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Hold up, the costs of all these services you mention does NOT come from labor cost. It comes from a pursuit of profit of investors and owners. While on the oth

Hold up, the costs of all these services you mention does NOT come from labor cost. It comes from a pursuit of profit of investors and owners. While on the other hand your income as a person ONLY depends on the competition you have from other qualified persons. What does it help if you flood the labor market more than it already is? Prices may go down 20%, but if your salary goes down 50%, does it really help? The oversupply of labor is the root cause of the problems you mention, not the solution!

astrange 5y ago
This is the “lump of labor fallacy”. You can’t just talk about supply and demand with labor because people are customers and generate their own demand. And it certainly does come from labor costs; services like healthcare naturally get relatively even more expensive as everything else becomes more productive, because you have to pay the healthcare workers more to stop them from leaving for more productive industries. (Baumol’s cost disease)
- rightbyte 5y ago
  I worked a short while on a Esta -- not allowed really but the tax office didn't complain -- in SF making more money as a new grad (6k USD/month + housing) than I will ever make where I live. Later I realized I was acctually wage dumping ... Make no mistake what would happen if there was a free flow of programmers to the US. "We" will undercut the locals.
  - astrange 5y ago
    Yes, I would make even more money than I already do because I’d sell goods and services to them, and I could address unmet demand from our existing customers. Surely even under the immigration is bad model, it wouldn’t apply to programmers who can do their work remotely. Our having a Beijing team hasn’t made me less employed.
    - rightbyte 5y ago
      Sure, I don't really understand how there can be such a pay discrepancy even inside the US for such a remote friendly occupation as programming. So I am not pretending to understand the dynamics. Entry level jobs would be swamped though. Like for local kids in London when UK was part of the EU. Like half the kids in the union could speak english good enough and many thought it would be cool to work in London. Good luck raising a family on a normal job when compeeting with people that happely live packed in an apartment for some years before bailing the city for raising families themself in their home countries. I know like half a dozen friends who did that.
      - astrange 5y ago
        You wouldn't be living five to an apartment or wishing you weren't if London had sensible housing policy like Tokyo does. Doesn't every single building in the UK need individual planning approval? Also, London is expensive but the rest of the UK isn't, which by the cheap immigrant logic should mean the rural areas would outcompete them for everything, surely?
        rightbyte 5y ago
        As I wrote earlier I have no clue =) However, I feel like it is way easier to get a job in e.g. London or SF since it is unsubstainable to live there for most people so there is a big churn. In smaller UK villages you can probably live a good life working at Subway doing sandwiches. Not so much in London. So you wont get the small village Subway job becouse the current holder does not quit. E.g. when I lived in Palo Alto I noticed a big lack of children so I assume you need to be rich to afford living there with them. So newcommers get the newly made parents jobs and so on.
- unglaublich 5y ago
  Baumol's cost disease does not apply if there is oversupply of labor. See again low-skilled workers. Where are the 'rises in pay' for those working at fast-food, supermarket chains, warehouses, etc.? Also, labor over-supply will only increase since not only immigration, but also automation will compete with workers. Automation and immigration can be good things, but only if we provide everyone with a basic income to put them in a position where they actually have a choice to work or not.
  - astrange 5y ago
    > Baumol's cost disease does not apply if there is oversupply of labor. More or less purely a symptom of bad monetary policy the US stopped doing around 2018. > See again low-skilled workers. Where are the 'rises in pay' for those working at fast-food, supermarket chains, warehouses, etc.? They have increased significantly above inflation in the last year because we're in a full employment economy. (While other classes may have had pay losses depending on how much they spend on gas/used cars, the lowest quartile definitely hasn't.) > Also, labor over-supply will only increase since not only immigration, but also automation will compete with workers. If you noticed, Andrew Yang lost the election. His automation platform was a myth, caused by our previous non-full-employment economy - there is no actual situation where it can destroy jobs. Either it requires inputs, so there is work to do there, or it doesn't, so it's a perpetual motion machine. (You can tell "rich people fire everyone and replace them with robots" can't actually happen because it's basically the plot of The Fountainhead.) Another interesting theory about the myth is that it's an accounting artifact caused by Moore's law - if we report computer production in units of computation speed, that means each factory worker is producing a zillion 70s computers a second, which makes it look like they've been automated out of a job. Countries with less immigration and worse age demographics (Russia, China, Japan) may need to develop automation though, since they'll need someone to take care of all of our old people. We will hopefully continue allowing immigration from Africa, soon to be the only region still producing young people.
    - MomoXenosaga 5y ago
      Australia's point system assures that you don't just let any useless immigrant in but only the ones with qualifications. In a highly advanced economy even a basic nurse has 4 years of training- and speak the language. We don't just need warm bodies.
sershe 5y ago
Why do costs of these services rise so rapidly compared to food, as mentioned? Or computers, or cars, etc.? Do these other industries not have "pursuit of profit of investors and owners"?
seanmcdirmid 5y ago
Have you tried to get any renovation or building done lately? These industries are completely labor constrained, even if the material is affordable, they won’t get to your job until a year and a half from now.
- diordiderot 5y ago
  You could afford more labor if you hadn't been sucked dry by cost of capital
  - seanmcdirmid 5y ago
    No, I can't. Construction workers are making a lot right now, that $50k reno is going to cost $100k now, and...that is with a year or two of waiting (who knows what it will cost when they actually get around to the job!). We need immigration, we simply don't have the talent locally, and Americans don't want to be plumbers or even electricians anymore.
