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What do you call it when real wages don’t go up in a system designed to “encourage productivity?” Since the gains aren’t going to workers at all, they must be g

What do you call it when real wages don’t go up in a system designed to “encourage productivity?” Since the gains aren’t going to workers at all, they must be going to those at the top, right? That sounds an awful lot like “protecting wealth” to me.

altonzheng 7y ago
While I agree with your sentiment that the system is flawed and not serving much of the population, I think the parent's point still stands. If the system was designed solely for protecting wealth, it wouldn't be encouraging competition -- ie. cartels and monopolies would be permitted. Make no mistake, whatever the goal is, the side-effects are unfortunate.
- thethethethe 7y ago
  > cartels and monopolies would be permitted Last time I checked both of these still exist and wield massive power globally. Just because something is “illegal” doesn’t mean that it isn’t part of the system. The system was “designed”, it’s behavior is emergent. States institute laws which have side effects and those side effects are part of the system.
- pmiller2 7y ago
  Really? You’re gonna tell me cartels and monopolies don’t exist when 10 companies control nearly the entire food and beverage industry? [0] What good is it being able to choose among 195 brands of bottled water [1] when there’s not much of a difference among them? Is this what all our productivity is going towards? Or maybe it’s all that advertising they drown us in to convince us to buy this stuff? —- [0]: https://www.businessinsider.com/10-companies-control-the-food-industry-2016-9 https://www.businessinsider.com/10-companies-control-the-foo... [1]: https://en.wikipedia.org/wiki/Bottled_water https://en.wikipedia.org/wiki/Bottled_water
- analog31 7y ago
  The prohibition of cartels and monopolies is an old law that has been allowed to be gradually weakened.
deleted 7y ago
[deleted]
ls612 7y ago
The difference between the median and the average strikes again! The popular comparison is that median real wages have only risen slightly from the 70s while average productivity (because by definition the labor productivity numbers are averages) has risen substantially. But much of that is due to the increases in productivity from high productivity individuals, say maybe those whose job it is to tell fancy electronic machines how to do low skill repetitive tasks. Some of those people might even browse this forum! There is actually fairly weak data to support the popular theory of a decreasing labor share of income (and thus an increasing capital share) causing more inequality and to the extent such an effect could exist its size is only a few percent of GDP over the past few decades.
- pmiller2 7y ago
  How does median vs mean matter here? Maybe only 50% of people are completely fucked? Big deal; I know the CEOs and software engineers are doing fine.
  - ls612 7y ago
    Because high skilled workers have seen both their productivity and income rise substantially. The median and other lower skilled workers have not. This will lead to an increasing average but a stagnant median, but it doesn’t mean that the idea people are mostly paid based on productivity is wrong.
    - pmiller2 7y ago
      I never claimed that. I claimed that workers generally are no longer reaping the benefits of increased productivity. If you want to offer income inequality as an explanation, then I'd be interested to hear how you work that all out, and if the math adds up. But, my contention that all the gains from increased productivity are going to those at the top seems to be exactly what you are espousing, yes? Are you agreeing with me in different words, or am I misunderstanding?
- imtringued 7y ago
  It doesn't matter if you compare incompatible measures. As long as past values are better than present values we are on a downwards trend.
randomdata 7y ago
Wages stopped increasing when human productivity peaked. The continued gains in productivity we have seen since that time have come by way of mechanization/automation. Given that the system encourages productivity, those who bring that automation to the economy reap the rewards. Those who only offer their labour to the economy are stuck since labour productivity has peaked. Humans simply cannot provide more productivity on their own. As most people only offer labour and only a small group offer the more and more productivity gains of automation, it is true that the rewards end up being concentrated in that small group of productivity providing people. "The top" as you put it. That disparity is meant to incentivize you to develop your own technologies that increase productivity further instead of "wasting" your time selling productive-constrained labour, but in the real world it is unquestionably difficult to recognize where productivity can be gained. The understanding of that was the basis for the idea behind pushing everyone into post-secondary schools, with a promise that higher learning would teach you how find solutions for increasing productivity, and thus increasing your reward for increasing overall productivity (a.k.a. providing you with a higher income). However, the real world is again messy and it hasn't really worked out. Despite a substantial increase in post-secondary attainment in recent times, the vast majority of graduates are making no more than they would have without having attended a post-secondary school (wages have been stagnant for decades upon decades) as they by and large end up only selling their productivity-limited labour.
- WanderPanda 7y ago
  Chapeau! This is the only rational comment I found under this post. Why is everybody just becoming emotional and reflexively starts hating minorities (like „the 1%“)?
  - Dylan16807 7y ago
    It's not hating someone to say they shouldn't have more than XX million dollars.
- pdonis 7y ago
  > Humans simply cannot provide more productivity on their own. Sure they can. Who is designing and building and installing all that automation? I know that you recognize this since it's a key point of the rest of your post. But I don't think you've fully realized the implications. The problem is not just that post-secondary schools haven't lived up to their promise of teaching people how to increase overall productivity. The problem is that, fundamentally, increasing overall productivity is entrepreneurship, and entrepreneurship is not something that can be taught in schools. It's a fundamental change in viewpoint: you have to stop thinking of yourself as an employee, a wage earner, and start thinking of yourself as a business owner. But schools teach people to be wage earners, and as you quite correctly point out, there is no real growth to be had at this point in being a wage earner.
