21 ms·

Wage Stagnation

259 points by myle 8y ago

beqcq 8y ago
It's because of femi nism: now every household has two wage earners, so it makes sense for wages to split in half.
- SketchySeaBeast 8y ago
  While I wouldn't be surprised that having two wage earners, and introducing a glut of new workers into the pool would certainly increase job competition, I really think that blaming feminism is pretty simplistic - it could be that culturally our desire for more required that we needed the spending power of two adults (not knowing that would hamstring our later earning potential), or it could be that due to a drop in birth rate due to modernization and standard of living increases women simply had less reason to stay home and more time for out of home activities.
- xutopia 8y ago
  No no no no no... Read the article. Read it!
- daze42 8y ago
  This is a good point. It's simple economics. If there is a sudden rise in worker supply, but not a corresponding increase in demand for those workers, wages must fall to accommodate the influx.
  - danharaj 8y ago
    No, it's not a good point. Do you think women were just shuffling their feet at home before they became wage earners? Technological improvements that reduced the total domestic workload for a household made it feasible to have two earner households (as a side note it didn't eliminate domestic work which working women continued to do disproportionately to men to this day). So the total labor required to live and work successfully in industrialized nations dropped but instead of that leading to more individual wealth it just meant that households now had allocated more of their labor to wage labor compared to before where half or more of the labor of a household was simply unacknowledged and unpaid. And it should be noted that poor women had been working. For less compensation than men, while performing domestic labor. Middle class and upper class women getting jobs was another story. Boo, hiss. Feminism. What an odious little comment thread.
    - Chris2048 8y ago
      > What an odious little comment thread. Why? You're the one who injected the "Boo, hiss".
  - ozzyman700 8y ago
    wages are drawn from the output of workers labor, not the other way around. At most, wages are an advance on the return a worker would expect from their labor. Subjugating half the population into not being part of the labor force is not an aspect of a free market in my opinion.
- SolaceQuantum 8y ago
  Because one wage earner cannot do housework or child rearing or other behaviors now(as they are working another job), wouldn't that cause a roughly 1:1 ratio of missing worker to demand for a new job to take care of the labor necessary? e.g. No time to cook, so buy more food on the go, no time to clean, so buy labor to clean, no time to organize home, buy labor to organize, etc.?
  - willpiers 8y ago
    That's correct, but none of those three people would then make as much money as the original single wage earner. And the couple wouldn't be getting ahead nearly as much as one would hope, since they have to pay for all that extra labor.
    - SolaceQuantum 8y ago
      This does not mean the conclusion drawn: that wages are split in half?
- TheShrug 8y ago
  I always find this very interesting. You feel strongly enough about your point that you need to say it (albeit using a throwaway account). My reaction to your point as well as some comments above about an influx of immigration is that I think it is worth discussing. Instead of discussing it though, you make a quick remark that intends to blame wage stagnation solely on the enfranchisement of women when the issue is very likely more complex and can perhaps can be resolved without alienating and stripping the rights and agency of 50% of the population. But the quick remark and the way you phrased it makes it seem like you just have something against women in the workplace, I'm guessing you feel threatened in some way. I don't think it would be a stretch to assume that you think the abolition of slavery also affected wages similarly.
- belorn 8y ago
  This is not what the data show if we overlap female participation in labor markets with the graph of the article. https://ourworldindata.org/female-labor-supply https://ourworldindata.org/female-labor-supply At 1948 the US had around 25% women in the work force. By 1973 that number is around 50%. The article say that wages increased proportionally with production between 1948 to 1973, and only after 1973 started to drop. There is just no relation between those two graphs that support the claim that that one caused the other.
leereeves 8y ago
The problem here is that the comparison is between median wages and total productivity, without demonstrating that the median worker is in any way responsible for the increased productivity. If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people? I'm not necessarily saying they aren't, just that such an argument should be made explicitly.
- occamrazor 8y ago
  Indeed, _total_ productivity should be compared to _average_ wages. The difficulty is that, at the higher end of income, the distinction between wage, business income (eg consultants), and investment income (eg stock based compensation) is not clear.
- expertentipp 8y ago
  Nowadays within couple of hours while sitting in front of the computer I can plan and book my holidays, submit a bank transfer, submit tax declaration, buy new clothes, and extend the insurance. Unthinkable until the late 90s. This technological leverage is created pretty much by a "median worker". Where the margins from this turbo-raise of productivity go? Because they certainly don't vanish neither reach the worker.
  - leereeves 8y ago
    The people who created that technological leverage are far from median workers, and earn many times the median wage.
    - expertentipp 8y ago
      More and more aggressively creation and maintenance of these systems are being outsourced and nearshored to the cheapest available location, ideally employing on-demand workforce.
      - leereeves 8y ago
Halluxfboy009 8y ago
One more mystery: if all of this is true, why isn’t small business formation higher? After all none of these factors (besides mismeasurement) applies to you if you have a small business. But if anything, business formation is down. (Also, the charts by educational attainment are meaningless. There has been a huge shift within categories. Being a high school dropout in 1960 meant something completely different than today)
- lotsofpulp 8y ago
  Consumers value the benefits of efficiencies of scale, such as online ordering, being able to return anywhere in the country, rewards programs, being able to find consistency in quality wherever you are, etc. It's also impossible to compete on price with bigger competitors. How can a small business compete with Costco? Technology has allowed the bigger players to wring out all the efficiencies bringing margins down to as low as possible, so it's only viable to start businesses that have higher margins, such as professional services.
  - pas 8y ago
    Also anything that you can sell as high value, to support your high margin. Hence the craft beer, artisanal soap, etc. (see also Etsy and co.) But usually that doesn't require people to start a small business, nor do most of these etsy shops are really able to support/become one.
- adrianN 8y ago
  Because business formation is pretty risky and, to me, seems to be getting riskier as you have to compete with global players in almost every market.
  - chii 8y ago
    > Because business formation is pretty risky and, to me, seems to be getting riskier as you have to compete with global players in almost every market. so by not risking, isn't it then "correct" to say that an employee shouldn't reap the rewards that the owners currently get as they bear the risk?
RickJWagner 8y ago
I'm glad for wage stagnation, so long as inflation stays down. For people at or near retirement, it's a great thing. Nothing erodes savings like rising prices.
- close04 8y ago
  Wage stagnation that comes attached to increase productivity could be offset by a shorter work week. I mean if you are ~2.5 times more productive but the wage can't increase due to other reasons, why not take different actions to consider employee happiness just just employer profits?
  - derekp7 8y ago
    You could also lower the price of the items sold so that the average consumer can afford more stuff
    - close04 8y ago
