36 ms·

If pay had kept pace with productivity gains, minimum wage would be $24 an hour

• dcolkitt 6y ago
  Average annual wages in the United States for was $63,000 for the most recent year available.[1] Average annual hours worked was 1,779 per year.[2] That implies an average wage of $35/hour. [1]https://en.wikipedia.org/wiki/List_of_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_countries_by_average_w... [2]https://data.oecd.org/emp/hours-worked.htm https://data.oecd.org/emp/hours-worked.htm
  • ardy42 6y ago
    That doesn't contradict the actual article, whose full title is: > If Worker Pay Had Kept Pace With Productivity Gains Since 1968, Today's Minimum Wage Would Be $24 an Hour It looks like when it was shortened one of its most important words were dropped.
    • deegles 6y ago
      Sorry, I was trying to make it fit the character limit :(
      • dredmorbius 6y ago
        Title-smithing is an art. Email the mods if you're stuck; hn@ycombinator.com (I have, with some shorter suggestions.)
    • dcolkitt 6y ago
      That makes more sense. But keep in mind that only 2.3% of hourly workers make minimum wage.[1] It's not really fair to compare productivity (a mean) or even median output to wages at the second percentile. It's an interesting question in its own right. Do the very lowest paid people in the economy have it better or worse than 50 years ago. I don't know the full answer to that question, but I do know that in 1968 about 5% of American households didn't have full indoor plumbing.[2] Just based on that datum, I'd much rather trade places with a very poor American in 2020 than 1968. [1] https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm [2] https://www.aceee.org/files/proceedings/2004/data/papers/SS04_Panel1_Paper17.pdf https://www.aceee.org/files/proceedings/2004/data/papers/SS0...
      • nroets 6y ago
        When I was in the US, I saw someone offering free phones to the unemployed (Obama phone). Food stamps being used. FEMA given new houses to people left homeless by hurricane Michael. I even met people whose diet consisted mainly of expired food. They had to fish it out of dumpsters, which wasn't nice. But they had free food!
    • refurb 6y ago
      That makes sense, but why would productivity gains be equally applied across all wage levels? You'd naturally expect it to be unequal based on the productivity gains in specific job functions.
  • ruined 6y ago
    As noted in your first link, average wage is misleading because the high end is incomprehensibly large (and is where most growth has taken place) and that skews the result. >The wage distribution is right-skewed; the majority of people earn less than the average wage. For an alternative measure, the median household income uses median instead of average.
    • ochoseis 6y ago
      Agreed, a comparison of the median is better. Although, it’d be nice if the mean and median weren’t too far apart.
    • bhupy 6y ago
      Yup, you're right. The real median personal income in the US, today is $35,977 -> https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N Unfortunately I'm having a hard time finding the median number of annual hours worked. But using the average hours worked, that puts the median worker at $20/hr. Obviously not perfect unless we can get the median hours worked. Also, like other commenters have said, I don't think anyone has ever claimed that the bulk of productivity gains will go equally to the minimum wage as the median wage, since the latter is usually pretty low leverage work in general.
      • sixstrings 6y ago
        Is that net or gross? And assuming 30 days of vacation at 7,5 hours each, are those 225 hours part of the equation? Interesting to see how those numbers aren’t as drastically different from my country as I’d assumed.
        • monocasa 6y ago
          Someone making $35k isn't getting 30 days of vacation in the US. Maybe 10 days of combined sick days and vacation.
      • OscarCunningham 6y ago
        > Obviously not perfect unless we can get the median hours worked. Even then, the median annual wage divided by the median annual number of hours worked won't necessarily be equal to the median hourly wage.
  • deleted 6y ago
    [deleted]
  • PaulDavisThe1st 6y ago
    "Average" anything in populations with large ranges is a terrible, terrible measure. As the joke goes, Bill Gates walks into a bar, and on average everyone in the bar is a millionaire. Median is the appropriate statistic for such cases.
    • bleepblorp 6y ago
      Along these lines, here's a graph from the Federal Reserve's data service which plots median household income in contrast to GDP per household over time. https://fred.stlouisfed.org/graph/?g=bOfK https://fred.stlouisfed.org/graph/?g=bOfK Note the increasing spread between GDP/household and median income. That's the US's entire socioeconomic problem--from rising consumer debt levels, rising deaths of despair, and the rise of reactionary politics--shown in one chart. The median person is falling behind.
    • dcolkitt 6y ago
      Yeah, I actually agree. But the article is directly citing productivity, which by definition is the average economic output per hour worked. It's fine if you want to focus on median wages, but at the same time you need to compare against the median worker's economic output- not aggregate productivity. Otherwise you're just comparing apples to oranges.
  • downrightmike 6y ago
    A good chuck of that average is all the workers that are structurally unemployed and will only accelerate https://prospect.org/coronavirus/unsanitized-big-structural-unemployment/ https://prospect.org/coronavirus/unsanitized-big-structural-...
• comeonseriously 6y ago
  How much would a cheeseburger and a shake cost?
  • glitchc 6y ago
    Labour is anywhere from 25% to 34% of the food cost. So, anywhere from 1/3 to 1/4. It's not the lion's share as envisioned. https://totalfood.com/busting-restaurant-labor-cost-myth/ https://totalfood.com/busting-restaurant-labor-cost-myth/
    • pnw_hazor 6y ago
      There would be increased costs up the whole supply chain -- all passed up to restaurants.
    • alextheparrot 6y ago
      Isn't this only first-order labor? If the butcher needs to pay more for labor as well, you're still experiencing an increase in price that's labor-related, just hidden.
