7 ms·

"In the popular imagination workers’ share of the economic pie has room to grow at the expense of profits. But recent research suggests that labour’s share of t

"In the popular imagination workers’ share of the economic pie has room to grow at the expense of profits. But recent research suggests that labour’s share of the value created by firms has in fact been fairly stable in most rich countries during recent decades. We estimate that it has already risen by one percentage point on average in big rich countries during the pandemic. There may not be very much scope for further increases." Wow, that's a truly obnoxious misdirect. Just use the word "stability" and hope nobody notices that stability is not the subject. Profits in retail went up 40% during COVID -- and wages are up 1%. The scope for further wage increases therefore approaches 39%. Obviously companies are going to continue to try to hold on to as much of that increase as possible for themselves, but here the Economist is pointing at the fact that wages have been artificially depressed, and pretending that that constitutes evidence that there's no room to raise them! https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ https://www.brookings.edu/essay/windfall-profits-and-deadly-...

makomk 5y ago
That doesn't follow, at all. You're measuring the 40% increase in profits relative to the amount of profits but the 1% increase in wages relative to the amount spent on wages, and those pots are generally very different in size - in fact, the smaller the amount of money that goes to profits compared to workers, the more biased against workers and towards profits measuring this way makes it look. Generally in retail, wages are one of the main costs and are a lot bigger than profit margin outside of small specialized companies. Also, that article reads like propaganda. They carefully avoid quoting any figures that are meaningfully comparable. For example, the industry-wide figures they quote compare the average increase in profit for selected entire large companies for a year not to the increase in their annual staffing bill, but the increase in one hour's pay for one worker. The only comparison between total staffing bills and anything else is for one cherry-picked company that increased its pay to staff whilst making a loss on its US operations over the time period they're looking at and having a 68% drop in overall profits, if I'm reading the linked report correctly. But they carefully don't compare to that company's profits at all.
- Closi 5y ago
  It’s a good point, especially considering retail profits in sectors like food can be as low as 2-3% of revenue, so a 40% increase might be an extra 1% of revenue, while labour costs might make up 30-40% of costs, so if those went up by the same absolute percentage then the chain would be losing money (which would presumably then allow them to cut everyone’s wages by the same proportion by the same logic?)
mdavidn 5y ago
If the profit margin is 2% but it increases to 3%, that’s a 50% increase in profit.
- seanmcdirmid 5y ago
  Yes, the same trick can be used when writing a scientific paper: "we improve process X's accuracy by 150%!" (when the base is 1% accurate, it is now 2.5% accurate).
  - ajit_singh 5y ago
    This trick is used all the time. In my previous SaaS company we used to write case studies to show the impact caused by our product on the business' bottomline. A typical impact used to be like conversion increased from 10% to 12%. However, this impact used to seem very tiny and absolutely not case study worthy. Hence, we would deliberately calculate impact by taking not the previous sales but the previous conversion rate as the denominator. Thus, would 10 to 12% growth would go like "we increased Y's conversion rate by 20%." Can't be mathematically disputed and totally clickbaity at the same time.
    - sokoloff 5y ago
      In that case, it’s not particularly misleading. All else equal, I’d expect an increase of 20% of sales, not an increase of 2%. Sure, a clarifying footnote/endnote would be nice.
- jtbayly 5y ago
  Yep. And if wages cost 33% of the income, to increase the worker pay by three percent will take 100% of the additional profit. That is why a 50% increase in profit tells you nothing about how much wages can increase.
sandworm101 5y ago
>> companies are going to continue to try to hold on to as much of that increase as possible for themselves Shareholders are going to continue to try to hold on to as much of that increase as possible for themselves. It is too easy to place blame on heartless corporations. Place the blame squarely on the flesh-and-blood people running and benefiting from corporations. Those profits aren't sitting in a big vault at Amazon. They are sitting in the bank accounts of every Amazon shareholder.
- throwawayboise 5y ago
  So you mean you, me, your grandmother, and everyone else with a 401k or pension?
  - Frost1x 5y ago
    A 401k with a vesting schedule geared at minimizing the already empheral retirement contribution businesses don't want to provide hoping on turnover with vesting to reduce payout and for those remaining with enough disposable income to contribute hefty amounts to their 401k? Sure. Even 401ks are evaporating in significance so that is becoming a less valid point. Given the typical audience here, you and me sure, but the vast majority aren't reaping rewards or able to tie money up in unrealized gains they cant magically realize like many with piles of investments (often tax free).
    - nly 5y ago
      Why are 401k's evaporating in significance? Curious Brit here.
      - mrep 5y ago
        Not sure what OP is referring to because 401(k) balances are at all time highs [0]. [0]: https://www.cnbc.com/2021/08/19/401k-balances-hit-a-new-all-time-high-fidelity-says-.html https://www.cnbc.com/2021/08/19/401k-balances-hit-a-new-all-...
  - 5y ago
Freskis 5y ago
"Profits in retail went up 40% during COVID -- and wages are up 1%." HackerNews is generally a highly-educated conversation space. Your absurdly misleading statistics are unlikely to work here. Perhaps a lower-quality populist website such as Reddit may be a better fit for you?

