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The demand for labor was already on the decline. Covid-19 just accelerated it. Here's some graphs to make the point: https://fred.stlouisfed.org/series/CIVPAR

The demand for labor was already on the decline. Covid-19 just accelerated it. Here's some graphs to make the point: https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART We can see the labor participation rate has been declining since early 2000. Even more so for men once women joined the labor force: https://fred.stlouisfed.org/series/LNS11300001 https://fred.stlouisfed.org/series/LNS11300001 But even for women this has gone sideways: https://fred.stlouisfed.org/series/LNS11300002 https://fred.stlouisfed.org/series/LNS11300002 The productivity vs pay gap illustrates a stagnant growth in wages even as the value of goods and services grows: https://www.epi.org/productivity-pay-gap https://www.epi.org/productivity-pay-gap A combination of women joining the labor force in the 70s-80s, globalization, growing population, and automation has weakened the demand for labor. At some point the declining demand for labor and the growing costs of things will come to a head. The current system will not work. It seems like this pandemic could be the catalyst for facing this reality and finding a solution.

refurb 5y ago
Labor participation is down due to baby boomers retiring. Note that’s not unemployment but rather people not working or looking for jobs.
- jameslk 5y ago
  Perhaps partially, but that's not a reason for wages to stay mostly stagnant for decades
  - sokoloff 5y ago
    It’s not at all obvious to me that wages should increase faster than inflation over a long period of time.
    - wildrhythms 5y ago
      Kindly refer yourself to The Productivity-Pay Gap: https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/
    - jumelles 5y ago
      Should profits?
      - sokoloff 5y ago
        Great question! Profits of the most successful companies (the ones most skilled at making strategic, marketing, investment, and other business decisions) probably should (at least “will” and I’m fine with “should”) rise faster than inflation while profits of companies who are not good at these decisions should rise less quickly than inflation (or even fall or become negative). I’d expect there to be a subset of companies who have grown their profits faster than inflation and for survivorship bias to mean that appears very common in a backward-looking point-in-time snapshot.
  - refurb 5y ago
    Wages aren’t stagnant. https://www.census.gov/library/publications/2020/demo/p60-27 https://www.census.gov/library/publications/2020/demo/p60-27... The 2019 real median incomes of White, Black, Asian, and Hispanic households all increased from their 2018 medians [between 5.7% (Blacks) and 10.6% (Asians)] Percentage change in share of aggregate income was highest for the lowest income quintile (+1.8%). High income quintile saw decrease in share of aggregate income (-0.6%)
imgabe 5y ago
The demand for labor declined because we shipped it all overseas. People say automation and that’s true, but automation doesn’t seem to be stopping China from lifting millions of people out of poverty and giving them jobs, so I’m not sure why the US can’t do it. If you have more automation that doesn't necessarily mean you have fewer jobs, it can also mean you make more things.
- mdorazio 5y ago
  The US largely doesn’t have the stomach for it because it would require labor protections and significant tariffs/trade restrictions on goods produced via dirt cheap labor overseas. As soon as anyone tries that, the country loses its mind about “trade wars”.
  - kasey_junk 5y ago
    Well that and expensive goods...
    - lumost 5y ago
      This is a more complicated question. If wages go up, then goods cost less relatively. If everything is made internally, then the price of goods can be substantially lower than it is when everything is imported. Compare the price level of Hawaii to the mainland USA. Food is expensive because it's imported, yet Hawaii has some of the most productive farmland in the world. Unfortunately that production goes to cash crops owned by global corporations, nearly eliminating all local food production.
      - gruez 5y ago
        >Unfortunately that production goes to cash crops owned by global corporations, nearly eliminating all local food production. "Unfortunately"? Clearly you haven't heard of https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage
dan-robertson 5y ago
It’s going down if you count from 2000 but up if you count from 2015. I’m not sure whether it makes more sense to look at the trend over the last 5 or 20 years but I think you must make an argument that one should pick the span that supports your thesis, rather than the one that contradicts it.
jackcosgrove 5y ago
There is weakening demand for low- and semi-skilled labor. There is a shortage of skilled labor in many places.
- XorNot 5y ago
  This is highly questionable: ask any business owner and they'll declare there's a shortage of skilled labor, while whatever skill they're looking for is widely available in the market and has a decent velocity of job change (meaning they're looking for work). What it means is they don't want to pay the market rate for it, not that they can't find it.
  - jandrewrogers 5y ago
    That does not follow. There are many cases where the total demand exceeds the total supply; in such cases, no amount of "paying more" will alleviate the shortage, you are just moving it around. Furthermore, the upper bound on pay is the amount of value that can be generated with those skills -- a market requires buyers which requires a positive exchange for both parties. Consequently, the market clearing wage in a skill shortage is a function of the amount of value a company can create with a given set of skills. The challenge for highly skilled labor is that the latency between a market demand signal and new supply is typically many years. Demand won't manufacture that supply on any time horizon that matters.
deleted 5y ago
[deleted]
mizzack 5y ago
> The current system will not work. It seems like this pandemic could be the catalyst for facing this reality and finding a solution. Good news, everyone! That's exactly what's going to happen. https://www.weforum.org/focus/the-great-reset https://www.weforum.org/focus/the-great-reset
bitshiftfaced 5y ago
> At some point the declining demand for labor and the growing costs of things will come to a head. The current system will not work. Declining demand for labor goes hand in hand with lower production costs (cheaper labor overseas and automation). That means lower costs of things, not higher. And if the costs of things were higher than what people could afford due to being underemployed, the demand drops, which puts even more negative pressure on prices.
- StanislavPetrov 5y ago
  >That means lower costs of things, not higher. Theory and reality aren't the same. If Nike finds some slaves willing to work for .25 cents a day instead of .50 that has no bearing on what they charge for their sneakers. Nor does declining demand for labor mitigate the rapidly rising prices of the things people require to live (food, healthcare, housing, insurance).
  - bitshiftfaced 5y ago
    If Nike competes with another shoe company (who can also find cheap labor), then what they can pay for labor does impact what they charge for sneakers.
    - StanislavPetrov 5y ago
      You're assuming fictional consumer behavior based on theories that do not comport with reality. Nike's markup isn't correlated to what they pay for labor. There are plenty of other shoe companies that pay the same for slave labor and charge only a fraction of what Nike charges. People who pay $100 for a shoe that costs .50 cents to make aren't the "rational consumers" whose behavior is supposedly described by economic theories.
      - bitshiftfaced 5y ago
        > You're assuming fictional consumer behavior based on theories that do not comport with reality. Yes, I understand that this is your original argument. You don't believe that established economic theories like supply and demand apply in today's society. > Nike's markup isn't correlated to what they pay for labor. There are plenty of other shoe companies that pay the same for slave labor and charge only a fraction of what Nike charges. People who pay $100 for a shoe that costs .50 cents to make aren't the "rational consumers" whose behavior is supposedly described by economic theories. Nike gets a higher price because of the strength of their brand. When I talk about their competitors, I'm referring to other premium sneaker brands like Adidas, Asics, and Puma. In fact, premium brands aren't an appropriate example for either of our arguments. It's not appropriate for my argument, since there is in fact a well known psychological effect (contrary to your claim) where consumers assume higher prices are associated with exclusivity and luxury. This can change the equation of how cost inputs effect price equilibrium. It's also a poor example for your argument, since we are talking about people who may not be able to afford sneakers due to rising prices that allegedly break the laws of supply in demand. For that discussion, we'd need to use an example of a brand perceived as affordably-priced, not luxury-priced. (I could go on Amazon and find some, but their brand probably wouldn't be recognizable anyway, which is part of the point.) Those brands do compete on price, and cost inputs like labor absolutely effect what they charge consumers.

