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The balance of power between labor and capital is shifting a little bit back towards labor, and this is one aspect of that. It’s going to mean higher wages and

The balance of power between labor and capital is shifting a little bit back towards labor, and this is one aspect of that. It’s going to mean higher wages and slightly lower profit margins. A good thing, in my view. I’ve noticed an uptick in labor organizing, minimum wage referendums, and so on. Also we’re finally giving a little bit of due to the house and home portion of a person’s work- the work of maintaining a house and caring for children. In other words some of those people now are probably staying home to care for kids. Now hacker news being a bastion of people who want to be capital C capitalists, it’s natural the prevailing sentiment favors capital. I therefore expect that my expression of support for labor to garner me some harsh words. But you can’t argue against the fact that having some kind of government assistance to fall back on makes it much easier to negotiate a higher salary, and will result in higher wages.

rsj_hn 5y ago
This conflates several different concepts: * profit margins: profit margins are set by 1) how competitive is the market, and 2) interest rates, which are set by the central bank. The "power" of labor has nothing to do with it. For 1) this is about monopolies and we are seeing more concentration of market power, not less. For 2) yes, interest rates are in a secular low period which does give rise to secularly low profit margins. That does not mean that workers earn more, it means investment increases so that marginal return projects are funded and more workers are hired. * The "balance of power" between labor and capital. First, there is no battle between labor and capital, the battle is between non-management labor and management labor. Capital doesn't care and isn't affected by these disputes, which are struggles of the share of the pie given to management versus non-supervisory workers. When you buy a share of stock in company X, you just price the cashflow relative to what you can get from the central bank or another company, including foreign companies. You price it so that the risk adjusted returns are the same in all cases. So companies that earn fewer profits are just priced down to be less valuable and capital is reallocated elsewhere. So for capital, every return is the same. The real battle is between managers (e.g. CEOs on down to branch managers) and non-supervisory labor. In that battle, management has a lot of tricks up its sleeves: outsourcing to foreign countries, outsourcing to contract workers, eliminating demand for labor via automation. Non-supervisory workers have at their disposal the power of unionization and trying to get lawmakers to outlaw some of management's techniques. It's not clear at all who wins and who loses, and this may shake out differently in different industries. There is no global change where one side wins and the other side loses. While most want executive pay reduced -- CEO pay seems especially obscene, so far management has proven itself to be effective at taking a bigger share of the labor bucks. Investors see low returns generally in an low IR environment, and that has been the case for some time, even to the point of many pension funds going bankrupt as the returns just aren't what they had predicted. Yet executives keep seeking and obtaining windfalls. For example, in the 70s, it was a grim time to hire workers since wages kept rising and unions were powerful. But then again, inflation was high, so those wages were not rising in real terms. Thus labor thought it had "won" something when in reality there was stagnation in living standards.
- Ericson2314 5y ago
  Capital does care. Managerial labor is paid off in e.g. stock options and huge CEO competition go stay loyal to Capital. Where it gets weird is when Capital is also pension funds.
  - rsj_hn 5y ago
    "Capital" is just faceless organizations wanting to park their wealth somewhere to get a return. 40% of US corporate equity is owned by the foreign sector 40% is in tax-advantaged retirement accounts and pension funds as well as tax-advantaged non-profits. 20% is in various taxable accounts of US citizens and US based corporations. source: https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/ https://theirrelevantinvestor.com/2020/10/25/who-owns-the-st... It used to be that 70% of the stock market was owned by retirement funds, before we began accepting massive capital inflows from the foreign sector. I guarantee you very few people who buy these portfolios even know the names of the businesses they own. There is nothing about "caring" involved in this equation. Nor is there anything about "loyalty". It's not a good idea to anthropomorphize capital markets, not if you are trying to understand them. People at a horse track placing bets on which horse is the fastest are not loyal to the horses, nor do they expect the horses to be loyal to them. If a horse doesn't run as fast, they just change the odds on that horse. Really, I think a poor understanding of both capital markets and banking is the main reason a lot of well-intentioned reforms end up being ineffective or backfiring. For example, you'd get a lot farther at promoting higher wages if you ban capital inflows than with unionization efforts.
    - Ericson2314 5y ago
      I'm not trying to humanize Capital. There are plenty stock market analyses that matter-of-fact-ly complain about wages and demand more buybacks/dividends. And the profit have also been increasing more than wages or reinvestments. To the extent the "new inequality" is these institutional investors, well it's "first time as tragedy, second time as farce" all over again. > https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/ https://theirrelevantinvestor.com/2020/10/25/who-owns-the-st... That's a neat graph. I would also like to see some measure of foreign assets with US owners to put that in perspective. "Foreigners" I also want to break down; that label makes it sound like all the rich individuals families went abroad (!), but I assume the foreign investors are institutional too?
elliekelly 5y ago
> But you can’t argue against the fact that having some kind of government assistance to fall back on makes it much easier to negotiate a higher salary, and will result in higher wages. It also makes it much easier to start a business. If anyone should be cheering it on it’s entrepreneurs and VCs.
nautilus12 5y ago
Where is it shifting back to labor? Everywhere I see the gig economy making so that even previously white collar jobs are now commodoties.