makomk 5y ago

That doesn't follow, at all. You're measuring the 40% increase in profits relative to the amount of profits but the 1% increase in wages relative to the amount spent on wages, and those pots are generally very different in size - in fact, the smaller the amount of money that goes to profits compared to workers, the more biased against workers and towards profits measuring this way makes it look. Generally in retail, wages are one of the main costs and are a lot bigger than profit margin outside of small specialized companies. Also, that article reads like propaganda. They carefully avoid quoting any figures that are meaningfully comparable. For example, the industry-wide figures they quote compare the average increase in profit for selected entire large companies for a year not to the increase in their annual staffing bill, but the increase in one hour's pay for one worker. The only comparison between total staffing bills and anything else is for one cherry-picked company that increased its pay to staff whilst making a loss on its US operations over the time period they're looking at and having a 68% drop in overall profits, if I'm reading the linked report correctly. But they carefully don't compare to that company's profits at all.

Closi 5y ago
It’s a good point, especially considering retail profits in sectors like food can be as low as 2-3% of revenue, so a 40% increase might be an extra 1% of revenue, while labour costs might make up 30-40% of costs, so if those went up by the same absolute percentage then the chain would be losing money (which would presumably then allow them to cut everyone’s wages by the same proportion by the same logic?)

mdavidn 5y ago

If the profit margin is 2% but it increases to 3%, that’s a 50% increase in profit.

seanmcdirmid 5y ago
Yes, the same trick can be used when writing a scientific paper: "we improve process X's accuracy by 150%!" (when the base is 1% accurate, it is now 2.5% accurate).
- ajit_singh 5y ago
  This trick is used all the time. In my previous SaaS company we used to write case studies to show the impact caused by our product on the business' bottomline. A typical impact used to be like conversion increased from 10% to 12%. However, this impact used to seem very tiny and absolutely not case study worthy. Hence, we would deliberately calculate impact by taking not the previous sales but the previous conversion rate as the denominator. Thus, would 10 to 12% growth would go like "we increased Y's conversion rate by 20%." Can't be mathematically disputed and totally clickbaity at the same time.
  - sokoloff 5y ago
    In that case, it’s not particularly misleading. All else equal, I’d expect an increase of 20% of sales, not an increase of 2%. Sure, a clarifying footnote/endnote would be nice.
jtbayly 5y ago
Yep. And if wages cost 33% of the income, to increase the worker pay by three percent will take 100% of the additional profit. That is why a 50% increase in profit tells you nothing about how much wages can increase.

sandworm101 5y ago

>> companies are going to continue to try to hold on to as much of that increase as possible for themselves Shareholders are going to continue to try to hold on to as much of that increase as possible for themselves. It is too easy to place blame on heartless corporations. Place the blame squarely on the flesh-and-blood people running and benefiting from corporations. Those profits aren't sitting in a big vault at Amazon. They are sitting in the bank accounts of every Amazon shareholder.

throwawayboise 5y ago
So you mean you, me, your grandmother, and everyone else with a 401k or pension?
- Frost1x 5y ago
  A 401k with a vesting schedule geared at minimizing the already empheral retirement contribution businesses don't want to provide hoping on turnover with vesting to reduce payout and for those remaining with enough disposable income to contribute hefty amounts to their 401k? Sure. Even 401ks are evaporating in significance so that is becoming a less valid point. Given the typical audience here, you and me sure, but the vast majority aren't reaping rewards or able to tie money up in unrealized gains they cant magically realize like many with piles of investments (often tax free).
  - nly 5y ago
    Why are 401k's evaporating in significance? Curious Brit here.
    - mrep 5y ago
      Not sure what OP is referring to because 401(k) balances are at all time highs [0]. [0]: https://www.cnbc.com/2021/08/19/401k-balances-hit-a-new-all-time-high-fidelity-says-.html https://www.cnbc.com/2021/08/19/401k-balances-hit-a-new-all-...
- 5y ago

Freskis 5y ago

"Profits in retail went up 40% during COVID -- and wages are up 1%." HackerNews is generally a highly-educated conversation space. Your absurdly misleading statistics are unlikely to work here. Perhaps a lower-quality populist website such as Reddit may be a better fit for you?