malandrew 7y ago
The benefits of increased productivity go to the people who made the changes that increase productivity, which is basically the managers who made the investment and the people who implemented the solutions using that investment, such as software engineers. Why should it accrue to those simply using the new better solutions when they are not responsible for the productivity gains provided by those solutions. If anything, their jobs usually become easier than it was previously with the advances. This idea that only management making the investment and shareholders benefit from productivity gains is wrong. People like myself and many others on HN that are engineers are major beneficiaries of the productivity gains because we’re the ones actually building the solutions responsible for those gains.
- pmiller2 7y ago
  Because those “investments” don’t matter if there are no workers using the tools. Look around you. How is the economy doing with everyone staying at home due to the pandemic?
  - malandrew 7y ago
    Last I checked, I and many other people are still working from home. Just because our jobs don't have to occur outside the home doesn't mean that we're not still making improvements that lead to greater productivity. There is no issue with people using the tools. The issue is with workplaces where multiple people need to work together. People with jobs where they use the tools but don't need to be around others or very many others are generally still working. Also, not all productivity improvements are from tools that still need to be used by workers. A lot is from automation. Anyways, my point is that tons of people who are not at the top of the businesses experiencing increased productivity are reaping the rewards of productivity improvements. It's a falsehood to think that only those making the investments are reaping the benefits. It only looks that way if you myopically don't look beyond the firm whose productivity improved.
    - pmiller2 7y ago
      > Anyways, my point is that tons of people who are not at the top of the businesses experiencing increased productivity are reaping the rewards of productivity improvements. It's a falsehood to think that only those making the investments are reaping the benefits. It only looks that way if you myopically don't look beyond the firm whose productivity improved. Your point literally misses the point. From the perspective of improving the lot of ordinary workers, "beyond the firm whose productivity improved" doesn't matter. What matters is peoples' paychecks. Before the mid 70's, when overall productivity went up, wages went up. That is no longer the case. It wouldn't be a problem if things like housing (both home prices and rents), education, medical insurance, and healthcare services (which is still important even for those with health insurance due to out of pocket maximums and deductibles). Notice how all of these are basic essentials of life, some of which are essential enough to form the base of Maslow's hierarchy of needs? I also want to stress that people today have to fund their own retirement, because there are no more company pensions. Things that have gone up at or below the rate of inflation since the mid 70s are, by and large, not essentials: cars, computers, airline tickets, phone service, TVs, and clothes. [0] Granted, clothes, and sometimes cars are essential, but the savings there don't come close to making up the shortfall in the other things. > Also, not all productivity improvements are from tools that still need to be used by workers. A lot is from automation. If anything, I would guess that automation has harmed workers by eliminating good jobs, rather than benefiting people overall. Yeah, we have free stock trades now, but who cares? I'm open to being convinced otherwise on the automation point, but I have a hard time seeing how people like my mom and dad, neither of whom went to college, could make it into the middle class today if you waved a magic wand and made them 25 again. --- [0]: https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2017/05/10-things-that-are-cheaper-today.html https://www.bizjournals.com/bizjournals/how-to/growth-strate...
missedthecue 7y ago
Real compensation has increased dramatically. It's a great mistake to assume that a wage is the only cost of employing someone. The cost of labour has gone up significantly over the past few decades.
- pmiller2 7y ago
  “Compensation” doesn’t pay my rent. Wages do. I can’t exactly offer my landlord a part of my health insurance coverage I’m not using this month in lieu, can I? Speaking of rent, that has also gone up faster than real wages since the 70s — does an increase in productivity explain that as well? [0] Oh, and there are no company pensions anymore, either, so I have to somehow figure out how to fund my retirement, too. Tell me again how much better off we are? —- [0]: https://www.apartmentlist.com/rentonomics/rent-growth-since-1960/ https://www.apartmentlist.com/rentonomics/rent-growth-since-...
  - core-questions 7y ago
    Well, where is all that excess wealth (in terms of real goods produced and real services performed, i.e. the labour time exchanged) actually going? Could it be that the idea of demanding each wealth-producer feed some number of non-wealth-producers has a scaling limitation?
    - pmiller2 7y ago
      What are you getting at? You are dangerously close to referring to human beings as “useless eaters.” [0] —- [0]: https://en.wiktionary.org/wiki/useless_eater https://en.wiktionary.org/wiki/useless_eater
- analog31 7y ago
  Sure, workers are getting "paid" to "buy" health care that should be a public good, and is twice as expensive overall as anywhere else in the world. That's a transference of wealth from the wealthy to the wealthy -- possibly to themselves.
username90 7y ago
> What do you call it when real wages don’t go up in a system designed to “encourage productivity? Low skill immigration. Without them McDonalds workers would earn $25 an hour in San Francisco like they do in Zurich since otherwise nobody would want to work there.