roenxi 5y ago
> Hold up, the costs of all these services you mention does NOT come from labor cost. I don't know if that is actually true, but if it is there'd have to be a pretty strong "and who's fault is that?" to ask. Housing is capital intensive, but medical care, education & child care can all be provided with basically nothing but labour and a dash of equipment. Assuming a fairly free market where people are allowed to compete, anyway. If competition is illegal then whoever has the licenses will charge wages + a lot.
- lotsofpulp 5y ago
  There is tremendous capital expense in medical care. Extremely highly educated and well trained doctors do not materialize out of thin air. The mechanisms of human bodies is extremely complex, and requires ever more capital as society’s expectations of “healthcare” continue to march upward. 1950s level of healthcare is cheap. 2022 level of medicine, machinery, the R&D to be able to see inside of a body, the thousands of hours of training to read and understand statistics, measurements, and imaging, etc is incalculable. All sprinkled with a heavy dose of financial liability for all parties involved. There are similar arguments to be made for childcare and education.
  - roenxi 5y ago
    In the context of labour costs vs other costs? Most of that comes in as labour costs. It is paying humans money to spend time doing things. The high prices of healthcare aren't because of the expensive machines; the production of that can be outsourced, they're relatively long-lifed and they don't consume a lot of physical inputs.
    - lotsofpulp 5y ago
      The lines get blurry on labor vs capital costs when intellectual property comes into play. But I would model a doctor spending hundreds of thousands of dollars on education and 10 years of their life in the capital column. You cannot spin them up and down, and for better or worse, that much investment into a person is basically permanent from a country perspective. The machines also require very highly skilled people to develop, with enormous R&D costs, same as medicines. Maybe instead of capital costs, it would have been more accurate for me to write that the labor being bought and sold in the 1950s is nowhere near the same labor being bought and sold in 2022.
nostrademons 5y ago
Something seemed off about your statement, so I went and looked up some data. Gross margins for Anthem Blue Cross [1] are about 15%; they take in $117B in premiums and pay out $102B in benefits. Gross margins for HCA healthcare are better at about 80% ($50B gross profit on $58B in revenue) [2], but net margins aren't much better at 11%. Half of that $50B goes into "selling, general, and administrative" salaries, with much of the rest in "other expenses". By contrast, Google has gross margins of about 50% and net margins of about 30% [3]. I think the real explanation is Baumol's cost disease [4], which does come from labor cost, albeit indirectly. The tech industry is extremely high productivity, which is why they can afford to pay their not-very-numerous employees $500K+/year. But that means that you have to pay people in other industries more to keep them from becoming tech employees. Probably not as much more - programming has pretty high barriers to entry - but more than a middle-class worker used to make. Housing, healthcare, education, and childcare are essential services, which gives them the negotiating leverage needed to pass these labor cost increases along to consumers. Things like manufacturing, food service, and retail are not, which is why those industries are just going bankrupt. It's not really oversupply or undersupply of labor that matters here. It's productivity. To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways that one nurse could take care of hundreds of patients, or one teacher could teach tens of thousands of students. This is why things like telemedicine, machine-learning based diagnostics, mRNA vaccines, immunotherapies, MOOCs, online learning, 4-over-1 condos, etc are so appealing to investors. The problem is that these innovations haven't yet proven attractive enough to win in the marketplace, so we're stuck with conventional labor-intensive ways of servicing these industries for the foreseeable future. [1] https://finance.yahoo.com/quote/ANTM/financials?p=ANTM https://finance.yahoo.com/quote/ANTM/financials?p=ANTM [2] https://finance.yahoo.com/quote/HCA/financials?p=HCA https://finance.yahoo.com/quote/HCA/financials?p=HCA [3] https://finance.yahoo.com/quote/GOOG/financials?p=GOOG https://finance.yahoo.com/quote/GOOG/financials?p=GOOG [4] https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
- mschuster91 5y ago
  > Half of that $50B goes into "selling, general, and administrative" salaries And a lot of this overhead cost isn't necessary simply because the system is so horribly broken. And not just on the side of insurance expenses, but also on the benefits payout side. The US system has consistently shown to be more expensive for worse outcomes than other nations' systems. > To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways [...] No you Americans don't need to invent anything new. Americans should just go and look how other countries operate, the typical American Exceptionalism attitude of "no one does anything better than the US" is the biggest problem the country has. Housing cost is inflated because rural areas are getting depopulated because of rotting infrastructure (e.g. broadband Internet, adequately funded schools, public transport, access to healthcare) and because employers for modern jobs are located in urban areas. Fixing that requires investment in mentioned infrastructure and incentives for companies to provide remote work for people living outside of urban areas. In some areas, foreign dark money and speculation (cough AirBnB) add to the mix, the former can be confiscated (which the US is beginning to do, at least against Russian assets) and the latter banned or at least severely taxed. Healthcare costs can be fixed by literally copying any of the other Western nations' healthcare model, and by providing access to more MD education to fix the supply side of doctors. Education costs aren't that inflated (actually, they are often enough so horribly underfunded that schools only run for four days so teachers can go and run side gigs, or teachers having to pay for supplies out of their already poor wages), but if cost savings were to be made there, I'd start with professional school sports teams and by providing food not out of school budgets but out of social services budgets. Childcare costs... well, there's supply and demand right there. When both parents have to work two or more jobs to barely make rent, they need childcare. A decent minimum wage that provides enough for a single income to live a decent life should fix the demand and knock out a whole lot of other poverty-related side effects in the process.