      • stormbrew 6y ago
        Once you get away from point of service, I think two things kick in that make it really unlikely that any stage before it would substantially increase the % that goes to labour costs: 1) economies of scale, factory farming employs very few people per pound of meat produced, having been subject to a lot of automation. Likewise, supply chain areas like storage and shipping move a lot of product per employee. 2) 'butchers' and similar jobs are relatively high skill and likely pay above minimum wage anyways. They also have better economies of scale. But at any rate, it's unlikely professional butchers are particularly involved in producing meat for fast food burgers and likely 1 or 2 low wage employees in a factory are doing all the manual labour involved in producing meat for hundreds of burgers. At any rate, I don't think the null hypothesis can really be that every level of the supply chain has the same level of labour costs.
        • 6y ago
• NovemberWhiskey 6y ago
  Is there any evidence that whole-workforce productivity applies equally to minimum wage jobs? If not, the claim seems unsustainable. Completely anecdotally, improvements in labor productivity due to automation (etc) are less likely to be impactful in jobs like waiting tables, delivering newspapers or flipping hamburgers. That anecdotal evidence is backed by research that shows that service sector productivity tends to lag other sectors significantly.
  • thunderbird120 6y ago
    It absolutely does not. Productivity gains over the past 50 years have been disproportionately concentrated in higher skilled positions (who earn salaries, not wages). If you feel like reading a 66 page extremely dry analysis of the relationship between compensation and productivity then here you go. https://www.nber.org/papers/w24165.pdf https://www.nber.org/papers/w24165.pdf
    • hinkley 6y ago
      A good follow-on question might be, do we expect more from low-wage employees now than we did then? When I was a teenager, food service proved to be a much more complicated job than I anticipated it to be. My first tech jobs paid better (even though an internship would have paid more), and felt simpler. If only because I'd spread out the effort of learning the skills over 8 years instead of 3 months.
      • falcolas 6y ago
        > do we expect more from low-wage employees now than we did then? Given an example of warehouse workers, and how companies are enacting more and more automated "anti-slacking" restrictions, yeah, I think we are.
        • hinkley 6y ago
          I had to pay my way through college, like a few of my friends, but I was struggling to juggle the two and trying to grow up at the same time. The on-campus tech job paid about 10% more, day 1, than any of my friends were making. So I used the higher pay and all the tricks my roommates taught be for frugal living and cut back my hours about 25%. I tried not to brag about it. I even felt a little guilty about how hard they were busting their asses, while I had a job where I could automate the tedious bits myself, and once I was not low man on the totempole I could delegate other parts. PSA: Be nice to your food service staff. And your janitors. Instead of thanking god it's them instead of you, be grateful someone else took that shit job so you don't have to cook and clean up after yourself.
• hinkley 6y ago
  Smart-but-lazy employees are interested in efficiency, and will work uncharacteristically hard in order to achieve it. Bosses and owners are only interested if there's something in it for them. As in does it increase our output without a proportional increase in costs. The bigger the gap the more social capital I will burn on making that change (including, but not limited to, fucking over my loyal employees by replacing half of them with a machine, or imports). We would have barely any of those productivity gains if they didn't also lower the cost of labor per item. So this number is a largely hypothetical. And perhaps a little unhealthy to dwell on. Conversely, though, if minimum wage had kept pace with inflation, we might see higher productivity today because process people would have had the ammunition to push for more and bigger improvements to production and overhead costs. New equipment would be rolled out sooner while prices were still high, making a steeper adoption curve and accelerating R&D expenditure. Still, it would be better if management did not try to keep 99% of every dollar saved. We could easily see a world where, instead of the $12/hr we should have simply to maintain the spirit of the minimum wage as it was conceived, everybody had Seattle's $15/hr minimum wage and big cities were trying to legislate for $20.
  • jankotek 6y ago
    > Smart-but-lazy employees are interested in efficiency, and will work uncharacteristically hard in order to achieve it. So if their job could be replaced with simple script....
    • iso1631 6y ago
      I have such a long list of things to do that I constantly try to replace them with a simple script. Why would I want to do a job that can be scripted?
      • PaulDavisThe1st 6y ago
        Because you enjoy it anyway? Because you believe it brings you closer to god? Because you feel it drives you towards a level of mastery you have not yet otherwise achieved? Because you feel bad for the script having to do nothing but meaningless work? There are all kinds of things in life that contemporary culture encourages us to stop doing and instead pay someone else to do on our behalf. While division of labor is almost certainly a net gain for human comfort and quality of life, that doesn't mean it's always the appropriate thing to do.
• sudosysgen 6y ago
  Could we have the title changed to reflect the title of the article? It's not Wages, it's specifically minimum wage.
• dehrmann 6y ago
  The title says the minimum wage would be $24 per hour.
• dehrmann 6y ago
  This is this same sort of group that would say "trickle down economics doesn't work." It's funny they'd expect productivity gains to trickle down to wages. Productivity is a ceiling on wages; once wages raise beyond a certain point, the company will take a loss, even after passing down the cost of labor to customers. Wages not keeping up with productivity gains isn't just on the low end. Seeing how well they tracked before 1970, there was an overall labor shortage. Around 1970, that changed, and there was more labor than the market needed, so wages were kept low enough that it's cheaper to pay someone minimum wage to take your order than to install an order kiosk.
  • vannevar 6y ago
    I think this a a demonstration that trickle-down economics doesn't work, because additional capital injected into a capitalist system tends to be captured by the capital at the top. Rationally, you would expect productivity gains to be captured disproportionately at the point where the gain occurs, on the assembly line, not back up through the hierarchy. But because of the rich-get-richer mathematics of capital, those gains tend to get sucked up to the wealthiest tier in the corporate structure.
    • SpicyLemonZest 6y ago
      But do productivity gains occur on the assembly line in the first place? I would guess that people today are about as good at working on an assembly line as they were 50 years ago, and we're more productive only because of capital improvements in machinery and infrastructure. That's not to say we shouldn't work to improve the average worker's wealth and quality of life, of course! I'm all in favor. But it's not a matter of gains getting "sucked up" from where they naturally would have gone; recent gains in manufacturing productivity just aren't at the individual level in the first place.