      I'm not an economist but can imagine forcing the lowering of prices could have far more impact on the whole economy, not all good. Off the top of my head it would lead to shortages and thus to increased prices. You'd have to produce more while having less money available to invest in that. Possibly a whole lot more. But reducing the work week only impacts the employer's profit via slightly decreased productivity. On the other hand with 3 free days per week you'd be more likely to put more money back into the economy. The problem is today's balance of productivity vs. wage is only perfect for the employer and not much else is taken into consideration. What kind of bargaining power do employees have to change this?
      - count 8y ago
        It would only lead to shortages if at the current price there is a perfect match of buyer to product with no waste, AND no capacity to produce a larger volume of supply. That's hardly ever the actual case.
zeroname 8y ago
Wages have been "decoupled" from productivity because they weren't be coupled in the first place. They were correlated because productivity and economic growth are correlated and economic growth and demand for labor are correlated. However, wages (like all other prices) in a market are set by supply and demand. Wages will rise to meet demand but not higher, irrespective of productivity. Furthermore, productivity increases through automation decrease demand for human labor and therefore suppress wages.
- BerislavLopac 8y ago
  This is a very important point. The graphs in the original article -- especially when taking into account those from other countries -- essentially shows that at some point the increase of productivity is due to automation, and that the human component in the workplace is becoming less relevant.
- daze42 8y ago
  This, exactly. As technology continues to move forward and make things even more efficient, I would expect this gap to continue to widen. I'm confused as to why anyone would want it to remain linked. As the gap widens, the demand for Universal Basic Income will rise and gobble up the working class and, eventually, even the most complicated jobs, until money is considered worthless and all basic needs are met by robots. Given the option to have robots do all the work and humans reap all the benefits (besides skynet), who wouldn't take it?
  - helen___keller 8y ago
    > As the gap widens, the demand for Universal Basic Income will rise and gobble up the working class and, eventually, even the most complicated jobs, until money is considered worthless and all basic needs are met by robots. The problem here is that nobody knows when we'll get there, if at all. UBI seems like a solution designed for a society where most people have been displaced from the need to work, but it doesn't look like society is there yet. In the meantime we still have people who are struggling to even exist. If the gap to achieve Full Automation in most sectors is multiple generations, you might long reach social unrest before you can even "justify" UBI from a political perspective. Right now billions in capital investment haven't quite mastered the art of getting cars to navigate roads by themselves, and some industry leaders (Waymo CEO) are skeptical we'll ever get level 5 autonomous cars. And this is all for one single and self-contained task in the human existence (which doesn't even rely on human appendages! try to imagine automating handiwork). If 70% of people are without work, UBI is an obvious solution. But if 1-10% of people are without work and 40-60% are paid peanuts for shit jobs, what's the solution? If UBI is still best here, how do we justify that to society without appealing to Full Automation?
mannykannot 8y ago
There appears to be a section missing: the one that discusses the consequences of the globalization of the labor market, especially with regard to non-physical labor. Arguably, this is a consequence of policy changes, but it is not discussed in that section, either.
- mc32 8y ago
  That’s probably because it’s antithetical to current economic and political thought (free global trade is an unalloyed good). Of course this has an impact. It’s the converse of the rising foreign economy where the local worker has seen their incomes rise due to export driven economics. They’re exporting their labor, we’re importing to complement our labor and that has placed negative pressure on wages. It’s clearly seen in farm workers. Large agri businesses say that unless they have cheap imported labor, they can’t afford workers. But that does not stand. In their current economic model cheap labor is necessary, but it’s not inherently necessary. The late 1990s to early 2000s anti-WTO leftists understood this, Perot understood this, but they were vanquished by non labor interests.
- bryanlarsen 8y ago
  In the conclusion the author guesstimated globalization was ~5% of the effect. It'd be nice to see the reasoning for the guesstimate.
- CoolGuySteve 8y ago
  Particularly telling is that he compares the gap between the US, Germany, Italy, Spain, and France. I really want to see the same charts for coastal vs inland China and Mexico. Did a rising tide lift all boats there or not?
  - RPLong 8y ago
    The problem is mostly one of data availability. China has plenty of data, but not all of it is credulous. That, and the fact that comparisons of any two nations will always be susceptible to the accusation that the data has been "cherry-picked" to show a favorable result. But the global data on poverty is basically unassailable. Poverty has declined absolutely everywhere. The rising tide lifted at least the very poorest boats, whatever can be said for the American middle class notwithstanding.
gerbilly 8y ago
Real wages haven't increased since 1970. We only feel richer because: * Most households have two wage earners now. * We use lines of credit to borrow for discretionary purchases, we lease cars, pay by subscription for things more. * We have more gadgets. (Note that this has been proven to make people any happier.)
- focusgroup0 8y ago
  Another factor: The Immigration Act of 1965 significantly increased the amount of labor immigrating to the country https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1965 https://en.wikipedia.org/wiki/Immigration_and_Nationality_Ac...
  - WhompingWindows 8y ago
    How does this lead to wage stagnation? You've stated a potential piece of evidence but provided no reasoning to link to your (implicit) claim that immigration leads to stagnant wages. If that's not your claim, feel free to fill out the details. Arguments have CER - claim, evidence, reasoning. Your comment was missing two.
    - deogeo 8y ago
      It's pretty obvious he meant that wages were suppressed due to supply and demand, where the immigration act increased the supply of labor. If you'd like proof of the act doing just that: https://www.migrationpolicy.org/programs/data-hub/charts/immigrant-population-over-time https://www.migrationpolicy.org/programs/data-hub/charts/imm...
      - repsilat 8y ago
        Is that obvious that's what they meant? I understood it to mean that immigrants tend to earn less (I don't have this data myself), and could drag the average down. In that case the overall average real wage could stagnate while the average real wage of every cohort increased.
Chico11Kidlet 8y ago
Of course any discussion about labour vs capital share of gdp needs to talk about land as well. So ‘5. Could Wage Decoupling Be Explained By Increasing Labor-Vs-Capital Inequality?’ would be more interesting with land. That also came up in the discussions around Piketty.
shams93 8y ago
It's worse than it looks when you add massive education debt and in states like California we have seen the vast share of tax increases landing on wage earners plus incredibly high rent.
- WhompingWindows 8y ago
  Yes, I'm not sure if the linked post discusses education debt. Even if wages increased 50% more than we think due to inflation issues, as the blog post claims, I don't know how a slightly better wage makes up for vastly increased education/housing spending. I don't know if the CPI or productivity account for either of those, either.
3pt14159 8y ago