astrange 5y ago

This is the “lump of labor fallacy”. You can’t just talk about supply and demand with labor because people are customers and generate their own demand. And it certainly does come from labor costs; services like healthcare naturally get relatively even more expensive as everything else becomes more productive, because you have to pay the healthcare workers more to stop them from leaving for more productive industries. (Baumol’s cost disease)

rightbyte 5y ago
I worked a short while on a Esta -- not allowed really but the tax office didn't complain -- in SF making more money as a new grad (6k USD/month + housing) than I will ever make where I live. Later I realized I was acctually wage dumping ... Make no mistake what would happen if there was a free flow of programmers to the US. "We" will undercut the locals.
- astrange 5y ago
  Yes, I would make even more money than I already do because I’d sell goods and services to them, and I could address unmet demand from our existing customers. Surely even under the immigration is bad model, it wouldn’t apply to programmers who can do their work remotely. Our having a Beijing team hasn’t made me less employed.
  - rightbyte 5y ago
    Sure, I don't really understand how there can be such a pay discrepancy even inside the US for such a remote friendly occupation as programming. So I am not pretending to understand the dynamics. Entry level jobs would be swamped though. Like for local kids in London when UK was part of the EU. Like half the kids in the union could speak english good enough and many thought it would be cool to work in London. Good luck raising a family on a normal job when compeeting with people that happely live packed in an apartment for some years before bailing the city for raising families themself in their home countries. I know like half a dozen friends who did that.
    - astrange 5y ago
      You wouldn't be living five to an apartment or wishing you weren't if London had sensible housing policy like Tokyo does. Doesn't every single building in the UK need individual planning approval? Also, London is expensive but the rest of the UK isn't, which by the cheap immigrant logic should mean the rural areas would outcompete them for everything, surely?
      - rightbyte 5y ago
        As I wrote earlier I have no clue =) However, I feel like it is way easier to get a job in e.g. London or SF since it is unsubstainable to live there for most people so there is a big churn. In smaller UK villages you can probably live a good life working at Subway doing sandwiches. Not so much in London. So you wont get the small village Subway job becouse the current holder does not quit. E.g. when I lived in Palo Alto I noticed a big lack of children so I assume you need to be rich to afford living there with them. So newcommers get the newly made parents jobs and so on.
unglaublich 5y ago
Baumol's cost disease does not apply if there is oversupply of labor. See again low-skilled workers. Where are the 'rises in pay' for those working at fast-food, supermarket chains, warehouses, etc.? Also, labor over-supply will only increase since not only immigration, but also automation will compete with workers. Automation and immigration can be good things, but only if we provide everyone with a basic income to put them in a position where they actually have a choice to work or not.
- astrange 5y ago
  > Baumol's cost disease does not apply if there is oversupply of labor. More or less purely a symptom of bad monetary policy the US stopped doing around 2018. > See again low-skilled workers. Where are the 'rises in pay' for those working at fast-food, supermarket chains, warehouses, etc.? They have increased significantly above inflation in the last year because we're in a full employment economy. (While other classes may have had pay losses depending on how much they spend on gas/used cars, the lowest quartile definitely hasn't.) > Also, labor over-supply will only increase since not only immigration, but also automation will compete with workers. If you noticed, Andrew Yang lost the election. His automation platform was a myth, caused by our previous non-full-employment economy - there is no actual situation where it can destroy jobs. Either it requires inputs, so there is work to do there, or it doesn't, so it's a perpetual motion machine. (You can tell "rich people fire everyone and replace them with robots" can't actually happen because it's basically the plot of The Fountainhead.) Another interesting theory about the myth is that it's an accounting artifact caused by Moore's law - if we report computer production in units of computation speed, that means each factory worker is producing a zillion 70s computers a second, which makes it look like they've been automated out of a job. Countries with less immigration and worse age demographics (Russia, China, Japan) may need to develop automation though, since they'll need someone to take care of all of our old people. We will hopefully continue allowing immigration from Africa, soon to be the only region still producing young people.
  - MomoXenosaga 5y ago
    Australia's point system assures that you don't just let any useless immigrant in but only the ones with qualifications. In a highly advanced economy even a basic nurse has 4 years of training- and speak the language. We don't just need warm bodies.

