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I think a large part of the reason why wages have lagged productivity gains for the last 40 years is that as soon as the Fed saw wage growth, they'd raise inter
by ProjectArcturis 5y ago
I think a large part of the reason why wages have lagged productivity gains for the last 40 years is that as soon as the Fed saw wage growth, they'd raise interest rates out of fear of inflation. So you basically had the most powerful actor in the economy consistently squashing any rising wages.
- neilwilson 5y agoThat's because interest rates are the Wizard of Oz routine The operation behind the curtain is making people unemployed. That's how inflation is actually curbed - eliminating wages from certain people and providing no alternative job. Since they have less money, they naturally demand less. That elimination of demand then impacts prices - eventually.
- Workaccount2 5y agoRates have been in steady decline though for the last 40 years.
- dnautics 5y agoYeah if anything it's the opposite. As soon as there was wage growth, the fed would drop interest rates to keep people from saving that sweet money they got and push them into investing it in rich people.
- legitster 5y agoThis may be true if interest rates haven't spent two decades at historical lows
- ProjectArcturis 5y agoOr a knock-on effect of lower wages is lower demand, which reduces the flat-level Fed rate necessary to maintain low inflation.
- pkaye 5y agoDid the low interest rate benefit the workers much? Maybe the home owners, corporations and investors more?
- tootie 5y agoHome buyers and other debt owners sure. But otherwise they weren't intended to help workers as that isn't part of the Fed's mandate. It helps indirectly in that it helps pave the way for the federal government to enact fiscal stimulus via debt.
- chii 5y agoit helps workers as the low interest rate boosts employment due to lowering the risk of investments (which creates jobs at some point in the financial chain).
- redisman 5y agoI don’t think so. In fact it’s driven the housing market (the one asset class where it could have helped) into financial speculation yet again
- imtringued 5y agoThe fed raised interest rates in 2018 and it is considered a policy mistake nowadays.
- kansface 5y agoProductivity gains are all in tech - mostly software at that. Seriously, I’d guess 95% of all gains in that time period. The people implementing that tech have captured a slice of the value. Senior engineers with no degree can and do pull in $500k. And how could they not? It may not be easy to do a start up, but it’s trivial. At the same time, companies are competing for employees in their rapidly expanding markets - fighting for billions of future dollars. The people being replaced or made to be more productive have not captured any of that value nor do I see any market based reason why they would. Do their jobs require specialized skills now? No, nothing more than a bit of training… in fact demand is down for them. Productivity gains and wages are strongly coupled but productivity gains are not uniformly distributed.
- machiaweliczny 5y agoYeah, maybe it would be nice if govt run some infra jobs and research from taxing th ese gains? Just a question. Don't know answer. Maybe it's better if VCs reinvest these gains (but probably it too short-term)
- machiaweliczny 5y agoI think that OSS software for govt use would make a big difference to capture these recent gains for society
- imtringued 5y agoThe Fed is actually here as a brake to prevent the economy from overheating. However, I'm no longer convinced that 2% is the ideal rate. In my opinion inflation allows the economy to adjust and higher inflation lets the economy adapt faster. I'd say anything below 5% is fair and anything above 10% is harmful.