altonzheng 7y ago

While I agree with your sentiment that the system is flawed and not serving much of the population, I think the parent's point still stands. If the system was designed solely for protecting wealth, it wouldn't be encouraging competition -- ie. cartels and monopolies would be permitted. Make no mistake, whatever the goal is, the side-effects are unfortunate.

thethethethe 7y ago
> cartels and monopolies would be permitted Last time I checked both of these still exist and wield massive power globally. Just because something is “illegal” doesn’t mean that it isn’t part of the system. The system was “designed”, it’s behavior is emergent. States institute laws which have side effects and those side effects are part of the system.
pmiller2 7y ago
Really? You’re gonna tell me cartels and monopolies don’t exist when 10 companies control nearly the entire food and beverage industry? [0] What good is it being able to choose among 195 brands of bottled water [1] when there’s not much of a difference among them? Is this what all our productivity is going towards? Or maybe it’s all that advertising they drown us in to convince us to buy this stuff? —- [0]: https://www.businessinsider.com/10-companies-control-the-food-industry-2016-9 https://www.businessinsider.com/10-companies-control-the-foo... [1]: https://en.wikipedia.org/wiki/Bottled_water https://en.wikipedia.org/wiki/Bottled_water
analog31 7y ago
The prohibition of cartels and monopolies is an old law that has been allowed to be gradually weakened.

deleted 7y ago

[deleted]

ls612 7y ago

The difference between the median and the average strikes again! The popular comparison is that median real wages have only risen slightly from the 70s while average productivity (because by definition the labor productivity numbers are averages) has risen substantially. But much of that is due to the increases in productivity from high productivity individuals, say maybe those whose job it is to tell fancy electronic machines how to do low skill repetitive tasks. Some of those people might even browse this forum! There is actually fairly weak data to support the popular theory of a decreasing labor share of income (and thus an increasing capital share) causing more inequality and to the extent such an effect could exist its size is only a few percent of GDP over the past few decades.

