13 ms·

I don't buy this explanation. Very few employees are paid in any financially complex way. Wages dropping overall must have a different explanation, which I su

I don't buy this explanation. Very few employees are paid in any financially complex way. Wages dropping overall must have a different explanation, which I suspect is an increase in labor supply due to women entering the labor force and illegal immigration combined with a decrease in demand due to automation.

jaypeg25 6y ago
You can't be serious. Are you insinuating it has nothing to do with executive wages ballooning (CEO compensation growing nearly 1,000% since the 1970's) and is instead because women are working? https://www.epi.org/publication/ceo-compensation-2018/ https://www.epi.org/publication/ceo-compensation-2018/
- frockington1 6y ago
  I think you are missing the scale and reaching for a political point where one does not need to be made. There are 500 CEOs in the SP500 and 164 million women in the US. The supply increase of 164 million women will have a far greater impact on the common persons salary than 500 CEOs getting paid more
  - jayd16 6y ago
    Isn't that still like $7b[1] at the average 15m? Compare that to $45k[2] * for the 76k[3] women in the workforce, that's only ~$3.5b. Its US women vs the global S&P list, but it is interesting to compare, now that you mention it. [1]https://aflcio.org/paywatch https://aflcio.org/paywatch [2]https://www.catalyst.org/research/womens-earnings-the-pay-gap/#:~:text=A%20Gender%20Wage%20Gap%20Exists,time%2C%20year%2Dround%20workers.&text=This%20is%20compared%20to%2060.2%25%20in%201980.&text=Women%20earned%20a%20median%20of,2018%2C%20and%20men%20earned%20%2455%2C291 https://www.catalyst.org/research/womens-earnings-the-pay-ga.... [3]https://www.catalyst.org/research/women-in-the-workforce-united-states/#:~:text=Covid%2D19%20Is%20Disrupting%20Women's%20Labor%20Force%20Participation&text=In%202019%2C%20there%20were%2076%2C852%2C000,of%20the%20total%20labor%20force.&text=57.4%25%20of%20women%20participated%20in,compared%20to%2069.2%25%20of%20men https://www.catalyst.org/research/women-in-the-workforce-uni....
    - s1artibartfast 6y ago
      your math is of by a factor of 1000X. Per your link, there are 76 million women in the workforce, not 76k. That is $7 billion to CEOs vs $3.5 Trillion for women.
      - jayd16 6y ago
        derp. Of course.
    - JohnPrine 6y ago
      *76m women in the workforce
- nullc 6y ago
  If you divide the CEO compensation increase by the number of employees in the company you'll see that it itself is not particularly relevant in employee wages. For example Tim Cook earns 133M/yr which is $976 per employee. ... and this probably massively overstates the figure due to contractors. Or Sundar Pichai with $86M/yr which is $676 per employee (again... not counting contractors). Obviously it's more if you include more executives, but the number of top executive companies is basically a constant and at large companies it still ends up being not very large per employee. This isn't to say that it isn't a concern but I don't see how to justify the belief that the executive compensation at large companies is a major factor in the overall wage market.
  - deleted 6y ago
    [deleted]
TuringNYC 6y ago
>> I don't buy this explanation. Very few employees are paid in any financially complex way. It depends on the class of workers. I'd agree with you w/r/t most wage earners being paid in transparent manner. But I think the GP comment was referring to technology workers (given the context of HN.) In the case of tech workers, many are paid in very complex ways. If you have illiquid stock options in a private company, and especially if you have taken a below-market salary as many startup employees have, your compensation is about as complex as a CDO. Just like a CDO there are multiple tiers above you that need to be paid out before you ever get paid. Unlike a CDO, where you can actually pull up the details on the tiers above you (tranches), at startups as employees, you dont get to see the cap table, so the whole maze is invisible too! Worse, unlike a CDO where you can sell at any time, here you have to exercise and hold stock for some far-away liquidity event that usually doesnt happen. So you have an invisible maze, and then a pot of gold at the end, perhaps. Or not.
- meesles 6y ago
  > if you have taken a below-market salary as many startup employees have I think this is part of the startup mythos. At the three startups I've worked at (~10 people), none of us had to sacrifice competitive salaries for stock options. The options were on top to incentivize staying at the company longer. I wonder how common it actually is for people to take significant paycuts in 2020 for a startup opportunity (founders aside)