      • vannevar 6y ago
        That "machinery and infrastructure" is on the assembly line, not in the C-suite. It is literally there to make the assembly line workers more productive, so it takes fewer of them to do the same work. Now, you can say that the workers contributed nothing to the improvement, so why should they benefit? But the system is set up so they can't contribute improvement---they can't accumulate the capital it would take to upgrade the machinery and infrastructure because their wages are minimal, and there's no mechanism in place for them to capture the benefits if they could. Sure, there are token rewards for assembly line improvements, but those kinds of sporadic rewards are generally minuscule compared to the long-term benefit realized by the company.
• CyberRabbi 6y ago
  Maybe I’m wrong but what is the causal link between productivity and wages, especially minimum wage? I always thought that cost of living dictated wages and the so-called wage stagnation was due to relative lack of inflation for basic living expenses over the past 20 years. Also the past 20 years have seen a relative large influx of immigration compared to the previous 20 years. Increasing the competition between workers and would in turn lowering wages, at least according to supply/demand forces. This effect would be especially pronounced for minimum wage workers but with the expansion of the H1B program it will soon be observed for high income tech workers as well.
  • vsareto 6y ago
    I don't think there is. This is mostly political in that businesses ought to be keeping up wages because that's the right thing to do. If the supply of labor is such that they always have access to lower-paid workers though, there's no real obligation to increase pay. This is when minimum wage should come in, and this would be an argument for increasing minimum wage to that end, but businesses themselves can just ignore these kinds of arguments. Certain benevolent PR acts run contrary to this where they do increase wages because it's the right thing to do.
    • bleepblorp 6y ago
      There's a little more to preventing real wage erosion than it simply being the right thing to do from a humanitarian perspective. The interests of individual firms are not aligned with the interests of the broader economy. It's in the interest of every firm to pay its workers as little as possible, but it's in the interest of the broader economy that most people can afford to buy goods and services. Every employee's wage is ultimately some other firm's income; keeping the game going requires that enough people are paid enough money to be able to spend it on things other than absolute essentials. Even minimum wage workers have to pay for the basic necessities of life at prices that are largely set on the basis of what the median worker can afford. If minimum wages erode, minimum wage workers can't afford to live. This is a both a humanitarian concern and an economic problem because starving people don't make good employees, and people who don't have money can't buy goods and services from other firms. Every person who is pushed out of the economy in this way is an economic loss as they are no longer contributing to economic demand or producing goods/services with their own hands. In a society with a social safety net, under-paid workers are also a cost to government as they will not pay taxes and will be due social assistance payments/transfers to help cover their costs for food and shelter. Further, underpaid workers may also pose a crime problem (in part because starving people will steal food), which imposes direct costs on crime victims and costs to government for police, prosecution, and corrections. Underpaying workers benefits firms that do it, but the practice harms the overall economy and imposes externalities on others. Preventing this is why minimum wage laws exist and should keep up with the cost of living.
• css 6y ago
  Wages are a function of the scarcity of labor. Advances that increase the productivity of workers often also makes it easier to do those jobs, hence a larger labor supply that pushes the price of labor downwards.
  • PaulDavisThe1st 6y ago
    > Wages are a function of the scarcity of labor This assumes an unconstrained "market" for the exchange of labor and wages, just as the claim that "prices are a function of the scarcity of goods" assumes an unconstrained "market" for the exchanges of goods and money. But this is not the only model for economic exchanges of labor, goods and money. The Romans, for example, did not use market pricing, but instead were primarily a "cost-plus" economy (you paid the cost plus a known margin). I know it is extremely hard when most of us have been embedded in a neoliberal, market-centric culture for our entire lives to think this far outside the box, but there really is no law of nature that says that what I pay you to do work for me must depend on how many other people could do the work.
    • css 6y ago
      That other models of thought exist does not belie than an abundance of labor is the reason wages do not track productivity.
      • PaulDavisThe1st 6y ago
        There's no inherent reason why an abundance of labor would cause wages to not track productivity (either within a sector, or across an entire economy). In a culture that viewed the economy as a tool to enhance the living standards and quality for all of its members, there might be a very weak or even non-existent connection between labor availability and wages. Productivity gains could be viewed as way to either (a) reduce the amount of labor required (b) increase the amount of goods & services available, or both. Wages could remain fixed, or increase in such a scenario. This is nothing like the economic system in which we live, however; an economic system that is viewed as a playground in which which some will accumulate vast resources (and thus power) and others will not can never function the way I just described.
• michaelbuckbee 6y ago
  There's a lot of reasons for this but one of the largest is the near invisible (to me) structural shift from direct hire to contractors for jobs at the lower end of the wage/salary spectrum. There is a fantastic long form article that articulates this better than I can at: https://highline.huffingtonpost.com/articles/en/poor-millennials-print/ https://highline.huffingtonpost.com/articles/en/poor-millenn... The portion relevant to this discussion: "Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies. The effect of all this “domestic outsourcing”—and, let’s be honest, its actual purpose—is that workers get a lot less out of their jobs than they used to. One of Batt’s papers found that employees lose up to 40 percent of their salary when they’re “re-classified” as contractors. In 2013, the city of Memphis reportedly cut wages from $15 an hour to $10 after it fired its school bus drivers and forced them to reapply through a staffing agency. Some Walmart “lumpers,” the warehouse workers who carry boxes from trucks to shelves, have to show up every morning but only get paid if there’s enough work for them that day."
  • woo49 6y ago
    The biggest reason is that there has been almost no productivity gain for cleaning a hotel in the last 20-30 years. It takes same amount of time and effort. So why would the wages go up if productivity is not up? The productivity gains went to either things that got automated (e.g. speciality equipment operator - wages are higher but there are less jobs) or knowledge workers (software engineering salaries have skyrocketed).