refurb 5y ago

Labor participation is down due to baby boomers retiring. Note that’s not unemployment but rather people not working or looking for jobs.

jameslk 5y ago
Perhaps partially, but that's not a reason for wages to stay mostly stagnant for decades
- sokoloff 5y ago
  It’s not at all obvious to me that wages should increase faster than inflation over a long period of time.
  - wildrhythms 5y ago
    Kindly refer yourself to The Productivity-Pay Gap: https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/
  - jumelles 5y ago
    Should profits?
    - sokoloff 5y ago
      Great question! Profits of the most successful companies (the ones most skilled at making strategic, marketing, investment, and other business decisions) probably should (at least “will” and I’m fine with “should”) rise faster than inflation while profits of companies who are not good at these decisions should rise less quickly than inflation (or even fall or become negative). I’d expect there to be a subset of companies who have grown their profits faster than inflation and for survivorship bias to mean that appears very common in a backward-looking point-in-time snapshot.
- refurb 5y ago
  Wages aren’t stagnant. https://www.census.gov/library/publications/2020/demo/p60-27 https://www.census.gov/library/publications/2020/demo/p60-27... The 2019 real median incomes of White, Black, Asian, and Hispanic households all increased from their 2018 medians [between 5.7% (Blacks) and 10.6% (Asians)] Percentage change in share of aggregate income was highest for the lowest income quintile (+1.8%). High income quintile saw decrease in share of aggregate income (-0.6%)

imgabe 5y ago

The demand for labor declined because we shipped it all overseas. People say automation and that’s true, but automation doesn’t seem to be stopping China from lifting millions of people out of poverty and giving them jobs, so I’m not sure why the US can’t do it. If you have more automation that doesn't necessarily mean you have fewer jobs, it can also mean you make more things.