I've thought about this for the past decade or so. It's obviously going to be many simultaneous factors for any type of decoupling this pervasive in society, but I tend to simulate things out in my head and here is what I've largely ruled in and out. 1. It isn't gross executive compensation. Holding everything else constant, executives are very good at negotiating the very best deal for themselves and corporations live and die by the law of the jungle. These two forces balance each other out. Higher executive compensation probably means that executives are more important than they used to be, which I would expect with an increasingly technological society. 2. That said, executives and the wealthy class pay way less in tax than they used to because they're less tied to a region which means they're less civically minded and they're more able to region shop for lower tax rates, leading to a race to the bottom. 3. Computers automate tasks that used to require a high school education. IBM is IBM because they started with cash registers before computers came along. There used to be a banker with a real education in every single town. There isn't anymore and we (especially we!) know why. 4. Communications—starting with the telegraph, but certainly not ending there—make locality irrelevant. Combined with the forces of capitalism (e.g., comparative advantage, re-invested returns) this hyper concentrates specialization. 5. Standardized shipping, especially sea containers. The Chinese government's greatest insight was the importance of physical freight and they leaned in hard to become the centre of the worlds manufacturing by essentially[0] subsidizing it. 6. Many decades of low interest rates, on the half-baked ideas of Keynesian theory of productive capital. Surprise! It turns out that injecting liquidity doesn't necessarily expand business activity. There's plenty of cash locked up in corporations and monied investors. They're desperate for return, but the hyper specialization issue stops them from getting alpha once they hit the market's carrying capacity. Instead these low interest rates go to... 7. Asset bubbles and arms races! Everyone needs a home. Everyone wants a good education at a prestigious university. People buy whatever sugary drink advertises the most. Inflation isn't really low. When a small family home in Toronto costs more money than the median family makes after tax in twenty years we know its bullshit. The inflation rate is papered over because of cheaper manufacturing due to technological progress and international trade, but it doesn't work for housing and many other things. 8. The more complex world is inherently less governable by democracies. A ballot only has a byte of information tops and it only operates over a period of four to six years. This is why lobbyists win, especially in larger democracies like America where the ratio of governed to lawmakers is higher. 9. Surveillance capitalism relies on inexplicable insights and returns. This hyper centralizes wealth whilst simultaneously shrouding the mechanism. [0] Solving coordination problems is a form of governmental subsidization even if the government in question makes a huge profit. Canada does the same with forestry. I don't know how to square it with global trade.
defertoreptar 8y ago
I'm having trouble understanding why, in a society with ever-advancing technology, why wages would trend with productivity. I'm seeing it like this (and please correct me if I'm off base): Input = (Labor portion) + (tech & automation portion) + (other portion including things like land, materials, and overhead) Productivity = output / input Wages reflect the labor portion's contribution to "input." We know that tech and automation's portion is continuing to increase in relation to labor. Therefore, with this understanding, wages must decrease in proportion with productivity.
- pas 8y ago
  That might be true, but it seems tech is not that meaningful. Usually technological change carries with it a lot of need for human labor. (Eg. first it needs to be evaluated, planned, implemented, supervised, maintained, repaired, etc.) And it seems that tech displaces the middle income jobs. ( https://economics.mit.edu/files/11563 https://economics.mit.edu/files/11563 ) Which of course puts a downward pressure on wages, which probably contributes to the decline of labor share of income, but this effect is no as big as using a different deflator, nor is the technological change well correlated with the aforementioned decoupling.
  - crdoconnor 8y ago
    It's weird how capital is assumed to take credit for automation. Automation is built by labor.
    - AnimalMuppet 8y ago
      Yes, but not yours. That is: when the Acme Widget Factory buys Jake's Improved Widget-Making Tool(TM), it's Jake's employees' labor that made that tool, not Acme's. It is therefore Jake's employees who deserve to be rewarded for creating the automation, not Acme's. That's why I said "not yours" - not specifically you, crdoconnor, but the labor of the company that buys automation did not build that automation. They still should be rewarded for the the increased productivity that comes from knowing how to use it, but they didn't build it. And when I said "they still should be rewarded", that doesn't mean that they get all the benefits from the increased productivity. The tool maker has to be rewarded, too, or there won't be many tools to improve productivity. And the capitalists who bought the tool have to be rewarded, too, or there won't be many such tools bought.
RobertoG 8y ago
>>"We shouldn’t dismiss this as irrelevant, because many things that close only a small part of the gap may, when added together, close a large part of the gap. But this doesn’t do much on its own." I'm not saying is not true, but I find this idea highly suspicious when there is a clear trend that start at some point. I mean, what are the chances that many independent things move the trend, in the same direction at the same time, every year?.
- mindB 8y ago
  He discusses this point in his conclusion. He was also expecting to find a single, clear factor but didn't. Even if multiple factors causing a single large change is relatively rare, we'd still expect to see it sometimes, and he's arguing that this is one of those times. I found the argument relatively convincing.
- RootReducer 8y ago
  The author addresses this in the conclusion, and is also suspicious, but presents some possibilities that explain it. "This surprises me, because the dramatic shift in 1973 made me expect to see a single cause (and multifactorial trends should be rare in general, maybe, I think). It looks like there are two reasons why 1973 seems more important than it is...."
soVeryTired 8y ago
Once you realise that workers are compensated according to their bargaining power rather than their productivity, none of this should be surprising.
- zackmorris 8y ago
  I was going to say something similar. I'm 41, and when I was a child in the early 80s, work was simultaneously higher paying, a bit more intense than today's standards, but also had shorter hours and more leisure time. Where I live in Idaho, my family and friends were: a dentist (dad) dental office manager (mom), carpenter (godfather), minister, interior decorator, teacher, artist, mechanic, lots of military workers on the airbase by my hometown, etc. Maybe half or less of the mothers I knew worked outside the home. Fathers hunted in the fall to feed their families. But our community was largely self-sufficient. We didn't have Walmart yet and its associated trade deficits which contributed to the national debt. I'll admit that we were dependent on the nearby military base, BUT that was during the Cold War. Had the base closed (as it probably should have after the Berlin Wall fell, say 1990), I think my home town would have survived on ranching, timber and mining (none of which I support by the way, as Idaho's environment is under constant attack). Yes I see the contradictions in what I am saying. But I also believe that we could have had a more sustainable future had we faced facts and started the process of transitioning to a 21st century economy earlier. That might have even led to Gore being elected instead of Bush. So it's complicated, and not always easy to discern cause from effect. It's all been 20 years delayed, but there is work in green energy here today. My feeling is that the American worker HAD MORE LEVERAGE then - in terms of being able to walk onto any construction job, or specialize in a 2 year education trade, or even get free college in many states. We still had unions. We didn't have the welfare cuts that happened under Clinton or the 100,000 factories shut down under GW Bush yet. Quality of life and the feeling of making one's own way was higher then. If we want to fix our economy, we need to get organized and take a bigger piece of the pie for workers (perhaps we should call them makers or producers), rather than giving it to people who already have money. We can moan and complain about this simple fact from all political angles, but until we start electing people who understand how this works, our long slow decline will continue.