    • dublinben 6y ago
• ikeboy 6y ago
  The data isn't sourced. Most claims of this nature ultimately source back to EPI's faked data that uses two different measures of inflation to falsely portray the productivity gap as far higher than it actually is. See https://www.reddit.com/r/badeconomics/comments/6rtoh4/productivity_pay_gap_in_epi_we_trust/ https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc... for details. I'm almost positive the same is going on here.
• qeternity 6y ago
  This is so horribly flawed. Productivity improvements have been concentrated at the high end, and those that have occurred in low skilled jobs have been almost entirely due to technology, not to labor efficiency. Technology gains have always disproportionately been captured by the providers of capital over the providers of labor (given they are the ones who invest in said technology).
  • ahoy 6y ago
    I don't think "this is fine because capitalism privileges capitalists by design" is the rebuttal you think it is.
    • idrios 6y ago
      I think he was just saying "this is what's expected" not "this is fine"
      • qeternity 6y ago
        Yes, bummed I had to scroll to end of comments for someone who gets it. Society can change the contract we all abide by. But as it stands right now, this is working as intended. And living standards of the bottom 10% versus 100 years ago are unimaginably better off, which is what we sought a century ago: absolute improvements. Now everybody is rich enough that we can afford to debate the relativism of the capitalist social contract...but that’s only thanks to the advancements brought about in the first place.
    • chordalkeyboard 6y ago
      It's not "by design" but rather an emergent property of an economy.
  • sixstrings 6y ago
    That view is even more flawed, since everyone who pays taxes is an investor of technology. Most breakthroughs in tech happen at universities. It’s not private equity that funds tech, but taxes. So the beneficiaries of tech breakthroughs should be... everyone.
• H8crilA 6y ago
  https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/ 1971, 1968, doesn't really matter. But - many such "negative" effects only really show up after 1981, that is after the peak of the interest rates. RIP Volcker, the last Fed president with vision. If you're into slightly crazy sounding theories about the cyclical nature of human progress I recommend: https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generatio.... Ray Dalio is also writing a lot on his own version of the "around 80 years cycle" theory.
  • jdmichal 6y ago
    I could have bought into this theory... Except that it has these four generations grouped and seems to just cherry-pick good and bad events for each to meet the narrative. I would have expected that every generation have certain crises and certain renaissances active at the same time, and that the pattern of these might loop over time.
  • decker 6y ago
    Shipping containers were standardized between 1968-1970. A device that enables efficient outsourcing to cheaper labor is a likely reason for labor wages stagnating while overall productivity rises. https://en.wikipedia.org/wiki/Intermodal_container#History https://en.wikipedia.org/wiki/Intermodal_container#History
    • lasagnaphil 6y ago
      Or if you reverse the cause and effect, the demand for global free trade (which is more about neoliberal politics than technology) might has created the need for standardized shipping containers.
• newcomputer 6y ago
  Have burger flippers at McDonalds really gotten 2x more productive since 1968? I highly doubt it. I would expect most low-skill labor has not gotten any more productive. Also, commondreams.org is a known socialist website. Their claims on economic productivity should be taken with an enormous grain of salt.
• olvar_ 6y ago
  I feel this discussion always misses an important point. The value of something has nothing to do with its costs or profits. The value of things (labor included) is subjective and is normally related to its scarcity. In the period analyzed the workforce basically doubled because the inclusion of woman to the workforce, therefore it had a huge pressure to keep it low.
  • dredmorbius 6y ago
    If the productivity of less-skilled workers has not kept pace with average productivity, this was by design. It was not the fault of these workers; it was the fault of those who designed policies that had the effect of devaluing their skills. From Baker's article.
    • olvar_ 6y ago
      my point is that the value of the work is not directly related with its productivity but with its availability, which doubled during the last few decades.
• rayiner 6y ago
  These sorts of comparisons are extremely difficult to make. They depend very strongly on what exactly you’re looking at, how you’re measuring inflation, etc. You can easily make charts that show total worker compensation is closely tracking productivity growth: https://www.americanactionforum.org/research/does-compensation-lag-behind-productivity/ https://www.americanactionforum.org/research/does-compensati... (Unlike Common Dreams, this article shows their work and discloses their exact methodology and data sources.) There’s a couple of big picture issues to consider: 1) Why focus on just wages, rather than just benefits? If productivity doubles, but the cost of providing healthcare triples, should employers cover the increased healthcare costs and also double wages? It’s not Microsoft’s fault that it costs $5,000 to get an MRI. From the perspective of how much is transferred from the employer to the employee, a dollar spent on wages isn’t any different than a dollar spent on healthcare. Failing to distinguish the two things obscured the real problems. It makes you think something is a structural economic problem when in reality it’s cost disease in a particular industry. Wages aren’t keeping up with the cost of housing in New York and San Francisco. But nationwide, the median mortgage payment as a percentage of the median income has scarcely changed since the 1970s. Are wages the problem or are local laws around housing the problem? 2) There is kind of a metaphysical question about who should get the benefits of investment in technology. If you replace 100 workers with technology + very expensive capital equipment, productivity will increase by a factor of 10. (That’s how labor productivity is measured.) Does that mean wages should go up by a factor of 10?
  • ptmcc 6y ago
    Many (most) minimum wage jobs do not provide any meaningful benefits, so it's tangential to the minimum wage in most cases. There's no doubt some fuzzy math involved to extrapolate inflation over the course of 50+ years, but I don't think that invalidates the fact that minimum wage has objectively not kept up with inflation even remotely. The federal minimum wage has been stuck at $7.25 since 2009, and a handful of states are only just now breaching $15/hr. At this rate by the time a federal increase happens we'll already be another 20 years behind. Worse yet is that labor data shows that more and more adults are working in minimum wage jobs, so the talking point of "it's just summer jobs for teenagers" and "it's entry level work to move on from" is very out of touch with reality these days. There are millions of people trying to survive on these wage levels and without benefits and it is not working.