pmiller2 7y ago
How does median vs mean matter here? Maybe only 50% of people are completely fucked? Big deal; I know the CEOs and software engineers are doing fine.
- ls612 7y ago
  Because high skilled workers have seen both their productivity and income rise substantially. The median and other lower skilled workers have not. This will lead to an increasing average but a stagnant median, but it doesn’t mean that the idea people are mostly paid based on productivity is wrong.
  - pmiller2 7y ago
    I never claimed that. I claimed that workers generally are no longer reaping the benefits of increased productivity. If you want to offer income inequality as an explanation, then I'd be interested to hear how you work that all out, and if the math adds up. But, my contention that all the gains from increased productivity are going to those at the top seems to be exactly what you are espousing, yes? Are you agreeing with me in different words, or am I misunderstanding?
imtringued 7y ago
It doesn't matter if you compare incompatible measures. As long as past values are better than present values we are on a downwards trend.

randomdata 7y ago

Wages stopped increasing when human productivity peaked. The continued gains in productivity we have seen since that time have come by way of mechanization/automation. Given that the system encourages productivity, those who bring that automation to the economy reap the rewards. Those who only offer their labour to the economy are stuck since labour productivity has peaked. Humans simply cannot provide more productivity on their own. As most people only offer labour and only a small group offer the more and more productivity gains of automation, it is true that the rewards end up being concentrated in that small group of productivity providing people. "The top" as you put it. That disparity is meant to incentivize you to develop your own technologies that increase productivity further instead of "wasting" your time selling productive-constrained labour, but in the real world it is unquestionably difficult to recognize where productivity can be gained. The understanding of that was the basis for the idea behind pushing everyone into post-secondary schools, with a promise that higher learning would teach you how find solutions for increasing productivity, and thus increasing your reward for increasing overall productivity (a.k.a. providing you with a higher income). However, the real world is again messy and it hasn't really worked out. Despite a substantial increase in post-secondary attainment in recent times, the vast majority of graduates are making no more than they would have without having attended a post-secondary school (wages have been stagnant for decades upon decades) as they by and large end up only selling their productivity-limited labour.

WanderPanda 7y ago
Chapeau! This is the only rational comment I found under this post. Why is everybody just becoming emotional and reflexively starts hating minorities (like „the 1%“)?
- Dylan16807 7y ago
  It's not hating someone to say they shouldn't have more than XX million dollars.
pdonis 7y ago
> Humans simply cannot provide more productivity on their own. Sure they can. Who is designing and building and installing all that automation? I know that you recognize this since it's a key point of the rest of your post. But I don't think you've fully realized the implications. The problem is not just that post-secondary schools haven't lived up to their promise of teaching people how to increase overall productivity. The problem is that, fundamentally, increasing overall productivity is entrepreneurship, and entrepreneurship is not something that can be taught in schools. It's a fundamental change in viewpoint: you have to stop thinking of yourself as an employee, a wage earner, and start thinking of yourself as a business owner. But schools teach people to be wage earners, and as you quite correctly point out, there is no real growth to be had at this point in being a wage earner.

malandrew 7y ago

The benefits of increased productivity go to the people who made the changes that increase productivity, which is basically the managers who made the investment and the people who implemented the solutions using that investment, such as software engineers. Why should it accrue to those simply using the new better solutions when they are not responsible for the productivity gains provided by those solutions. If anything, their jobs usually become easier than it was previously with the advances. This idea that only management making the investment and shareholders benefit from productivity gains is wrong. People like myself and many others on HN that are engineers are major beneficiaries of the productivity gains because we’re the ones actually building the solutions responsible for those gains.