TomMckenny 8y ago
Returns on investment always exceed wage growth. And as wealth concentrates, the effect is cumulative even over generations. It happens to be tech. It could just as easily be empire. There was a moment after the world wars when this was intentionally compensated for and now it isn't. There is no William Beveridge, no Roosevelt brain trust and, Keynesian is apparently a bad word now.
- Gpetrium 8y ago
  I think one of the biggest concerns that governments are having is that the more you try to re-balance wage stagnation and wealth, the less competitive you are in the world, leading to other types of stagnation.
  - TomMckenny 8y ago
    Intuitively this seems quite reasonable. Yet the period 1946-1973 saw enormous growth in all western countries and wages kept up with growth during that time. Of course, it seems likely there are government interventions that damage growth. But apparently there are some that don't. In particular, progressive tax structures and social safety nets don't seem to.
choeger 8y ago
When did China enter the global market? Am I the only one to think that this might be a natural cause of an extreme growth in world-wide working population? I think we are already through the worst parts and the dividends are beginning to pay.
- RPLong 8y ago
  I have thought that for a long time, too. It's natural that, on a global scale, developed-economy wages would appear to "stagnate" if developing-economy wages are increasing while competing for the same jobs.
- simonsarris 8y ago
  Hmm. If the ngram "Chinese manufacturing" started exploding in books in the mid 80's we can assume the phenomenon started exploding a few years before that. https://books.google.com/ngrams/graph?content=Chinese+manufacturing&year_start=1800&year_end=2010&corpus=15&smoothing=3&share=&direct_url=t1%3B%2CChinese%20manufacturing%3B%2Cc0 https://books.google.com/ngrams/graph?content=Chinese+manufa...
- jahewson 8y ago
  Early 1970s. Nixon visited China in 1972. Don't forget that China had to industrialize first - it was initially importing equipment from the US. Imports into the US at the time were more likely to come from Japan, Taiwan and Korea. Seems a to be a bit too late to explain the timeline, but it could be a factor - OTOH, given that China's workforce is no longer expanding then your theory would predict that wages will now stop stagnating but that does not seem to be the case?
api 8y ago
This is really great! I have to toss something in re: unionization and the percentage it may explain. Executive salaries have exploded while worker salaries have stagnated. Could this be because executives by virtue of the social networks they belong to are effectively unionized? Unionization of executives is not necessarily explicit, but the executive pool is smaller and more tightly connected and therefore executives will tend to behave more like a coherent social group. The worker pool is enormous, more diverse, and far less organized with far less opportunity for "out-of-band" social connection.
- deleted 8y ago
  [deleted]
BrandonMarc 8y ago
Aaaah, scott! So much information! It's a long read, and I have work to do, but ... is there a summary?
andrewla 8y ago
The problem with this entire discussion is that we use terms like "wages" and "productivity", which have meanings in the English language, and associate them with metrics which are utterly divorced from those meanings. To have a sane discussion, we're forced to use these shorthands, but the fact of the matter is that if we spelled out what we were actually measuring it would be very clear that all of these phenomena being measured refer to things disconnected from any of our actual experience. Even more so, the methodology for most of this data has changed so much over time, with so little overlap between methodologies, that we have literally no idea what the state of the world was even a few years ago. All we have are a mixture of giant measurement artifacts, and when two of them correlate we celebrate because we might have found a metric that can bridge the divide between methodologies, but that correspondence disappears as soon as we try to find out if there are systemic changes -- our ability to determine whether something has changed has an implicit reliance on the assumption that nothing has changed, so all of these arguments become circular. Econometrics is a philosophical dead end that just ends up producing broken policies disconnected from reality and causing us to make up a new suite of politically-motivated metrics to match the outcomes that we're looking for, and then give the metrics names that refer to things that have intuitive meanings and pretend we've found insight. You really have to go back to non-econometric-based economics (the Austrians, von Mises and Hayek) to get any sort of insight into how economies can be made to work at scale, and the answer is that we don't understand them, and that technological progress and population changes mean that attempts to push them in a direction will have side effects that far outweigh any of the attempted influence.
- frgtpsswrdlame 8y ago
  This is a brilliant piece of political propaganda. I honestly salute you for getting it to the top of this comment section.
- roymurdock 8y ago
  This isn’t true, the study of applied economics (new Keynsian) saved the US in 2008 when the Fed decided to shore up liquidity and helped bail out industry in concert with the government. Austrian policy would’ve let the entire system collapse and rebuild itself to avoid the construction of perverse risk incentives and the zombification we are seeing in the economy today. You can argue which would be better long term (I think Austrian) but short term we needed Keynesian measures to save jobs and lives from being consumed in a downward spiral of debt chain triggering and collection. Productivity has a precise economic definition - ratio of output to inputs - and correlates highly to standard of living. We don’t fully understand how and why technology advances, but we measure increased technology through a variable called the solow residual. Economic policy can help lead to technology breakthroughs that increase productivity and the standard of living. It’s very shortsighted to dismiss economics out of hand as something we don’t understand. A lot of it is politically motivated but let’s face it politics is what happens when groups of people get together and try to collaborate. There’s a lot of important work to be done around productivity economics and I’m glad it’s getting more mainstream coverage
wazoox 8y ago
Because of energy. Productivity going up means one person uses more machines, and as time goes, the machines do an ever increasing part of the job, because the energy feeding the machines is so much cheaper than human labour (in the order of 200 to 400 times cheaper). This is not by chance that wage stagnation appeared in correlation with these events: US oil production peaked in 1970. Dollar convertibility to gold ended in 1971. Oil crisis came in 1974. OECD countries enter a permanent trend of public deficit in 1974. Unemployment soared in OECD countries at the same time. As the ability to augment energy consumption became more and more capped by the ability to extract energy from the ground, workers gradually lost their capacity to obtain their part of the cake because it's always cheaper to put more capital than people at work, so far. The trend intensifies, nowadays we're talking of ending employment and of the necessity of basic income and similar tools. Until the (unavoidable) end of cheap energy, that is... Then we'll be back to the ancient order of things, when a country GDP was entirely correlated to the size of its population.
amanaplanacanal 8y ago
Of course, if this continues long enough... At some point the workers rebel, and bring back the guillotine. Or something worse (see Soviet Russia). This can't continue long term. Populist politicians promising to make things better relieve some of the pressure in the short run, though.
omouse 8y ago
I wonder if there's an impact from the increase in startups? Since most early employees are getting paid in equity rather than real dollars wouldn't there be a stagnation for a few years until the equity is transformed into cash? Also any conversation about wage stagnation has to take into account collusion, in recent years Google, Intel, Adobe and others were avoiding poaching each other's employees.