• mercutio2 6y ago
  Can the title be updated, dang, since it dropped the word "minimum" which is very relevant, and is in the actual title?
• exabrial 6y ago
  Those two things are disconnected. Wages are dictated by supply and demand, not efficiency. An oversimplified example [with lots of nuances I'm sure people will comment on instead of the original point]: The supply of heart surgeons is small, therefore they can command a larger wage and have their choice of jobs. The supply of burger-flippers is much larger and employers can usually find someone willing to do the labor for cheaper than another person. The point being, the best way to increase your wage is to switch jobs to something where the supply of applicants is smaller and the demand is strong.
  • pydry 6y ago
    Supply and demand isn't purely about total numbers. it's also about the power to walk away. This is why employer lobbies are very keen on reducing public benefits (means you are more reliant on having a job) and reducing public sector wages (reduces competition in the labor market).
  • shadowgovt 6y ago
    Essentially. Which is why unionization is such an important process---it binds the supply-demand curve so that employers are forced to allocate the resources more equitably. Supply suddenly dries up if nobody's willing to work for you because you won't pay a living wage (let alone a decent wage).
    • commandlinefan 6y ago
      Well, any way you slice it - through unionization or through legislation - a $24/hour minimum wage is just going to mean massive unemployment, not 3x more money in everybody's paycheck.
      • shadowgovt 6y ago
        I think it depends. If the CEO can make more money selling 200 million whatever than 100 million whatever, they're still going to hire enough to make 200 million, even if they're taking home less than they would in the hypothetical world where they were making 200 million whatever and their bottom-tier employees were on government subsidized housing. But in the longer term, I think you raise a great point---it's a huge incentive for the CEO to figure out how to automate making 200 million whatever so that they can pay $0. Which is good for the economy in general (automation means more free human time), but societies have to adapt to a lack of labor-intensive jobs to go around. They already need to be adapting to that, because we're already in the middle of the automation revolution.
• carry_bit 6y ago
  If the late 1965's minimum wage of $1.25 was paid out in 1964 quarters, then it would be worth $22 today based on the melt value of those quarters.
• norseboar 6y ago
  I think there's a bad assumption in here, which is that pay should keep pace with productivity gains in the first place. I'd argue the whole point of productivity gains is that they do outpace pay. The idea is the same work generates more value. Some of that extra value can be passed back to the employee, but if all of it is passed back to the employee, then the goods produced don't actually get cheaper. If nothing gets cheaper, there's no incentive for a business to invest in tech that makes employees more productive. The data in the piece has a lot of problems with it too, but I think the core assumption is fundamentally off-base.
  • germinalphrase 6y ago
    Presumably, it is possible for a product to also get better.
    • bhupy 6y ago
      Yes, and product improvement is largely attributable to R&D, rather than assembly-line-level production. Those gains disproportionately flow to high skill white collar workers.
  • Sohcahtoa82 6y ago
    This flies in the face of so many HN readers that claim that salaries are based on the value created by the employee.
    • phamilton 6y ago
      Value created is the ceiling, the floor is min(cost of employee's alternative, cost of employer's alternative).
    • jedberg 6y ago
      > so many HN readers that claim that salaries are based on the value created by the employee. That's because those people are sadly wrong. Salaries have never been based on value created. They have always been based on the minimum a company could pay for the talent they desire.
• ivojp 6y ago
  I'm going to pose this question more in the context of their analysis and without consideration to anything else. There have been a myriad of studies which try to link minimum wage to worker productivity and the default assumption is always that the worker should bear the fruit of all productivity gains. Why is this the case? Often, it is not the worker who was responsible for the capital investments that increased his/her productivity. A couple crude examples to illustrate my opposition to this notion: - My employer pays me to create web applications. We agreed on a rate (could be 10 money units per hour OR 100 money units per application). My performance is assessed throughout my employment to see if my productivity is satisfactory for my rate. Maybe my employer refuses to invest in any tooling for me and I have to use vim to write all my code. If they then invest in an IntelliJ license for me (thanks employer!) and I am more productive, should I be paid more? Debatably, my job didn't get easier/harder. Now if I invest in the tooling myself, and am paid per application, I should get paid more; this often isn't the case. - In 1956 if my laundromat employer paid me to wash clothes, I was probably doing it by hand and maybe getting 3-5 pounds of clothes done per hour. My wage (likely minimum) would be $1/hr. In 2020, we have laundry machines that can do 20 pounds of clothes every 30 minutes. $1/hr (of 1956 money) would be roughly $10/hr in 2020. No one would suggest that we pay someone upwards of $100/hr to run a laundry machine (unless the worker was paid per pound of laundry done and personally made the investment in the machine). It likely wouldn't even be a job if the minimum wage was $24/hr today. It seems like these analysis of what the minimum wage should be should take into account that technology and capital investments have made a lot of jobs either lower skilled or less valuable. I'm not sure how to quantify the lack of job creation in sectors that would warrant $24/hr. Another option would be to pay workers directly for their output but this would have other consequences. Starbucks invests in making baristas efficient so they can handle the morning rush but pays them just the same for the afternoon lull. Caveat that I am pretty ignorant to this so I may be wrong but I do not believe a low floor is what is driving wages down.
  • jbob2000 6y ago
    Your assumption that wage should align to productivity is false. It’s pretty hard to justify some athlete and artist wages this way, you have to really stretch what it means to be “productive” Wage aligns with replaceability - how easy is it to replace you? Professional athletes are hard to replace, doctors less so, cashiers even less. Wages are driving down because, unless you get lucky, there’s not much to do. Big companies chop up specialized roles into a hundred “dumb” ones so people can be easily replaced.
• deleted 6y ago
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• tasty_freeze 6y ago
  Many comments are focused on "But why should minimum wage jobs pay scale rise with productivity? The jobs haven't gotten any more demanding." But isn't this logic applied to average CEO pay, which has gone up many times faster than productivity? CEOs work isn't any more demanding than it used to be, either.
