and it is also a fact that the majority of people choose to own their home, for very good reasons. https://tradingeconomics.com/united-states/home-ownership-rate https://tradingeconomics.com/united-states/home-ownership-ra... "Home Ownership Rate in the United States remained unchanged at 64.20 percent in the first quarter of 2018 from 64.20 percent in the fourth quarter of 2017. Home Ownership Rate in the United States averaged 65.24 percent from 1965 until 2018, reaching an all time high of 69.20 percent in the second quarter of 2004 and a record low of 62.90 percent in the second quarter of 1965." And again, I don't know about the US, but in Canada it is a little known fact that our government "just so happens" to choose their representative rental properties for CPI calculations such that the numbers they produce don't even remotely resemble the actual increase in renting costs. The fact of the matter is, in the current environment of skyrocketing housing costs in much of the Western world, the CPI does not reflect actual cost of living increases for the citizens whose tax dollars pay the salaries of the people printing the numbers, and for statistical agencies to dismiss this by simply pointing at some technical "reason" tucked away on a website (that almost no one knows about) is a failure of democracy.
snarf21 8y ago
This is absolutely correct however the one dichotomy is that we are also the collective shareholders (obviously not majority). People love seeing their 401K go up 15% annually year over year. That is only happening because of this funneling. Collectively we need to stop wanting it both ways. We want cheap goods but then complain about offshoring and outsourcing of labor. Look at dollar stores: Their boom happened almost immediately after Clinton re-opened trade with China. Wal-Mart went from "proudly made in the USA" to cheapest crap they can buy. It annoys me when some people talk about changing X but neglect to even try to think about what change that might cause for Y and Z.
- pjmorris 8y ago
  > we are also the collective shareholders (obviously not majority) It's that 'not the majority' thing that's the fly in the ointment. I owe this claim a link, but most shareholders are part of the wealthy and/or the professional classes, skewing stock gains toward a few, and away from the many. EDIT: Added link supporting claim. Per WP article, chart 'Stock ownership is heavily concentrated', top 20% of US households by wealth own 90% of stock, and even that's skewed heavily to the top. [0] https://www.washingtonpost.com/news/wonk/wp/2017/12/18/for-roughly-half-of-americans-the-stock-markets-record-highs-dont-help-at-all/?utm_term=.85c6383d91ed https://www.washingtonpost.com/news/wonk/wp/2017/12/18/for-r...
  - sdhgaiojfsa 8y ago
    Most shareholders (holders of the wealth represented by companies) are members of the wealthy class? :P You don't say. I'm of two minds on this. Wealth and income are not the same. You get wealth by not consuming all of your income, and instead by investing it. Of course, if you have just enough income to survive, then you cannot accumulate wealth. But most people (in the US) are not in that boat. One of the phenomena that continuously fascinates me are the differences in wealth accumulation between people in the same income brackets. Sometimes there are good reasons for it (e.g. medical issues), but my sense is that in the vast majority of cases, there is simply a difference between the elective consumption levels of different households. http://www.visualcapitalist.com/relationship-income-and-wealth/ http://www.visualcapitalist.com/relationship-income-and-weal... For example, I have a sibling whose wealth is in the 98th percentile for his age bracket. However, his income has never been above the 60th percentile, and has often been lower. This is an example of how a certain attitude about consumption can have a strong impact on wealth accumulation. I definitely think that the rich (broadly defined -- both via high income or high wealth) need to be contributing more back to society than we are. But, as a saver, I'm biased towards targeting high-income more than high-wealth.
candiodari 8y ago
But people have been working for a decade and a half to open up global migration of workers, as well as allowing China and others to export whatever it wants at any price (and several other "details", like IP theft of course). When 2 markets merge, prices converge. What are engineer wages in China, the Phillipines, India, ... ? Oh wait ... Second: with opening up markets, ... if there is one well-known fact in economics it's that when money can move over a wider area it concentrates into fewer hands. The bigger the markets operated, the fewer rich there are. And therefore, the more "ultra" the ultra-rich are. The shareholder "wealth transfer" seems to me to be this effect playing out. That explains some of it. And that's with the minimal opening up of borders that has occurred over the past 2 decades (ie. mostly the EU and America, and in terms of population it's not that much). That's a bit of a question I have for globalists : global average wage is $2000. Not per month, not net after tax. Not actual dollars. That's yearly, before tax, PPP dollars, not actual dollars. (PPP dollars means it's $2000 worth of, say, food (say strawberries or big macs), but it's actually only $400 worth of things like Gold or perhaps more relevant, iPads/Phones, that have global prices) If one opens up global labor migration, that's the average wage that will be seen worldwide, and that's the expected result. Note: I am NOT saying that letting 1% of people migrate will drop wages like a stone immediately. But it will move in that direction. Nor am I saying that this has anything to do with work attitudes or ... The "big secrets" about the economy that must be denied because they are thoroughly at odds with policy that we want to pursue: 1) there is a global oversupply of labor. You could pick ~16% of humans worldwide, disappear everyone else, and have almost zero effect on the economy. That means wages everywhere (even in places with dismal wages like Bangladesh) are too high in market terms. And I would like to point out that at least 2/3rds of those 16% work for governments, directly or indirectly, and "if everyone just behaved correctly" we also wouldn't need them. (and note: this cannot be fixed with minimum wage laws for obvious reasons) 2) The global economy is demand-limited. Producing more goods would NOT result in more sales. We have "everything we want" (in economic terms, that means everything you're willing to work extra for). This means, loosely stated, that the above problem does not just apply to workers, but to companies in general as well.
- rorykoehler 8y ago
  Engineers wages in China often surpass even SV wages. China is not cheap anymore if you live in Beijing or Shanghai for example.
neilwilson 8y ago
It's a little more than that. It is the financialisation of the economy. If you stop paying workers, then they don't have the money to buy your output and you go out of business. That's the basic philosophy behind Ford's approach - high wages = high sales. However if you deregulate banks then you can replace wage growth with credit growth - increased private debt - which keeps the plates turning. You don't increase wages, you increase the debt people put themselves in overall - student debt, mortgage debt, credit cards. That has the advantage of putting a huge monkey on people's back forcing them to work ever harder in a system that structurally has fewer jobs than people that want them. Then when that falls apart, you plead with the government to plough huge amounts of public money into the banks, so they can restart the credit engine. The cycle that lead to 2008 will repeat again with ever lower interest rate peaks in each cycle.