Wage Stagnation

259 points by myle 8y ago

beqcq 8y ago

It's because of femi nism: now every household has two wage earners, so it makes sense for wages to split in half.

SketchySeaBeast 8y ago
While I wouldn't be surprised that having two wage earners, and introducing a glut of new workers into the pool would certainly increase job competition, I really think that blaming feminism is pretty simplistic - it could be that culturally our desire for more required that we needed the spending power of two adults (not knowing that would hamstring our later earning potential), or it could be that due to a drop in birth rate due to modernization and standard of living increases women simply had less reason to stay home and more time for out of home activities.
xutopia 8y ago
No no no no no... Read the article. Read it!
daze42 8y ago
This is a good point. It's simple economics. If there is a sudden rise in worker supply, but not a corresponding increase in demand for those workers, wages must fall to accommodate the influx.
- danharaj 8y ago
  No, it's not a good point. Do you think women were just shuffling their feet at home before they became wage earners? Technological improvements that reduced the total domestic workload for a household made it feasible to have two earner households (as a side note it didn't eliminate domestic work which working women continued to do disproportionately to men to this day). So the total labor required to live and work successfully in industrialized nations dropped but instead of that leading to more individual wealth it just meant that households now had allocated more of their labor to wage labor compared to before where half or more of the labor of a household was simply unacknowledged and unpaid. And it should be noted that poor women had been working. For less compensation than men, while performing domestic labor. Middle class and upper class women getting jobs was another story. Boo, hiss. Feminism. What an odious little comment thread.
  - Chris2048 8y ago
    > What an odious little comment thread. Why? You're the one who injected the "Boo, hiss".
- ozzyman700 8y ago
  wages are drawn from the output of workers labor, not the other way around. At most, wages are an advance on the return a worker would expect from their labor. Subjugating half the population into not being part of the labor force is not an aspect of a free market in my opinion.
SolaceQuantum 8y ago
Because one wage earner cannot do housework or child rearing or other behaviors now(as they are working another job), wouldn't that cause a roughly 1:1 ratio of missing worker to demand for a new job to take care of the labor necessary? e.g. No time to cook, so buy more food on the go, no time to clean, so buy labor to clean, no time to organize home, buy labor to organize, etc.?
- willpiers 8y ago
  That's correct, but none of those three people would then make as much money as the original single wage earner. And the couple wouldn't be getting ahead nearly as much as one would hope, since they have to pay for all that extra labor.
  - SolaceQuantum 8y ago
    This does not mean the conclusion drawn: that wages are split in half?
TheShrug 8y ago
I always find this very interesting. You feel strongly enough about your point that you need to say it (albeit using a throwaway account). My reaction to your point as well as some comments above about an influx of immigration is that I think it is worth discussing. Instead of discussing it though, you make a quick remark that intends to blame wage stagnation solely on the enfranchisement of women when the issue is very likely more complex and can perhaps can be resolved without alienating and stripping the rights and agency of 50% of the population. But the quick remark and the way you phrased it makes it seem like you just have something against women in the workplace, I'm guessing you feel threatened in some way. I don't think it would be a stretch to assume that you think the abolition of slavery also affected wages similarly.
belorn 8y ago
This is not what the data show if we overlap female participation in labor markets with the graph of the article. https://ourworldindata.org/female-labor-supply https://ourworldindata.org/female-labor-supply At 1948 the US had around 25% women in the work force. By 1973 that number is around 50%. The article say that wages increased proportionally with production between 1948 to 1973, and only after 1973 started to drop. There is just no relation between those two graphs that support the claim that that one caused the other.

leereeves 8y ago

The problem here is that the comparison is between median wages and total productivity, without demonstrating that the median worker is in any way responsible for the increased productivity. If the median worker isn't responsible for the increased productivity, are they entitled to a share of the work of other people? I'm not necessarily saying they aren't, just that such an argument should be made explicitly.

occamrazor 8y ago
Indeed, _total_ productivity should be compared to _average_ wages. The difficulty is that, at the higher end of income, the distinction between wage, business income (eg consultants), and investment income (eg stock based compensation) is not clear.
expertentipp 8y ago
Nowadays within couple of hours while sitting in front of the computer I can plan and book my holidays, submit a bank transfer, submit tax declaration, buy new clothes, and extend the insurance. Unthinkable until the late 90s. This technological leverage is created pretty much by a "median worker". Where the margins from this turbo-raise of productivity go? Because they certainly don't vanish neither reach the worker.
- leereeves 8y ago
  The people who created that technological leverage are far from median workers, and earn many times the median wage.
  - expertentipp 8y ago
    More and more aggressively creation and maintenance of these systems are being outsourced and nearshored to the cheapest available location, ideally employing on-demand workforce.
    - leereeves 8y ago

Halluxfboy009 8y ago

One more mystery: if all of this is true, why isn’t small business formation higher? After all none of these factors (besides mismeasurement) applies to you if you have a small business. But if anything, business formation is down. (Also, the charts by educational attainment are meaningless. There has been a huge shift within categories. Being a high school dropout in 1960 meant something completely different than today)

lotsofpulp 8y ago
Consumers value the benefits of efficiencies of scale, such as online ordering, being able to return anywhere in the country, rewards programs, being able to find consistency in quality wherever you are, etc. It's also impossible to compete on price with bigger competitors. How can a small business compete with Costco? Technology has allowed the bigger players to wring out all the efficiencies bringing margins down to as low as possible, so it's only viable to start businesses that have higher margins, such as professional services.
- pas 8y ago
  Also anything that you can sell as high value, to support your high margin. Hence the craft beer, artisanal soap, etc. (see also Etsy and co.) But usually that doesn't require people to start a small business, nor do most of these etsy shops are really able to support/become one.
adrianN 8y ago
Because business formation is pretty risky and, to me, seems to be getting riskier as you have to compete with global players in almost every market.
- chii 8y ago
  > Because business formation is pretty risky and, to me, seems to be getting riskier as you have to compete with global players in almost every market. so by not risking, isn't it then "correct" to say that an employee shouldn't reap the rewards that the owners currently get as they bear the risk?