  - nrmitchi 6y ago
    This is definitely going to be a debate depending on what market you're looking at. But I don't think it's up for debate that if someone is leaving a FAANG position to join a start up, or debating between the two options, that they are taking a non-trivial pay-cut for the start-up.
    - fnbr 6y ago
      Yeah, absolutely. My FAANG offers were ~2x what my startup offers were.
  - 6y ago
lumost 6y ago
I think you overestimate how much negotiating power an individual worker has when deciding the price for their labor. Anecdotally, in the Software field there is a lot of "price anchoring" where a large employer decides that a software engineer makes ~125k, and both smaller/peer employers decide that a software engineer makes 125k +/- 10%. From past experience the base "going rate" in a given market doesn't seem to change all that much unless a large employer decides to change the going rate because a higher or lower price point better suits their business - other companies will set their salaries to the baseline. Big Tech has recently been dragging wages up across the board by both hiring in volume, and paying more than everyone else. I'd be curious if anyone has a formal study on price anchoring in wage negotiations.
- bob33212 6y ago
  I don't think they just pull 125k out of the air. I think that at 90k you are not going to get many great candidates. And at 250k you risk spending a LOT more money and still not being able to successfully recruit people that are much better than the 125k people. It is not like all your 125k people are going to quit when you double salaries to make way for all the FAANG people who are looking to switch jobs for the same salary.
  - lumost 6y ago
    I think that hints to how these pay bands come to be within a company though, it's not a transparent and liquid market with a bid/ask spread and a clearing price. In practice the company decides a band that they think gets people in the door. HR gets involved, and management settles for a 0-2% inflationary increase YoY rather than the marginal rate. If you combine this with one employer bordering on a monopsony for buying a particular category of labor - then pay won't move in proportion to productivity.
- VRay 6y ago
  Coding is basically the one tradeskill where the free market is still working reasonably well. Apple or Google can turn a $500k total compensation package for an employee into $2M/year or more in revenue, so they'll keep snapping up people and dragging wages up. Facebook doesn't even bring people on to a specific team, they know that coders are so valuable that they'll hire as many as they can and just find things for them to do. Even at the low end, six months of tooling work from a $100k coder can often put a handful of $50k/year white collar employees permanently out of work (or make them twice as productive as before). If one company doesn't realize that, another eventually will. It's not too tough to pull in ~50-100k/year running a SaaS business or freelancing Things in the USA are really broken in the retail sector. Companies pay the absolute bare minimum that will keep them in business, and make up for a lot of the terrible morale issues that come along with that using Orwellian management systems
cgarvis 6y ago
The population has grown from 205 million in 1970 to 330 million today. If you think 50% of the people join the workforce that is an increase of 65 million more people working.
- XorNot 6y ago
  Demand went up with population. This is an absurd argument: demand as kept up with supply (otherwise productivity basically couldn't go up) but mysteriously compensation has not.
  - 411111111111111 6y ago
    > but mysteriously compensation has not. I think the damning thing is that it has. Just not for the workers. wages for high level executives for example not only kept up, it's gone so high that they can't even invest their money anymore. they're complaining about the lack of got investment opportunities instead, sitting on their billions which destroys their society even more by keeping the money from circulation.
Bresenham 6y ago
> an increase in labor supply due to women entering the labor force In the USA, there has been a (relative) decrease in labor supply due to women leaving the work force. Women's participation in the labor force by percentage has decreased over the past twenty years.
pjdemers 6y ago
>> an increase in labor supply due to women entering the labor force If you were born before between 1935 and 1955, this might have affected your career progression. Maybe. Because the more workers meant a bigger economy and therefore more jobs overall. If you were born before 1925 or after 1975, it had zero effect.