  • charlesu 6y ago
    Wages have little to do with productivity and everything to do with bargaining power. CEOs are paid well because we expect them to be and they can demand it, irrespective of their actual contributions to the success of the company. But for some reason only the worker must justify his pay.
    • arcticbull 6y ago
      CEOs are broadly speaking benchmarked on return on equity for investors. They receive high salaries in anticipation of their doing a good job, and if they don't they're removed. Further, a disproportionate amount of their compensation is equity based to align their incentives. I'm not saying it's right or wrong, just that they are expected to justify their pay too.
      • FartyMcFarter 6y ago
        > They receive high salaries in anticipation of their doing a good job, and if they don't they're removed. When they get removed, they often receive golden parachutes even if they seriously effed up the company. This can't be explained by return on equity. I guess it can be explained by bargaining power or cronyism, or perhaps other things I'm not thinking of.
        • jmalicki 6y ago
          I won't claim the system isn't corrupt at all... but if you were taking a job where the expectations were ridiculously high and there was a pretty chance you'd get fired possibly for things outside of your control, and in a way that would end your career because your failure would be so public if you screwed up, wouldn't you demand the golden parachute as insurance? True often the golden parachutes are way too high compared to realistic performance bonuses. But if you think of that as insurance - the board and the CEO both know this is risky, so they negotiate a fixed golden parachute just in case it doesn't work out - otherwise why would someone who wouldn't get fired take the job, since they wouldn't want to risk the downside?
• credit_guy 6y ago
  In a very simplistic way, shouldn't the average wage keep pace with the average productivity gains and the minimum wage keep pace with the minimum productivity gains? I can see the average farmer making huge productivity strides, since they use much more complex combines, and irrigation systems and such, but did the productivity of a burger flipper go up similarly?
  • chrisseaton 6y ago
    > In a very simplistic way, shouldn't the average wage keep pace with the average productivity gains and the minimum wage keep pace with the minimum productivity gains? Wages are set by the market, not by productivity.
    • credit_guy 6y ago
      That's for sure. This is an article that makes an appeal to fairness though. The underlying message is "the rich are getting richer, and the poor are getting poorer". So, if you want to follow the argument of fairness, should the wage of the minimum wage workers grow at the same rate as the average productivity for the nation, or as the rate of the productivity gains for the minimum wage workers? If it's the latter, then it's quite likely that the productivity of the lower end jobs did not see a whole lot of gains.
      • chrisseaton 6y ago
        > This is an article that makes an appeal to fairness though. Right... but there's absolutely no mechanism to achieve anything apart from through the market (for the private sector.) You can argue all you want, but nothing will happen. Nobody (to an approximation) is going to voluntarily pay more for an abstract concept of fairness.
  • bleepblorp 6y ago
    Productivity growth at the bottom end is very low, but wages at the bottom end still need to keep up with the cost of living or people who are in minimum wage jobs will no longer earn enough to survive.
• obelos 6y ago
  Direct result of the “Billionaire Vacuum Cleaner” sucking all the wealth out of our economies.
• hownottowrite 6y ago
  And yet not word on the transfer of trillions of dollars to emerging economies that eliminated wage gains for average Americans while inflating corporate profits and dividends? The gains in “productivity” are a direct result in leveraging a global labor pool.
• missedthecue 6y ago
  And if they had kept up since 1949, minimum wage would be $4.22 an hour. Two can play the game of cherrypicking troughs and peaks. Additionally, average productivity is not minimum wage productivity. They are separate statistics, and the bulk of the efficiency gains have not been made at the burger flipper level, but at higher levels, where there have been huge gains in pay. The productivity gains in engineering and manufacturing and energy production, etc... have dragged up the average. Someone stocking shelves in 2020 is about productive as someone stocking shelves in 1968. https://www.cnn.com/interactive/2019/business/us-minimum-wage-by-year/index.html https://www.cnn.com/interactive/2019/business/us-minimum-wag...
  • pmiller2 6y ago
    It's not cherry picking when wages have been stagnant for the last 40+ years.
    • missedthecue 6y ago
      Wages have not stagnated. Disposable income adjusted for inflation is up enormously since 1968, while at the same time, the average number of working hours per year is at an all time low. This is according to data collected by the federal reserve. https://fred.stlouisfed.org/graph/fredgraph.png?g=rKwm https://fred.stlouisfed.org/graph/fredgraph.png?g=rKwm
      • cryptoz 6y ago
        Wages have stagnated. Your graphs aren't really relevant to this question; so what if per capita disposable income has increased? That doesn't say anything at all about wages of people in America. Here is a more complete picture, with words and discussion and multiple graphs too: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
        • missedthecue 6y ago
• tboyd47 6y ago
  > In such a world, a full-time minimum wage worker would be earning $48,000 a year in the United States. I find it interesting to compare wages in terms of their value in gold. Gold has been used as money for millennia, so it lets us go back even further than we typically do with inflation data. Everyone always references Henry Ford's $5 a day wage in these discussions. $5 during that time was worth 1/4 oz of gold, so at 260 days a year, they were pulling in the US dollar value of 65 ounces of gold a year. You would need over $120,000 today to buy 65 ounces of gold. Sure beats the heck out of $48,000. If you buy the notion that wages should track productivity, it makes you wonder what they were doing in 1913 that made everybody so darn productive.
  • murderfs 6y ago
    Why not try this with other commodities? Silver was used as currency for longer than gold, and was still legal tender in the time of Henry Ford. Let's see what happens if you do the same analysis with silver instead. Silver was 1/20 the price of gold back then and 1/80 of the price of gold today, so your $120,000 turns into $30,000. Whoops. Aluminum? $433. It turns out that comparing wages over time with an arbitrary natural resource is a terrible idea.
    • tboyd47 6y ago
      Gold is obviously not just an "arbitrary natural resource." There's a reason why we say "gold standard" and not "silver standard," "aluminum standard," or even "dollar standard." Nevertheless, it was only a fun thought experiment (which is what most economic arguments boil down to).