pmiller2 7y ago
Because those “investments” don’t matter if there are no workers using the tools. Look around you. How is the economy doing with everyone staying at home due to the pandemic?
- malandrew 7y ago
  Last I checked, I and many other people are still working from home. Just because our jobs don't have to occur outside the home doesn't mean that we're not still making improvements that lead to greater productivity. There is no issue with people using the tools. The issue is with workplaces where multiple people need to work together. People with jobs where they use the tools but don't need to be around others or very many others are generally still working. Also, not all productivity improvements are from tools that still need to be used by workers. A lot is from automation. Anyways, my point is that tons of people who are not at the top of the businesses experiencing increased productivity are reaping the rewards of productivity improvements. It's a falsehood to think that only those making the investments are reaping the benefits. It only looks that way if you myopically don't look beyond the firm whose productivity improved.
  - pmiller2 7y ago
    > Anyways, my point is that tons of people who are not at the top of the businesses experiencing increased productivity are reaping the rewards of productivity improvements. It's a falsehood to think that only those making the investments are reaping the benefits. It only looks that way if you myopically don't look beyond the firm whose productivity improved. Your point literally misses the point. From the perspective of improving the lot of ordinary workers, "beyond the firm whose productivity improved" doesn't matter. What matters is peoples' paychecks. Before the mid 70's, when overall productivity went up, wages went up. That is no longer the case. It wouldn't be a problem if things like housing (both home prices and rents), education, medical insurance, and healthcare services (which is still important even for those with health insurance due to out of pocket maximums and deductibles). Notice how all of these are basic essentials of life, some of which are essential enough to form the base of Maslow's hierarchy of needs? I also want to stress that people today have to fund their own retirement, because there are no more company pensions. Things that have gone up at or below the rate of inflation since the mid 70s are, by and large, not essentials: cars, computers, airline tickets, phone service, TVs, and clothes. [0] Granted, clothes, and sometimes cars are essential, but the savings there don't come close to making up the shortfall in the other things. > Also, not all productivity improvements are from tools that still need to be used by workers. A lot is from automation. If anything, I would guess that automation has harmed workers by eliminating good jobs, rather than benefiting people overall. Yeah, we have free stock trades now, but who cares? I'm open to being convinced otherwise on the automation point, but I have a hard time seeing how people like my mom and dad, neither of whom went to college, could make it into the middle class today if you waved a magic wand and made them 25 again. --- [0]: https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2017/05/10-things-that-are-cheaper-today.html https://www.bizjournals.com/bizjournals/how-to/growth-strate...

missedthecue 7y ago

Real compensation has increased dramatically. It's a great mistake to assume that a wage is the only cost of employing someone. The cost of labour has gone up significantly over the past few decades.

pmiller2 7y ago
“Compensation” doesn’t pay my rent. Wages do. I can’t exactly offer my landlord a part of my health insurance coverage I’m not using this month in lieu, can I? Speaking of rent, that has also gone up faster than real wages since the 70s — does an increase in productivity explain that as well? [0] Oh, and there are no company pensions anymore, either, so I have to somehow figure out how to fund my retirement, too. Tell me again how much better off we are? —- [0]: https://www.apartmentlist.com/rentonomics/rent-growth-since-1960/ https://www.apartmentlist.com/rentonomics/rent-growth-since-...
- core-questions 7y ago
  Well, where is all that excess wealth (in terms of real goods produced and real services performed, i.e. the labour time exchanged) actually going? Could it be that the idea of demanding each wealth-producer feed some number of non-wealth-producers has a scaling limitation?
  - pmiller2 7y ago
    What are you getting at? You are dangerously close to referring to human beings as “useless eaters.” [0] —- [0]: https://en.wiktionary.org/wiki/useless_eater https://en.wiktionary.org/wiki/useless_eater
analog31 7y ago
Sure, workers are getting "paid" to "buy" health care that should be a public good, and is twice as expensive overall as anywhere else in the world. That's a transference of wealth from the wealthy to the wealthy -- possibly to themselves.

username90 7y ago

> What do you call it when real wages don’t go up in a system designed to “encourage productivity? Low skill immigration. Without them McDonalds workers would earn $25 an hour in San Francisco like they do in Zurich since otherwise nobody would want to work there.