manuelabeledo 6y ago
> I don't buy this explanation. Very few employees are paid in any financially complex way. I don't think the point has anything to do with the complexity of the wages, but how workers are generally hired and paid, and how work is now structured, compared to the 70s, e.g. nowadays there are more contractors than ever, taking a good chunk of the wages as they act as intermediaries between customers and the workers who, otherwise, would have to be hired directly by the customers themselves. I'm curious though about why would you think that illegal immigration is driving wages down. Undocumented immigrants make barely for 3% of the total US population [1], and that does not account for those who cannot work (elderly, children, disabled, etc.) Same goes for women, as the general issue is that household income is in decline, in relative terms to the economy [2]. Automation should also be making consumer products cheaper and more available, but prices are not going down at the same speed as wages need to go up. [1] https://www.brookings.edu/policy2020/votervital/how-many-undocumented-immigrants-are-in-the-united-states-and-who-are-they/ https://www.brookings.edu/policy2020/votervital/how-many-und... [2] https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Employment%20and%20Growth/Poorer%20than%20their%20parents%20A%20new%20perspective%20on%20income%20inequality/MGI-Poorer-than-their-parents-Flat-or-falling-incomes-in-advanced-economies-Executive-summary.pdf https://www.mckinsey.com/~/media/McKinsey/Featured%20Insight...
zpeti 6y ago
It’s funny how economists never talk about this (women in the workforce). Its adding 50% more people to the workforce. Yes, it’s less because women might work less or part time, buts it’s an insanely high number in terms of market effects. I wouldn’t be surprised if one of the reasons you simply can’t survive on one person per household working, as in the 60s and 70s, is simply that two people are willing to work now and spend all their free cash on mortgage payments. No one talks about this. I’d love to hear the debates. I’d love to be proved wrong.
- VRay 6y ago
  Man, I'd like to see some more info on the whole housing industry in general It seems to be completely FUBAR to me. In Japan, housing ISN'T a glamorous investment, and I think that helps the house pricing situation a lot.. You can get a nice apartment in the fanciest part of downtown Tokyo for cheaper than a dangerous hole in the wall in San Jose
  - JMTQp8lwXL 6y ago
    It's cultural. Americans generally have lower savings rate (when compared to other nations) and a home is one place where 'investing' and spending can overlap in a fairly bespoke way compared to anything else you spend money on. You can't live in a share of stock, though it may appreciate faster than a house. (You also generally speaking can't use leverage to purchase shares). But even if shares appreciate faster than homes, they don't feed into conspicuous consumption: and that matters to some segment of the population.
  - vladTheInhaler 6y ago
    The housing market in Japan is very different, for better or worse. As a consequence of the fact that houses aren't seen as investments, people...don't invest in their houses. They don't make necessary repairs, so the next owner would rather knock it over and rebuild than risk living in a rotting deathtrap [1]. From a macroscopic level, this is an enormous waste, because society is investing all these resources just to tread water, instead of accumulating wealth and resources over generations. [1] Raze, rebuild, repeat: why Japan knocks down its houses after 30 years: https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...
pm90 6y ago
Stagnating wages for the middle class is a well known problem but most economists currently believe that it’s roots lie in the erosion of labor unions, stagnation of minimum wages and fiscal austerity measures. Illegal immigration specifically has been called out as something not making a big enough effect to warrant attention.
- fennecfoxen 6y ago
  “Most economists” are not quite so overtly political about it like this. There are of course many factors; globalization and trade is a big one affecting both labor and labor union power: competition from overseas, direct or indirect, easily eclipses competition from immigrants. The thing is that trade also has massive benefits to real wages, and has boosted national output substantially. Nuanced discussions will try to examine this tradeoff.
rhino369 6y ago
Globalization is a factor too. Doesn't matter if Ford workers are 200% more productive when Mexican workers are 30% of the cost at similar productivity levels.