RickJWagner 8y ago

I'm glad for wage stagnation, so long as inflation stays down. For people at or near retirement, it's a great thing. Nothing erodes savings like rising prices.

close04 8y ago
Wage stagnation that comes attached to increase productivity could be offset by a shorter work week. I mean if you are ~2.5 times more productive but the wage can't increase due to other reasons, why not take different actions to consider employee happiness just just employer profits?
- derekp7 8y ago
  You could also lower the price of the items sold so that the average consumer can afford more stuff
  - close04 8y ago
    I'm not an economist but can imagine forcing the lowering of prices could have far more impact on the whole economy, not all good. Off the top of my head it would lead to shortages and thus to increased prices. You'd have to produce more while having less money available to invest in that. Possibly a whole lot more. But reducing the work week only impacts the employer's profit via slightly decreased productivity. On the other hand with 3 free days per week you'd be more likely to put more money back into the economy. The problem is today's balance of productivity vs. wage is only perfect for the employer and not much else is taken into consideration. What kind of bargaining power do employees have to change this?
    - count 8y ago
      It would only lead to shortages if at the current price there is a perfect match of buyer to product with no waste, AND no capacity to produce a larger volume of supply. That's hardly ever the actual case.

zeroname 8y ago

Wages have been "decoupled" from productivity because they weren't be coupled in the first place. They were correlated because productivity and economic growth are correlated and economic growth and demand for labor are correlated. However, wages (like all other prices) in a market are set by supply and demand. Wages will rise to meet demand but not higher, irrespective of productivity. Furthermore, productivity increases through automation decrease demand for human labor and therefore suppress wages.

BerislavLopac 8y ago
This is a very important point. The graphs in the original article -- especially when taking into account those from other countries -- essentially shows that at some point the increase of productivity is due to automation, and that the human component in the workplace is becoming less relevant.
daze42 8y ago
This, exactly. As technology continues to move forward and make things even more efficient, I would expect this gap to continue to widen. I'm confused as to why anyone would want it to remain linked. As the gap widens, the demand for Universal Basic Income will rise and gobble up the working class and, eventually, even the most complicated jobs, until money is considered worthless and all basic needs are met by robots. Given the option to have robots do all the work and humans reap all the benefits (besides skynet), who wouldn't take it?
- helen___keller 8y ago
  > As the gap widens, the demand for Universal Basic Income will rise and gobble up the working class and, eventually, even the most complicated jobs, until money is considered worthless and all basic needs are met by robots. The problem here is that nobody knows when we'll get there, if at all. UBI seems like a solution designed for a society where most people have been displaced from the need to work, but it doesn't look like society is there yet. In the meantime we still have people who are struggling to even exist. If the gap to achieve Full Automation in most sectors is multiple generations, you might long reach social unrest before you can even "justify" UBI from a political perspective. Right now billions in capital investment haven't quite mastered the art of getting cars to navigate roads by themselves, and some industry leaders (Waymo CEO) are skeptical we'll ever get level 5 autonomous cars. And this is all for one single and self-contained task in the human existence (which doesn't even rely on human appendages! try to imagine automating handiwork). If 70% of people are without work, UBI is an obvious solution. But if 1-10% of people are without work and 40-60% are paid peanuts for shit jobs, what's the solution? If UBI is still best here, how do we justify that to society without appealing to Full Automation?

mannykannot 8y ago

There appears to be a section missing: the one that discusses the consequences of the globalization of the labor market, especially with regard to non-physical labor. Arguably, this is a consequence of policy changes, but it is not discussed in that section, either.

mc32 8y ago
That’s probably because it’s antithetical to current economic and political thought (free global trade is an unalloyed good). Of course this has an impact. It’s the converse of the rising foreign economy where the local worker has seen their incomes rise due to export driven economics. They’re exporting their labor, we’re importing to complement our labor and that has placed negative pressure on wages. It’s clearly seen in farm workers. Large agri businesses say that unless they have cheap imported labor, they can’t afford workers. But that does not stand. In their current economic model cheap labor is necessary, but it’s not inherently necessary. The late 1990s to early 2000s anti-WTO leftists understood this, Perot understood this, but they were vanquished by non labor interests.
bryanlarsen 8y ago
In the conclusion the author guesstimated globalization was ~5% of the effect. It'd be nice to see the reasoning for the guesstimate.
CoolGuySteve 8y ago
Particularly telling is that he compares the gap between the US, Germany, Italy, Spain, and France. I really want to see the same charts for coastal vs inland China and Mexico. Did a rising tide lift all boats there or not?
- RPLong 8y ago
  The problem is mostly one of data availability. China has plenty of data, but not all of it is credulous. That, and the fact that comparisons of any two nations will always be susceptible to the accusation that the data has been "cherry-picked" to show a favorable result. But the global data on poverty is basically unassailable. Poverty has declined absolutely everywhere. The rising tide lifted at least the very poorest boats, whatever can be said for the American middle class notwithstanding.

gerbilly 8y ago

Real wages haven't increased since 1970. We only feel richer because: * Most households have two wage earners now. * We use lines of credit to borrow for discretionary purchases, we lease cars, pay by subscription for things more. * We have more gadgets. (Note that this has been proven to make people any happier.)

focusgroup0 8y ago
Another factor: The Immigration Act of 1965 significantly increased the amount of labor immigrating to the country https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1965 https://en.wikipedia.org/wiki/Immigration_and_Nationality_Ac...
- WhompingWindows 8y ago
  How does this lead to wage stagnation? You've stated a potential piece of evidence but provided no reasoning to link to your (implicit) claim that immigration leads to stagnant wages. If that's not your claim, feel free to fill out the details. Arguments have CER - claim, evidence, reasoning. Your comment was missing two.
  - deogeo 8y ago
    It's pretty obvious he meant that wages were suppressed due to supply and demand, where the immigration act increased the supply of labor. If you'd like proof of the act doing just that: https://www.migrationpolicy.org/programs/data-hub/charts/immigrant-population-over-time https://www.migrationpolicy.org/programs/data-hub/charts/imm...
    - repsilat 8y ago
      Is that obvious that's what they meant? I understood it to mean that immigrants tend to earn less (I don't have this data myself), and could drag the average down. In that case the overall average real wage could stagnate while the average real wage of every cohort increased.

Chico11Kidlet 8y ago

Of course any discussion about labour vs capital share of gdp needs to talk about land as well. So ‘5. Could Wage Decoupling Be Explained By Increasing Labor-Vs-Capital Inequality?’ would be more interesting with land. That also came up in the discussions around Piketty.

shams93 8y ago

It's worse than it looks when you add massive education debt and in states like California we have seen the vast share of tax increases landing on wage earners plus incredibly high rent.

WhompingWindows 8y ago
Yes, I'm not sure if the linked post discusses education debt. Even if wages increased 50% more than we think due to inflation issues, as the blog post claims, I don't know how a slightly better wage makes up for vastly increased education/housing spending. I don't know if the CPI or productivity account for either of those, either.