rsj_hn 5y ago

This conflates several different concepts: * profit margins: profit margins are set by 1) how competitive is the market, and 2) interest rates, which are set by the central bank. The "power" of labor has nothing to do with it. For 1) this is about monopolies and we are seeing more concentration of market power, not less. For 2) yes, interest rates are in a secular low period which does give rise to secularly low profit margins. That does not mean that workers earn more, it means investment increases so that marginal return projects are funded and more workers are hired. * The "balance of power" between labor and capital. First, there is no battle between labor and capital, the battle is between non-management labor and management labor. Capital doesn't care and isn't affected by these disputes, which are struggles of the share of the pie given to management versus non-supervisory workers. When you buy a share of stock in company X, you just price the cashflow relative to what you can get from the central bank or another company, including foreign companies. You price it so that the risk adjusted returns are the same in all cases. So companies that earn fewer profits are just priced down to be less valuable and capital is reallocated elsewhere. So for capital, every return is the same. The real battle is between managers (e.g. CEOs on down to branch managers) and non-supervisory labor. In that battle, management has a lot of tricks up its sleeves: outsourcing to foreign countries, outsourcing to contract workers, eliminating demand for labor via automation. Non-supervisory workers have at their disposal the power of unionization and trying to get lawmakers to outlaw some of management's techniques. It's not clear at all who wins and who loses, and this may shake out differently in different industries. There is no global change where one side wins and the other side loses. While most want executive pay reduced -- CEO pay seems especially obscene, so far management has proven itself to be effective at taking a bigger share of the labor bucks. Investors see low returns generally in an low IR environment, and that has been the case for some time, even to the point of many pension funds going bankrupt as the returns just aren't what they had predicted. Yet executives keep seeking and obtaining windfalls. For example, in the 70s, it was a grim time to hire workers since wages kept rising and unions were powerful. But then again, inflation was high, so those wages were not rising in real terms. Thus labor thought it had "won" something when in reality there was stagnation in living standards.

Ericson2314 5y ago
Capital does care. Managerial labor is paid off in e.g. stock options and huge CEO competition go stay loyal to Capital. Where it gets weird is when Capital is also pension funds.
- rsj_hn 5y ago
  "Capital" is just faceless organizations wanting to park their wealth somewhere to get a return. 40% of US corporate equity is owned by the foreign sector 40% is in tax-advantaged retirement accounts and pension funds as well as tax-advantaged non-profits. 20% is in various taxable accounts of US citizens and US based corporations. source: https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/ https://theirrelevantinvestor.com/2020/10/25/who-owns-the-st... It used to be that 70% of the stock market was owned by retirement funds, before we began accepting massive capital inflows from the foreign sector. I guarantee you very few people who buy these portfolios even know the names of the businesses they own. There is nothing about "caring" involved in this equation. Nor is there anything about "loyalty". It's not a good idea to anthropomorphize capital markets, not if you are trying to understand them. People at a horse track placing bets on which horse is the fastest are not loyal to the horses, nor do they expect the horses to be loyal to them. If a horse doesn't run as fast, they just change the odds on that horse. Really, I think a poor understanding of both capital markets and banking is the main reason a lot of well-intentioned reforms end up being ineffective or backfiring. For example, you'd get a lot farther at promoting higher wages if you ban capital inflows than with unionization efforts.
  - Ericson2314 5y ago
    I'm not trying to humanize Capital. There are plenty stock market analyses that matter-of-fact-ly complain about wages and demand more buybacks/dividends. And the profit have also been increasing more than wages or reinvestments. To the extent the "new inequality" is these institutional investors, well it's "first time as tragedy, second time as farce" all over again. > https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/ https://theirrelevantinvestor.com/2020/10/25/who-owns-the-st... That's a neat graph. I would also like to see some measure of foreign assets with US owners to put that in perspective. "Foreigners" I also want to break down; that label makes it sound like all the rich individuals families went abroad (!), but I assume the foreign investors are institutional too?

elliekelly 5y ago

> But you can’t argue against the fact that having some kind of government assistance to fall back on makes it much easier to negotiate a higher salary, and will result in higher wages. It also makes it much easier to start a business. If anyone should be cheering it on it’s entrepreneurs and VCs.

nautilus12 5y ago

Where is it shifting back to labor? Everywhere I see the gig economy making so that even previously white collar jobs are now commodoties.