jaypeg25 6y ago

You can't be serious. Are you insinuating it has nothing to do with executive wages ballooning (CEO compensation growing nearly 1,000% since the 1970's) and is instead because women are working? https://www.epi.org/publication/ceo-compensation-2018/ https://www.epi.org/publication/ceo-compensation-2018/

frockington1 6y ago
I think you are missing the scale and reaching for a political point where one does not need to be made. There are 500 CEOs in the SP500 and 164 million women in the US. The supply increase of 164 million women will have a far greater impact on the common persons salary than 500 CEOs getting paid more
- jayd16 6y ago
  Isn't that still like $7b[1] at the average 15m? Compare that to $45k[2] * for the 76k[3] women in the workforce, that's only ~$3.5b. Its US women vs the global S&P list, but it is interesting to compare, now that you mention it. [1]https://aflcio.org/paywatch https://aflcio.org/paywatch [2]https://www.catalyst.org/research/womens-earnings-the-pay-gap/#:~:text=A%20Gender%20Wage%20Gap%20Exists,time%2C%20year%2Dround%20workers.&text=This%20is%20compared%20to%2060.2%25%20in%201980.&text=Women%20earned%20a%20median%20of,2018%2C%20and%20men%20earned%20%2455%2C291 https://www.catalyst.org/research/womens-earnings-the-pay-ga.... [3]https://www.catalyst.org/research/women-in-the-workforce-united-states/#:~:text=Covid%2D19%20Is%20Disrupting%20Women's%20Labor%20Force%20Participation&text=In%202019%2C%20there%20were%2076%2C852%2C000,of%20the%20total%20labor%20force.&text=57.4%25%20of%20women%20participated%20in,compared%20to%2069.2%25%20of%20men https://www.catalyst.org/research/women-in-the-workforce-uni....
  - s1artibartfast 6y ago
    your math is of by a factor of 1000X. Per your link, there are 76 million women in the workforce, not 76k. That is $7 billion to CEOs vs $3.5 Trillion for women.
    - jayd16 6y ago
      derp. Of course.
  - JohnPrine 6y ago
    *76m women in the workforce
nullc 6y ago
If you divide the CEO compensation increase by the number of employees in the company you'll see that it itself is not particularly relevant in employee wages. For example Tim Cook earns 133M/yr which is $976 per employee. ... and this probably massively overstates the figure due to contractors. Or Sundar Pichai with $86M/yr which is $676 per employee (again... not counting contractors). Obviously it's more if you include more executives, but the number of top executive companies is basically a constant and at large companies it still ends up being not very large per employee. This isn't to say that it isn't a concern but I don't see how to justify the belief that the executive compensation at large companies is a major factor in the overall wage market.
- deleted 6y ago
  [deleted]

TuringNYC 6y ago

>> I don't buy this explanation. Very few employees are paid in any financially complex way. It depends on the class of workers. I'd agree with you w/r/t most wage earners being paid in transparent manner. But I think the GP comment was referring to technology workers (given the context of HN.) In the case of tech workers, many are paid in very complex ways. If you have illiquid stock options in a private company, and especially if you have taken a below-market salary as many startup employees have, your compensation is about as complex as a CDO. Just like a CDO there are multiple tiers above you that need to be paid out before you ever get paid. Unlike a CDO, where you can actually pull up the details on the tiers above you (tranches), at startups as employees, you dont get to see the cap table, so the whole maze is invisible too! Worse, unlike a CDO where you can sell at any time, here you have to exercise and hold stock for some far-away liquidity event that usually doesnt happen. So you have an invisible maze, and then a pot of gold at the end, perhaps. Or not.