3pt14159 8y ago

I've thought about this for the past decade or so. It's obviously going to be many simultaneous factors for any type of decoupling this pervasive in society, but I tend to simulate things out in my head and here is what I've largely ruled in and out. 1. It isn't gross executive compensation. Holding everything else constant, executives are very good at negotiating the very best deal for themselves and corporations live and die by the law of the jungle. These two forces balance each other out. Higher executive compensation probably means that executives are more important than they used to be, which I would expect with an increasingly technological society. 2. That said, executives and the wealthy class pay way less in tax than they used to because they're less tied to a region which means they're less civically minded and they're more able to region shop for lower tax rates, leading to a race to the bottom. 3. Computers automate tasks that used to require a high school education. IBM is IBM because they started with cash registers before computers came along. There used to be a banker with a real education in every single town. There isn't anymore and we (especially we!) know why. 4. Communications—starting with the telegraph, but certainly not ending there—make locality irrelevant. Combined with the forces of capitalism (e.g., comparative advantage, re-invested returns) this hyper concentrates specialization. 5. Standardized shipping, especially sea containers. The Chinese government's greatest insight was the importance of physical freight and they leaned in hard to become the centre of the worlds manufacturing by essentially[0] subsidizing it. 6. Many decades of low interest rates, on the half-baked ideas of Keynesian theory of productive capital. Surprise! It turns out that injecting liquidity doesn't necessarily expand business activity. There's plenty of cash locked up in corporations and monied investors. They're desperate for return, but the hyper specialization issue stops them from getting alpha once they hit the market's carrying capacity. Instead these low interest rates go to... 7. Asset bubbles and arms races! Everyone needs a home. Everyone wants a good education at a prestigious university. People buy whatever sugary drink advertises the most. Inflation isn't really low. When a small family home in Toronto costs more money than the median family makes after tax in twenty years we know its bullshit. The inflation rate is papered over because of cheaper manufacturing due to technological progress and international trade, but it doesn't work for housing and many other things. 8. The more complex world is inherently less governable by democracies. A ballot only has a byte of information tops and it only operates over a period of four to six years. This is why lobbyists win, especially in larger democracies like America where the ratio of governed to lawmakers is higher. 9. Surveillance capitalism relies on inexplicable insights and returns. This hyper centralizes wealth whilst simultaneously shrouding the mechanism. [0] Solving coordination problems is a form of governmental subsidization even if the government in question makes a huge profit. Canada does the same with forestry. I don't know how to square it with global trade.

defertoreptar 8y ago

I'm having trouble understanding why, in a society with ever-advancing technology, why wages would trend with productivity. I'm seeing it like this (and please correct me if I'm off base): Input = (Labor portion) + (tech & automation portion) + (other portion including things like land, materials, and overhead) Productivity = output / input Wages reflect the labor portion's contribution to "input." We know that tech and automation's portion is continuing to increase in relation to labor. Therefore, with this understanding, wages must decrease in proportion with productivity.

pas 8y ago
That might be true, but it seems tech is not that meaningful. Usually technological change carries with it a lot of need for human labor. (Eg. first it needs to be evaluated, planned, implemented, supervised, maintained, repaired, etc.) And it seems that tech displaces the middle income jobs. ( https://economics.mit.edu/files/11563 https://economics.mit.edu/files/11563 ) Which of course puts a downward pressure on wages, which probably contributes to the decline of labor share of income, but this effect is no as big as using a different deflator, nor is the technological change well correlated with the aforementioned decoupling.
- crdoconnor 8y ago
  It's weird how capital is assumed to take credit for automation. Automation is built by labor.
  - AnimalMuppet 8y ago
    Yes, but not yours. That is: when the Acme Widget Factory buys Jake's Improved Widget-Making Tool(TM), it's Jake's employees' labor that made that tool, not Acme's. It is therefore Jake's employees who deserve to be rewarded for creating the automation, not Acme's. That's why I said "not yours" - not specifically you, crdoconnor, but the labor of the company that buys automation did not build that automation. They still should be rewarded for the the increased productivity that comes from knowing how to use it, but they didn't build it. And when I said "they still should be rewarded", that doesn't mean that they get all the benefits from the increased productivity. The tool maker has to be rewarded, too, or there won't be many tools to improve productivity. And the capitalists who bought the tool have to be rewarded, too, or there won't be many such tools bought.

RobertoG 8y ago

>>"We shouldn’t dismiss this as irrelevant, because many things that close only a small part of the gap may, when added together, close a large part of the gap. But this doesn’t do much on its own." I'm not saying is not true, but I find this idea highly suspicious when there is a clear trend that start at some point. I mean, what are the chances that many independent things move the trend, in the same direction at the same time, every year?.

mindB 8y ago
He discusses this point in his conclusion. He was also expecting to find a single, clear factor but didn't. Even if multiple factors causing a single large change is relatively rare, we'd still expect to see it sometimes, and he's arguing that this is one of those times. I found the argument relatively convincing.
RootReducer 8y ago
The author addresses this in the conclusion, and is also suspicious, but presents some possibilities that explain it. "This surprises me, because the dramatic shift in 1973 made me expect to see a single cause (and multifactorial trends should be rare in general, maybe, I think). It looks like there are two reasons why 1973 seems more important than it is...."

soVeryTired 8y ago

Once you realise that workers are compensated according to their bargaining power rather than their productivity, none of this should be surprising.

zackmorris 8y ago
I was going to say something similar. I'm 41, and when I was a child in the early 80s, work was simultaneously higher paying, a bit more intense than today's standards, but also had shorter hours and more leisure time. Where I live in Idaho, my family and friends were: a dentist (dad) dental office manager (mom), carpenter (godfather), minister, interior decorator, teacher, artist, mechanic, lots of military workers on the airbase by my hometown, etc. Maybe half or less of the mothers I knew worked outside the home. Fathers hunted in the fall to feed their families. But our community was largely self-sufficient. We didn't have Walmart yet and its associated trade deficits which contributed to the national debt. I'll admit that we were dependent on the nearby military base, BUT that was during the Cold War. Had the base closed (as it probably should have after the Berlin Wall fell, say 1990), I think my home town would have survived on ranching, timber and mining (none of which I support by the way, as Idaho's environment is under constant attack). Yes I see the contradictions in what I am saying. But I also believe that we could have had a more sustainable future had we faced facts and started the process of transitioning to a 21st century economy earlier. That might have even led to Gore being elected instead of Bush. So it's complicated, and not always easy to discern cause from effect. It's all been 20 years delayed, but there is work in green energy here today. My feeling is that the American worker HAD MORE LEVERAGE then - in terms of being able to walk onto any construction job, or specialize in a 2 year education trade, or even get free college in many states. We still had unions. We didn't have the welfare cuts that happened under Clinton or the 100,000 factories shut down under GW Bush yet. Quality of life and the feeling of making one's own way was higher then. If we want to fix our economy, we need to get organized and take a bigger piece of the pie for workers (perhaps we should call them makers or producers), rather than giving it to people who already have money. We can moan and complain about this simple fact from all political angles, but until we start electing people who understand how this works, our long slow decline will continue.