mdorazio 5y ago
The US largely doesn’t have the stomach for it because it would require labor protections and significant tariffs/trade restrictions on goods produced via dirt cheap labor overseas. As soon as anyone tries that, the country loses its mind about “trade wars”.
- kasey_junk 5y ago
  Well that and expensive goods...
  - lumost 5y ago
    This is a more complicated question. If wages go up, then goods cost less relatively. If everything is made internally, then the price of goods can be substantially lower than it is when everything is imported. Compare the price level of Hawaii to the mainland USA. Food is expensive because it's imported, yet Hawaii has some of the most productive farmland in the world. Unfortunately that production goes to cash crops owned by global corporations, nearly eliminating all local food production.
    - gruez 5y ago
      >Unfortunately that production goes to cash crops owned by global corporations, nearly eliminating all local food production. "Unfortunately"? Clearly you haven't heard of https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage

dan-robertson 5y ago

It’s going down if you count from 2000 but up if you count from 2015. I’m not sure whether it makes more sense to look at the trend over the last 5 or 20 years but I think you must make an argument that one should pick the span that supports your thesis, rather than the one that contradicts it.

jackcosgrove 5y ago

There is weakening demand for low- and semi-skilled labor. There is a shortage of skilled labor in many places.

XorNot 5y ago
This is highly questionable: ask any business owner and they'll declare there's a shortage of skilled labor, while whatever skill they're looking for is widely available in the market and has a decent velocity of job change (meaning they're looking for work). What it means is they don't want to pay the market rate for it, not that they can't find it.
- jandrewrogers 5y ago
  That does not follow. There are many cases where the total demand exceeds the total supply; in such cases, no amount of "paying more" will alleviate the shortage, you are just moving it around. Furthermore, the upper bound on pay is the amount of value that can be generated with those skills -- a market requires buyers which requires a positive exchange for both parties. Consequently, the market clearing wage in a skill shortage is a function of the amount of value a company can create with a given set of skills. The challenge for highly skilled labor is that the latency between a market demand signal and new supply is typically many years. Demand won't manufacture that supply on any time horizon that matters.

deleted 5y ago

[deleted]

mizzack 5y ago

> The current system will not work. It seems like this pandemic could be the catalyst for facing this reality and finding a solution. Good news, everyone! That's exactly what's going to happen. https://www.weforum.org/focus/the-great-reset https://www.weforum.org/focus/the-great-reset

bitshiftfaced 5y ago

> At some point the declining demand for labor and the growing costs of things will come to a head. The current system will not work. Declining demand for labor goes hand in hand with lower production costs (cheaper labor overseas and automation). That means lower costs of things, not higher. And if the costs of things were higher than what people could afford due to being underemployed, the demand drops, which puts even more negative pressure on prices.

StanislavPetrov 5y ago
>That means lower costs of things, not higher. Theory and reality aren't the same. If Nike finds some slaves willing to work for .25 cents a day instead of .50 that has no bearing on what they charge for their sneakers. Nor does declining demand for labor mitigate the rapidly rising prices of the things people require to live (food, healthcare, housing, insurance).
- bitshiftfaced 5y ago
  If Nike competes with another shoe company (who can also find cheap labor), then what they can pay for labor does impact what they charge for sneakers.
  - StanislavPetrov 5y ago
    You're assuming fictional consumer behavior based on theories that do not comport with reality. Nike's markup isn't correlated to what they pay for labor. There are plenty of other shoe companies that pay the same for slave labor and charge only a fraction of what Nike charges. People who pay $100 for a shoe that costs .50 cents to make aren't the "rational consumers" whose behavior is supposedly described by economic theories.
    - bitshiftfaced 5y ago
      > You're assuming fictional consumer behavior based on theories that do not comport with reality. Yes, I understand that this is your original argument. You don't believe that established economic theories like supply and demand apply in today's society. > Nike's markup isn't correlated to what they pay for labor. There are plenty of other shoe companies that pay the same for slave labor and charge only a fraction of what Nike charges. People who pay $100 for a shoe that costs .50 cents to make aren't the "rational consumers" whose behavior is supposedly described by economic theories. Nike gets a higher price because of the strength of their brand. When I talk about their competitors, I'm referring to other premium sneaker brands like Adidas, Asics, and Puma. In fact, premium brands aren't an appropriate example for either of our arguments. It's not appropriate for my argument, since there is in fact a well known psychological effect (contrary to your claim) where consumers assume higher prices are associated with exclusivity and luxury. This can change the equation of how cost inputs effect price equilibrium. It's also a poor example for your argument, since we are talking about people who may not be able to afford sneakers due to rising prices that allegedly break the laws of supply in demand. For that discussion, we'd need to use an example of a brand perceived as affordably-priced, not luxury-priced. (I could go on Amazon and find some, but their brand probably wouldn't be recognizable anyway, which is part of the point.) Those brands do compete on price, and cost inputs like labor absolutely effect what they charge consumers.