meesles 6y ago
> if you have taken a below-market salary as many startup employees have I think this is part of the startup mythos. At the three startups I've worked at (~10 people), none of us had to sacrifice competitive salaries for stock options. The options were on top to incentivize staying at the company longer. I wonder how common it actually is for people to take significant paycuts in 2020 for a startup opportunity (founders aside)
- nrmitchi 6y ago
  This is definitely going to be a debate depending on what market you're looking at. But I don't think it's up for debate that if someone is leaving a FAANG position to join a start up, or debating between the two options, that they are taking a non-trivial pay-cut for the start-up.
  - fnbr 6y ago
    Yeah, absolutely. My FAANG offers were ~2x what my startup offers were.
- 6y ago

lumost 6y ago

I think you overestimate how much negotiating power an individual worker has when deciding the price for their labor. Anecdotally, in the Software field there is a lot of "price anchoring" where a large employer decides that a software engineer makes ~125k, and both smaller/peer employers decide that a software engineer makes 125k +/- 10%. From past experience the base "going rate" in a given market doesn't seem to change all that much unless a large employer decides to change the going rate because a higher or lower price point better suits their business - other companies will set their salaries to the baseline. Big Tech has recently been dragging wages up across the board by both hiring in volume, and paying more than everyone else. I'd be curious if anyone has a formal study on price anchoring in wage negotiations.

bob33212 6y ago
I don't think they just pull 125k out of the air. I think that at 90k you are not going to get many great candidates. And at 250k you risk spending a LOT more money and still not being able to successfully recruit people that are much better than the 125k people. It is not like all your 125k people are going to quit when you double salaries to make way for all the FAANG people who are looking to switch jobs for the same salary.
- lumost 6y ago
  I think that hints to how these pay bands come to be within a company though, it's not a transparent and liquid market with a bid/ask spread and a clearing price. In practice the company decides a band that they think gets people in the door. HR gets involved, and management settles for a 0-2% inflationary increase YoY rather than the marginal rate. If you combine this with one employer bordering on a monopsony for buying a particular category of labor - then pay won't move in proportion to productivity.
VRay 6y ago
Coding is basically the one tradeskill where the free market is still working reasonably well. Apple or Google can turn a $500k total compensation package for an employee into $2M/year or more in revenue, so they'll keep snapping up people and dragging wages up. Facebook doesn't even bring people on to a specific team, they know that coders are so valuable that they'll hire as many as they can and just find things for them to do. Even at the low end, six months of tooling work from a $100k coder can often put a handful of $50k/year white collar employees permanently out of work (or make them twice as productive as before). If one company doesn't realize that, another eventually will. It's not too tough to pull in ~50-100k/year running a SaaS business or freelancing Things in the USA are really broken in the retail sector. Companies pay the absolute bare minimum that will keep them in business, and make up for a lot of the terrible morale issues that come along with that using Orwellian management systems

cgarvis 6y ago

The population has grown from 205 million in 1970 to 330 million today. If you think 50% of the people join the workforce that is an increase of 65 million more people working.

XorNot 6y ago
Demand went up with population. This is an absurd argument: demand as kept up with supply (otherwise productivity basically couldn't go up) but mysteriously compensation has not.
- 411111111111111 6y ago
  > but mysteriously compensation has not. I think the damning thing is that it has. Just not for the workers. wages for high level executives for example not only kept up, it's gone so high that they can't even invest their money anymore. they're complaining about the lack of got investment opportunities instead, sitting on their billions which destroys their society even more by keeping the money from circulation.