      • murderfs 6y ago
        The "gold standard" just happened to be the last one to be abolished: it was only really predominant around the 1800s. Silver was by far the most prevalent metal used in currency for millenia, to the point where almost every single modern currency is named after a silver coin.
• tehjoker 6y ago
  Wage stagnation occurred right as the rate of profit fell for US companies so they started becoming more aggressive in reducing labor costs. They only would be restrained by worker disobedience and state sanction. They managed to cripple unions and pass free trade agreements. This is the result.
• blunte 6y ago
  I recently had a crazy (is it?) thought: what if hourly wages were the same for all jobs. Every human working one hour would be paid the same. The dishwasher in the restaurant would be paid the same as I would for writing software (they would earn more, I would probably earn less). I like money, but I would like every person giving an hour of their life to be compensated enough to get by measurably above poverty.
  • creata 6y ago
    But then why would anyone do a hard or dangerous job? (That's not to suggest that software engineering is hard or dangerous.)
    • blunte 6y ago
      People do all kinds of things we might think is nuts, for reasons often unknown to anyone. But true, some jobs are so crazy that nobody in their right mind would do them. But hey, there still may be people in a different mind who would. Paul Graham once explained the power of prestige - http://www.paulgraham.com/love.html http://www.paulgraham.com/love.html . I daresay some people would do hard or dangerous jobs primarily because of the prestige of being known to do them. And as for "dirty jobs", equal wages doesn't mean that everyone has a choice in which jobs they are capable of doing (or which jobs are locally accessible).
• defertoreptar 6y ago
  Maybe this has to do with women entering the workforce, increasing supply and putting downward pressure on prices. Look at real median family income: 1968, 55745 2019, 86011 https://fred.stlouisfed.org/series/MEFAINUSA672N https://fred.stlouisfed.org/series/MEFAINUSA672N Edit: Real median income has also increased: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N
• lazyjones 6y ago
  Productivity isn't measuring worker's "work" anymore. The share of purely financial sector "productivity" has greatly increased.
• jgilias 6y ago
  The graph in the article really looks like as if value generation simply got decoupled from minimum age earners' labour at some point. Intuitively this makes sense. Sure, the invention of steam engine driven factories or something like the assembly line did drive productivity. However, you still needed human labour to actually produce the widgets. Now total productivity growth is largely driven by highly paid specialists producing textual descriptions of widgets and setting up automated systems that keep churning out the widgets themselves. Figuratively speaking, you don't actually need to pay anyone to push the button to make a widget every time you need one. So you don't.
• punnerud 6y ago
  With higher minimum wages the incentive is higher for automation. Pushing companies to produce at “home” could then raise the prices in combination with giving more to the higher earners. How can we incentivize taking jobs back and increasing wage for the low earners? Stop to automate..?
• deleted 6y ago
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• randyrand 6y ago
  Productivity goes into reducing prices, not increasing pay. When a whole market can make 10x more solar panels for the same cost, solar prices go down by you guessed it - about 90%. You don't suddenly have 10x more profit to pay your employees. Maybe a monopoly would, but not a competitive market like most businesses are in. These people have absolutely no clue what they are talking about.
  • refurb 6y ago
    This is an interesting comment and your example is a good one, however, the productivity gains are measured in dollars, so I would assume they account for lower prices already. Unless there is some independent measure of the value of product that doesn't reflect lower prices.
• deleted 6y ago
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• CryptoPunk 6y ago
  This is an inapt comparison. The seeming divergence between productivity and wages is mostly a result of the price index used to track the price inflation of productivity diverging from the price index used to track the price of inflation of wages: https://www.brookings.edu/opinions/sources-of-real-wage-stagnation/ https://www.brookings.edu/opinions/sources-of-real-wage-stag...
• marketingPro 6y ago
  I think every discussion about worker pay should include the Federal Reserve/fractional reserve banking/fiat currency. CPI is a terrible indicator that doesn't include productivity gains. Inflation numbers from the government are notoriously unreliable. Is the problem corporations? Or fiat currency?
  • dragonwriter 6y ago
    > I think every discussion about worker pay should include the Federal Reserve/fractional reserve banking/fiat currency. Why? > CPI is a terrible indicator that doesn't include productivity gains. It's a price measure, why would it “include productivity gains”. There's certainly a use for a productivity index, but it has very little to do with the basic purpose of CPI. > Is the problem corporations, No. > Or fiat currency? Also, and even moreso, no. It's largely fiscal policy doing exactly what it was chosen for the purpose of doing.
• Wolfenstein98k 6y ago
  Why would pay keep up with productivity when the supply of labour has grown substantially more than the demand for labour?
• ChrisLomont 6y ago
  There’s no reason a minimum wage should track mean productivity, unless you want to price significant portions of workers out of jobs.