crankylinuxuser 8y ago

Well, yeah. This is fully intended. It keeps the proletariat in tatters. With threats to food and lodging, they won't protest and won't rise up. It's a very effective means of control. Bread and circuses, people.

sharemywin 8y ago
I thought Bread and circuses refers to the opposite. give the people just enough bread and circuses to keep them from rising up.
- CamTin 8y ago
  Right, the bread and circuses are the bit that keep us distracted from the important bit, which is our disenfranchisement as citizens. Now it takes the place of shareholders/bankers/pension fund managers seizing all the power in society by buying politicians, setting themselves up as monopolists (and, for labor, monopsonists), and generally being in charge of every decision that citizens (as consumers and producers) might conceivably make in a way adverse to those in power. The great thing about our system is that the ruling class even make money on the bread (farm subsidies, school lunch programs designed mainly as more farm subsidies rather than as a way to feed schoolkids healthy food, more farm subsidies) and the circus (monopolistic ISPs, cable companies, media holding companies, and content aggregators, now seemingly in the process of all merging into one by gobbling each other up) parts too!
- Mikhail_Edoshin 8y ago
  As far as I remember it was more about the moral decline of the people who do not want anything besides bread and circuses :) Just checked Wikipedia: "People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: bread and circuses." (Juvenal).
dang 8y ago
Please don't post ideological rants to HN. We're looking for substantive comments here. That means comments that contain information rather than rhetoric. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

baxtr 8y ago

Which is somewhat great because if they don’t pay well startups can exploit opportunities that open up as a consequence. However, my experience lately from Germany is that large companies are becoming more and more popular for developers. This was also reflected in a recent HN discussion https://news.ycombinator.com/item?id=17286939 https://news.ycombinator.com/item?id=17286939

m3rc 8y ago
Haha, something that should theoretically help small players actually only helps huge corps? That's CRAZY. I bet that's never happened before.
jimbofisher1 8y ago
It seems like a very poor financial decision to turn down 300k from Google to make 150k + fairy dust money from a Startup. Even if the 300k is lower than what Google ought to be paying.
- baxtr 8y ago
  Financially, I’d agree. But what about your lifetime?
  - jimbofisher1 8y ago
    Lifetime? Not sure what you mean. Given that the vast majority of Startups fail and any equity you were granted would be worthless and even those that do payout are usually just getting you to parity to people who were at a FAANG over the same time frame I fail to see how a Startup would benefit. Even Resume wise, recruiters won't care that you worked at a startup that had a $100M exit but they definitely will if you worked at Google for 5 years.

rohitb91 8y ago

If profits don't grow or profits don't reach or surpass expectations, board members get fired. If board members are threatened, management is threatened. If management is threatened, workers are threatened. Profits change by increasing revenue and/or decreasing costs. Wages are an obvious way of optimizing wages further.