TomMckenny 8y ago

Returns on investment always exceed wage growth. And as wealth concentrates, the effect is cumulative even over generations. It happens to be tech. It could just as easily be empire. There was a moment after the world wars when this was intentionally compensated for and now it isn't. There is no William Beveridge, no Roosevelt brain trust and, Keynesian is apparently a bad word now.

Gpetrium 8y ago
I think one of the biggest concerns that governments are having is that the more you try to re-balance wage stagnation and wealth, the less competitive you are in the world, leading to other types of stagnation.
- TomMckenny 8y ago
  Intuitively this seems quite reasonable. Yet the period 1946-1973 saw enormous growth in all western countries and wages kept up with growth during that time. Of course, it seems likely there are government interventions that damage growth. But apparently there are some that don't. In particular, progressive tax structures and social safety nets don't seem to.

choeger 8y ago

When did China enter the global market? Am I the only one to think that this might be a natural cause of an extreme growth in world-wide working population? I think we are already through the worst parts and the dividends are beginning to pay.

RPLong 8y ago
I have thought that for a long time, too. It's natural that, on a global scale, developed-economy wages would appear to "stagnate" if developing-economy wages are increasing while competing for the same jobs.
simonsarris 8y ago
Hmm. If the ngram "Chinese manufacturing" started exploding in books in the mid 80's we can assume the phenomenon started exploding a few years before that. https://books.google.com/ngrams/graph?content=Chinese+manufacturing&year_start=1800&year_end=2010&corpus=15&smoothing=3&share=&direct_url=t1%3B%2CChinese%20manufacturing%3B%2Cc0 https://books.google.com/ngrams/graph?content=Chinese+manufa...
jahewson 8y ago
Early 1970s. Nixon visited China in 1972. Don't forget that China had to industrialize first - it was initially importing equipment from the US. Imports into the US at the time were more likely to come from Japan, Taiwan and Korea. Seems a to be a bit too late to explain the timeline, but it could be a factor - OTOH, given that China's workforce is no longer expanding then your theory would predict that wages will now stop stagnating but that does not seem to be the case?

api 8y ago

This is really great! I have to toss something in re: unionization and the percentage it may explain. Executive salaries have exploded while worker salaries have stagnated. Could this be because executives by virtue of the social networks they belong to are effectively unionized? Unionization of executives is not necessarily explicit, but the executive pool is smaller and more tightly connected and therefore executives will tend to behave more like a coherent social group. The worker pool is enormous, more diverse, and far less organized with far less opportunity for "out-of-band" social connection.

deleted 8y ago
[deleted]

BrandonMarc 8y ago

Aaaah, scott! So much information! It's a long read, and I have work to do, but ... is there a summary?

andrewla 8y ago

The problem with this entire discussion is that we use terms like "wages" and "productivity", which have meanings in the English language, and associate them with metrics which are utterly divorced from those meanings. To have a sane discussion, we're forced to use these shorthands, but the fact of the matter is that if we spelled out what we were actually measuring it would be very clear that all of these phenomena being measured refer to things disconnected from any of our actual experience. Even more so, the methodology for most of this data has changed so much over time, with so little overlap between methodologies, that we have literally no idea what the state of the world was even a few years ago. All we have are a mixture of giant measurement artifacts, and when two of them correlate we celebrate because we might have found a metric that can bridge the divide between methodologies, but that correspondence disappears as soon as we try to find out if there are systemic changes -- our ability to determine whether something has changed has an implicit reliance on the assumption that nothing has changed, so all of these arguments become circular. Econometrics is a philosophical dead end that just ends up producing broken policies disconnected from reality and causing us to make up a new suite of politically-motivated metrics to match the outcomes that we're looking for, and then give the metrics names that refer to things that have intuitive meanings and pretend we've found insight. You really have to go back to non-econometric-based economics (the Austrians, von Mises and Hayek) to get any sort of insight into how economies can be made to work at scale, and the answer is that we don't understand them, and that technological progress and population changes mean that attempts to push them in a direction will have side effects that far outweigh any of the attempted influence.

frgtpsswrdlame 8y ago
This is a brilliant piece of political propaganda. I honestly salute you for getting it to the top of this comment section.
roymurdock 8y ago
This isn’t true, the study of applied economics (new Keynsian) saved the US in 2008 when the Fed decided to shore up liquidity and helped bail out industry in concert with the government. Austrian policy would’ve let the entire system collapse and rebuild itself to avoid the construction of perverse risk incentives and the zombification we are seeing in the economy today. You can argue which would be better long term (I think Austrian) but short term we needed Keynesian measures to save jobs and lives from being consumed in a downward spiral of debt chain triggering and collection. Productivity has a precise economic definition - ratio of output to inputs - and correlates highly to standard of living. We don’t fully understand how and why technology advances, but we measure increased technology through a variable called the solow residual. Economic policy can help lead to technology breakthroughs that increase productivity and the standard of living. It’s very shortsighted to dismiss economics out of hand as something we don’t understand. A lot of it is politically motivated but let’s face it politics is what happens when groups of people get together and try to collaborate. There’s a lot of important work to be done around productivity economics and I’m glad it’s getting more mainstream coverage

wazoox 8y ago

Because of energy. Productivity going up means one person uses more machines, and as time goes, the machines do an ever increasing part of the job, because the energy feeding the machines is so much cheaper than human labour (in the order of 200 to 400 times cheaper). This is not by chance that wage stagnation appeared in correlation with these events: US oil production peaked in 1970. Dollar convertibility to gold ended in 1971. Oil crisis came in 1974. OECD countries enter a permanent trend of public deficit in 1974. Unemployment soared in OECD countries at the same time. As the ability to augment energy consumption became more and more capped by the ability to extract energy from the ground, workers gradually lost their capacity to obtain their part of the cake because it's always cheaper to put more capital than people at work, so far. The trend intensifies, nowadays we're talking of ending employment and of the necessity of basic income and similar tools. Until the (unavoidable) end of cheap energy, that is... Then we'll be back to the ancient order of things, when a country GDP was entirely correlated to the size of its population.

amanaplanacanal 8y ago

Of course, if this continues long enough... At some point the workers rebel, and bring back the guillotine. Or something worse (see Soviet Russia). This can't continue long term. Populist politicians promising to make things better relieve some of the pressure in the short run, though.

omouse 8y ago

I wonder if there's an impact from the increase in startups? Since most early employees are getting paid in equity rather than real dollars wouldn't there be a stagnation for a few years until the equity is transformed into cash? Also any conversation about wage stagnation has to take into account collusion, in recent years Google, Intel, Adobe and others were avoiding poaching each other's employees.