• Jedd 6y ago
  As an Australian looking in, much that manifests in the USA is simply inexplicable. It feels like the sensation is shared in most other western democracies. (Actually, it's probably even worse for people in Europe, as in Australia we seem to have a stronger pull recently towards 'the American way of doing things', though perhaps I'm just more sensitive to it the last several years.) I suspect the problem with explaining the lack of social justice is in part because, if you're living within that system, and have had no experience living outside it, then alternatives just sound infeasible and fanciful. It's a challenge to just find a bit of ground to start any such conversation. An excellent article by David Bentley Hart published earlier this year included this quote, which did the social media rounds at the time, and conveys the exasperation any informed onlooker experiences. "Americans are, of course, the most thoroughly and passively indoctrinated people on earth. They know next to nothing as a rule about their own history, or the histories of other nations, or the histories of the various social movements that have risen and fallen in the past, and they certainly know little or nothing of the complexities and contradictions comprised within words like “socialism” and “capitalism.” Chiefly, what they have been trained not to know or even suspect is that, in many ways, they enjoy far fewer freedoms, and suffer under a more intrusive centralized state, than do the citizens of countries with more vigorous social-democratic institutions. This is at once the most comic and most tragic aspect of the excitable alarm that talk of social democracy or democratic socialism can elicit on these shores. An enormous number of Americans have been persuaded to believe that they are freer in the abstract than, say, Germans or Danes precisely because they possess far fewer freedoms in the concrete. They are far more vulnerable to medical and financial crisis, far more likely to receive inadequate health coverage, far more prone to irreparable insolvency, far more unprotected against predatory creditors, far more subject to income inequality, and so forth, while effectively paying more in tax (when one figures in federal, state, local, and sales taxes, and then compounds those by all the expenditures that in this country, as almost nowhere else, their taxes do not cover). One might think that a people who once rebelled against the mightiest empire on earth on the principle of no taxation without representation would not meekly accept taxation without adequate government services. " From: https://www.commonwealmagazine.org/three-cheers-socialism https://www.commonwealmagazine.org/three-cheers-socialism
• deleted 6y ago
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• DeonPenny 6y ago
  Why would pay keep up with productivity gains when the productivity of the labor purchased by a wage hasnt kept up with productivity gains. Businesses run on actual formulas. So if a mcdonald resturant doesn't make the the 100x% growth because the wages didn't create 100x% growth in each store revenue and wages went up 100x% how does it make sense to run most any small business in america
• sytelus 6y ago
  Pay depends on demand and supply, not productivity gains. All productivity gains are transferred to people with capital in capitalism. This is the one reason why rich gets richer.
• DubiousPusher 6y ago
  So where has the surplus gone? Does the disproportionate growth jn wealth at the top roughly equal this surplus?
• tobyhinloopen 6y ago
  Yes, and a big mac also would be $24
• username90 6y ago
  Offshoring low skill labor will increase gdp per capita without increasing low skill productivity in the home country. How much of the "productivity gains" in USA comes from that? It isn't fair that the money we save by paying a Chinese laborer less should be used to make the wealth gap between Chinese labor and American labor even wider. If anything you should argue that companies should pay their offshore labor more before they pay their American labor more. If there is any money left after we increased all offshore labor to American standards we can pay them more, but not before that. That is what would happen if we apply fair labor rules. The current system is what we get if we use market rates.
• username90 6y ago
  Productivity can be used to increase future productivity or to increase current consumption. By giving it to capital they use it to build factories or software to increase future productivity. By giving it to workers we let them consume more and live a better life. Now, the thing is there is a lot of factories and stuff that needs to be created in order for the entire world to get productive. So until the entire world is productive we need to spend a lot of our current productivity on it. Btw, the 1% consumes more per capita than the rest but they don't really consume a big fraction of the economy overall, when you give them money they mostly invest it. So the ultimate result is that in times where there is need to build a lot of factories or equivalent capital will get a bigger share of the pie, and as things stabilize workers will get a bigger share of the pie. Currently thanks to globalism there is need for immense capital investments to increase productivity so of course capital needs to take huge share of our productivity. And personally I'd rather see that another factory gets built in China providing them better productivity and living standard than seeing American workers get another car. This isn't rocket science.
• ikerdanzel 6y ago
  Labor is just another commodity. Its pricing (pay) is govern by law of demand and supply. There is no minimum wage. If there is, market will adjust to adapt to it. This is why EU has predominantly high unemployment vs say China or other parts of the world that don't practice minimum wage. You can even observe this is happening in states that practice and don't. Good luck with Cali and NYC. You can see a lot of business exodus there. Market is adjusting. Focus on increasing demand for labor (more jobs), their wage will automatically go up. Retrain the workers to fit into another market, hence reducing the supply of their existing market, those that remain, wage will go up. Build the wall with strong border reducing illegals, wage will go up. Invoke forced minimum wage, market will readjust reducing demand and increasing unemployment to justify wage to go up. All the pro minimum wage studies are flawed. You just have to check how Singapore did it. No minimum wage there.
• mac01021 6y ago
  Like most articles about this topic, this one does not take note of the fact that average fringe benefits have grown during the same time period. I don't know what fraction of the relative decline in real wages that makes up, but it is definitely significant.
• cwhiz 6y ago
  National minimum wage is stupid. Even state minimum wage is a bit silly. There is way too much variance from one location to another. MIT created a “living wage” calculator that tries to estimate what the minimum livable wage should be in a given city.[0] Some extreme variance from state to state and city to city. There is no reason to do this federally. States and cities should handle minimum wage. [0]: https://livingwage.mit.edu/ https://livingwage.mit.edu/
  • reducesuffering 6y ago
    Why shouldn't the federal government implement the min. wage as min(cities & states) so that any bad actors of states & cities that don't follow the "living wage" calculator are accounted for? Isn't this what the federal government currently tries to do?
    • cwhiz 6y ago
      It’s not the business of the federal government to dictate to each state what their minimum wage should be. States are free to make their own decisions on minimum wage. Citizens within those states can vote to change it, and if they don’t like it, they can leave to another state.
      • reducesuffering 6y ago
        Do you agree with free markets and globalization dictating unskilled labor's wages in the same way? Your suggestion is a miniature version of that. If one state sets no min. wage, most factories will be based in this state, and much of unskilled labor will be forced to move to this state as the other states won't be competitive because of the higher cost of labor. Isn't this similar to the US' predicament with regards to global labor (like Chinese and Indian factories) being much cheaper, thus many US made products aren't competitive on price?
• dennisgorelik 6y ago
  Minimum wage is a threshold for _not_ paying salary (if a candidate is not skillful enough to earn at least a minimum wage -- that worker cannot get a job). Minimum wage is bad for workers. Increasing minimum wage hurts low-skilled workers even more. Which is a cruel thing to do, especially for a programmer who earns significantly more and is not affected by minimum wage.