mistermann 8y ago

> Nowadays there is no inflation If you ignore most people's largest expense: housing costs, the price increases of which are "adjusted" away in inflation calculations.

guelo 8y ago
That is incorrect. Here you can see that the US CPI-U includes shelter which is running at 3.5% inflation https://www.bls.gov/news.release/cpi.htm https://www.bls.gov/news.release/cpi.htm
- mistermann 8y ago
  > That is incorrect. Maybe, show me your math proving that number is correct. I can't speak for the US, but in Canada the housing component of the CPI has utterly no connection to actual observed costs of owning or renting, at the national level as well as the municipal level. You don't have to take this as a fact (I can't really prove it if the government doesn't share their data or calculations, can I), but moreso something to think about in the formation of your world view.
  - nradov 8y ago
    Don't be lazy. The BLS publishes their methodology in detail. What specific part of it do you disagree with?
    - mistermann 8y ago
      "I can't speak for the US..."
    - mistermann 8y ago
      https://www.bls.gov/cpi/factsheets/common-misconceptions-about-cpi.htm https://www.bls.gov/cpi/factsheets/common-misconceptions-abo... "The CPI used to include the value of a house in calculating inflation and now they use an estimate of what each house would rent for -- doesn't this switch simply lower the official inflation rate?" "No. Until 1983, the CPI measure of homeowner cost was based largely on house prices. The long-recognized flaw of that approach was that owner-occupied housing combines both consumption and investment elements, and the CPI is designed to exclude investment items. The approach now used in the CPI, called rental equivalence, measures the value of shelter to owner-occupants as the amount they forgo by not renting out their homes. The rental equivalence approach is grounded in economic theory, receives broad support from academic economists and each of the prominent panels, and agencies that have reviewed the CPI, and is the most commonly used method by countries in the Organization for Economic Cooperation and Development (OECD). Critics often assume that the BLS adopted rental equivalence in order to lower the measured rate of inflation. It is certainly true that an index based on home prices would be more volatile, and might move differently from other CPI indexes over any given time period. However, when it was first introduced, rental equivalence actually increased the rate of change of the CPI shelter index, and in the long run there is no evidence that the CPI method yields lower inflation rates than some other alternatives. For example, according to the National Association of Realtors, between 1983 and 2007 the monthly principal and interest payment required to purchase a median-priced existing home in the United States rose by 79 percent, much less than the rental equivalence increase of 140 percent over that same period." Now, one can certainly make a reasoned argument that this is a reasonable change to tracking shelter costs in the CPI, but it is a fact that housing purchase prices are not included in CPI calculations for shelter, and it is also a fact that the majority of people choose to own their home, for very good reasons. https://tradingeconomics.com/united-states/home-ownership-rate https://tradingeconomics.com/united-states/home-ownership-ra... "Home Ownership Rate in the United States remained unchanged at 64.20 percent in the first quarter of 2018 from 64.20 percent in the fourth quarter of 2017. Home Ownership Rate in the United States averaged 65.24 percent from 1965 until 2018, reaching an all time high of 69.20 percent in the second quarter of 2004 and a record low of 62.90 percent in the second quarter of 1965." And again, I don't know about the US, but in Canada it is a little known fact that our government "just so happens" to choose their representative rental properties for CPI calculations such that the numbers they produce don't even remotely resemble the actual increase in renting costs. The fact of the matter is, in the current environment of skyrocketing housing costs in much of the Western world, the CPI does not reflect actual cost of living increases for the citizens whose tax dollars pay the salaries of the people printing the numbers, and for statistical agencies to dismiss this by simply pointing at some technical "reason" tucked away on a website (that almost no one knows about) is a failure of democracy.

snarf21 8y ago

This is absolutely correct however the one dichotomy is that we are also the collective shareholders (obviously not majority). People love seeing their 401K go up 15% annually year over year. That is only happening because of this funneling. Collectively we need to stop wanting it both ways. We want cheap goods but then complain about offshoring and outsourcing of labor. Look at dollar stores: Their boom happened almost immediately after Clinton re-opened trade with China. Wal-Mart went from "proudly made in the USA" to cheapest crap they can buy. It annoys me when some people talk about changing X but neglect to even try to think about what change that might cause for Y and Z.