Bresenham 6y ago

> an increase in labor supply due to women entering the labor force In the USA, there has been a (relative) decrease in labor supply due to women leaving the work force. Women's participation in the labor force by percentage has decreased over the past twenty years.

pjdemers 6y ago

>> an increase in labor supply due to women entering the labor force If you were born before between 1935 and 1955, this might have affected your career progression. Maybe. Because the more workers meant a bigger economy and therefore more jobs overall. If you were born before 1925 or after 1975, it had zero effect.

manuelabeledo 6y ago

> I don't buy this explanation. Very few employees are paid in any financially complex way. I don't think the point has anything to do with the complexity of the wages, but how workers are generally hired and paid, and how work is now structured, compared to the 70s, e.g. nowadays there are more contractors than ever, taking a good chunk of the wages as they act as intermediaries between customers and the workers who, otherwise, would have to be hired directly by the customers themselves. I'm curious though about why would you think that illegal immigration is driving wages down. Undocumented immigrants make barely for 3% of the total US population [1], and that does not account for those who cannot work (elderly, children, disabled, etc.) Same goes for women, as the general issue is that household income is in decline, in relative terms to the economy [2]. Automation should also be making consumer products cheaper and more available, but prices are not going down at the same speed as wages need to go up. [1] https://www.brookings.edu/policy2020/votervital/how-many-undocumented-immigrants-are-in-the-united-states-and-who-are-they/ https://www.brookings.edu/policy2020/votervital/how-many-und... [2] https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Employment%20and%20Growth/Poorer%20than%20their%20parents%20A%20new%20perspective%20on%20income%20inequality/MGI-Poorer-than-their-parents-Flat-or-falling-incomes-in-advanced-economies-Executive-summary.pdf https://www.mckinsey.com/~/media/McKinsey/Featured%20Insight...

zpeti 6y ago

It’s funny how economists never talk about this (women in the workforce). Its adding 50% more people to the workforce. Yes, it’s less because women might work less or part time, buts it’s an insanely high number in terms of market effects. I wouldn’t be surprised if one of the reasons you simply can’t survive on one person per household working, as in the 60s and 70s, is simply that two people are willing to work now and spend all their free cash on mortgage payments. No one talks about this. I’d love to hear the debates. I’d love to be proved wrong.

VRay 6y ago
Man, I'd like to see some more info on the whole housing industry in general It seems to be completely FUBAR to me. In Japan, housing ISN'T a glamorous investment, and I think that helps the house pricing situation a lot.. You can get a nice apartment in the fanciest part of downtown Tokyo for cheaper than a dangerous hole in the wall in San Jose
- JMTQp8lwXL 6y ago
  It's cultural. Americans generally have lower savings rate (when compared to other nations) and a home is one place where 'investing' and spending can overlap in a fairly bespoke way compared to anything else you spend money on. You can't live in a share of stock, though it may appreciate faster than a house. (You also generally speaking can't use leverage to purchase shares). But even if shares appreciate faster than homes, they don't feed into conspicuous consumption: and that matters to some segment of the population.
- vladTheInhaler 6y ago
  The housing market in Japan is very different, for better or worse. As a consequence of the fact that houses aren't seen as investments, people...don't invest in their houses. They don't make necessary repairs, so the next owner would rather knock it over and rebuild than risk living in a rotting deathtrap [1]. From a macroscopic level, this is an enormous waste, because society is investing all these resources just to tread water, instead of accumulating wealth and resources over generations. [1] Raze, rebuild, repeat: why Japan knocks down its houses after 30 years: https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...

pm90 6y ago

Stagnating wages for the middle class is a well known problem but most economists currently believe that it’s roots lie in the erosion of labor unions, stagnation of minimum wages and fiscal austerity measures. Illegal immigration specifically has been called out as something not making a big enough effect to warrant attention.

fennecfoxen 6y ago
“Most economists” are not quite so overtly political about it like this. There are of course many factors; globalization and trade is a big one affecting both labor and labor union power: competition from overseas, direct or indirect, easily eclipses competition from immigrants. The thing is that trade also has massive benefits to real wages, and has boosted national output substantially. Nuanced discussions will try to examine this tradeoff.

rhino369 6y ago

Globalization is a factor too. Doesn't matter if Ford workers are 200% more productive when Mexican workers are 30% of the cost at similar productivity levels.