pjmorris 8y ago
> we are also the collective shareholders (obviously not majority) It's that 'not the majority' thing that's the fly in the ointment. I owe this claim a link, but most shareholders are part of the wealthy and/or the professional classes, skewing stock gains toward a few, and away from the many. EDIT: Added link supporting claim. Per WP article, chart 'Stock ownership is heavily concentrated', top 20% of US households by wealth own 90% of stock, and even that's skewed heavily to the top. [0] https://www.washingtonpost.com/news/wonk/wp/2017/12/18/for-roughly-half-of-americans-the-stock-markets-record-highs-dont-help-at-all/?utm_term=.85c6383d91ed https://www.washingtonpost.com/news/wonk/wp/2017/12/18/for-r...
- sdhgaiojfsa 8y ago
  Most shareholders (holders of the wealth represented by companies) are members of the wealthy class? :P You don't say. I'm of two minds on this. Wealth and income are not the same. You get wealth by not consuming all of your income, and instead by investing it. Of course, if you have just enough income to survive, then you cannot accumulate wealth. But most people (in the US) are not in that boat. One of the phenomena that continuously fascinates me are the differences in wealth accumulation between people in the same income brackets. Sometimes there are good reasons for it (e.g. medical issues), but my sense is that in the vast majority of cases, there is simply a difference between the elective consumption levels of different households. http://www.visualcapitalist.com/relationship-income-and-wealth/ http://www.visualcapitalist.com/relationship-income-and-weal... For example, I have a sibling whose wealth is in the 98th percentile for his age bracket. However, his income has never been above the 60th percentile, and has often been lower. This is an example of how a certain attitude about consumption can have a strong impact on wealth accumulation. I definitely think that the rich (broadly defined -- both via high income or high wealth) need to be contributing more back to society than we are. But, as a saver, I'm biased towards targeting high-income more than high-wealth.

candiodari 8y ago

But people have been working for a decade and a half to open up global migration of workers, as well as allowing China and others to export whatever it wants at any price (and several other "details", like IP theft of course). When 2 markets merge, prices converge. What are engineer wages in China, the Phillipines, India, ... ? Oh wait ... Second: with opening up markets, ... if there is one well-known fact in economics it's that when money can move over a wider area it concentrates into fewer hands. The bigger the markets operated, the fewer rich there are. And therefore, the more "ultra" the ultra-rich are. The shareholder "wealth transfer" seems to me to be this effect playing out. That explains some of it. And that's with the minimal opening up of borders that has occurred over the past 2 decades (ie. mostly the EU and America, and in terms of population it's not that much). That's a bit of a question I have for globalists : global average wage is $2000. Not per month, not net after tax. Not actual dollars. That's yearly, before tax, PPP dollars, not actual dollars. (PPP dollars means it's $2000 worth of, say, food (say strawberries or big macs), but it's actually only $400 worth of things like Gold or perhaps more relevant, iPads/Phones, that have global prices) If one opens up global labor migration, that's the average wage that will be seen worldwide, and that's the expected result. Note: I am NOT saying that letting 1% of people migrate will drop wages like a stone immediately. But it will move in that direction. Nor am I saying that this has anything to do with work attitudes or ... The "big secrets" about the economy that must be denied because they are thoroughly at odds with policy that we want to pursue: 1) there is a global oversupply of labor. You could pick ~16% of humans worldwide, disappear everyone else, and have almost zero effect on the economy. That means wages everywhere (even in places with dismal wages like Bangladesh) are too high in market terms. And I would like to point out that at least 2/3rds of those 16% work for governments, directly or indirectly, and "if everyone just behaved correctly" we also wouldn't need them. (and note: this cannot be fixed with minimum wage laws for obvious reasons) 2) The global economy is demand-limited. Producing more goods would NOT result in more sales. We have "everything we want" (in economic terms, that means everything you're willing to work extra for). This means, loosely stated, that the above problem does not just apply to workers, but to companies in general as well.

rorykoehler 8y ago
Engineers wages in China often surpass even SV wages. China is not cheap anymore if you live in Beijing or Shanghai for example.

neilwilson 8y ago

It's a little more than that. It is the financialisation of the economy. If you stop paying workers, then they don't have the money to buy your output and you go out of business. That's the basic philosophy behind Ford's approach - high wages = high sales. However if you deregulate banks then you can replace wage growth with credit growth - increased private debt - which keeps the plates turning. You don't increase wages, you increase the debt people put themselves in overall - student debt, mortgage debt, credit cards. That has the advantage of putting a huge monkey on people's back forcing them to work ever harder in a system that structurally has fewer jobs than people that want them. Then when that falls apart, you plead with the government to plough huge amounts of public money into the banks, so they can restart the credit engine. The cycle that lead to 2008 will repeat again with ever lower interest rate peaks in each cycle.