sershe 5y ago

Why do costs of these services rise so rapidly compared to food, as mentioned? Or computers, or cars, etc.? Do these other industries not have "pursuit of profit of investors and owners"?

seanmcdirmid 5y ago

Have you tried to get any renovation or building done lately? These industries are completely labor constrained, even if the material is affordable, they won’t get to your job until a year and a half from now.

diordiderot 5y ago
You could afford more labor if you hadn't been sucked dry by cost of capital
- seanmcdirmid 5y ago
  No, I can't. Construction workers are making a lot right now, that $50k reno is going to cost $100k now, and...that is with a year or two of waiting (who knows what it will cost when they actually get around to the job!). We need immigration, we simply don't have the talent locally, and Americans don't want to be plumbers or even electricians anymore.

roenxi 5y ago

> Hold up, the costs of all these services you mention does NOT come from labor cost. I don't know if that is actually true, but if it is there'd have to be a pretty strong "and who's fault is that?" to ask. Housing is capital intensive, but medical care, education & child care can all be provided with basically nothing but labour and a dash of equipment. Assuming a fairly free market where people are allowed to compete, anyway. If competition is illegal then whoever has the licenses will charge wages + a lot.

lotsofpulp 5y ago
There is tremendous capital expense in medical care. Extremely highly educated and well trained doctors do not materialize out of thin air. The mechanisms of human bodies is extremely complex, and requires ever more capital as society’s expectations of “healthcare” continue to march upward. 1950s level of healthcare is cheap. 2022 level of medicine, machinery, the R&D to be able to see inside of a body, the thousands of hours of training to read and understand statistics, measurements, and imaging, etc is incalculable. All sprinkled with a heavy dose of financial liability for all parties involved. There are similar arguments to be made for childcare and education.
- roenxi 5y ago
  In the context of labour costs vs other costs? Most of that comes in as labour costs. It is paying humans money to spend time doing things. The high prices of healthcare aren't because of the expensive machines; the production of that can be outsourced, they're relatively long-lifed and they don't consume a lot of physical inputs.
  - lotsofpulp 5y ago
    The lines get blurry on labor vs capital costs when intellectual property comes into play. But I would model a doctor spending hundreds of thousands of dollars on education and 10 years of their life in the capital column. You cannot spin them up and down, and for better or worse, that much investment into a person is basically permanent from a country perspective. The machines also require very highly skilled people to develop, with enormous R&D costs, same as medicines. Maybe instead of capital costs, it would have been more accurate for me to write that the labor being bought and sold in the 1950s is nowhere near the same labor being bought and sold in 2022.

nostrademons 5y ago

Something seemed off about your statement, so I went and looked up some data. Gross margins for Anthem Blue Cross [1] are about 15%; they take in $117B in premiums and pay out $102B in benefits. Gross margins for HCA healthcare are better at about 80% ($50B gross profit on $58B in revenue) [2], but net margins aren't much better at 11%. Half of that $50B goes into "selling, general, and administrative" salaries, with much of the rest in "other expenses". By contrast, Google has gross margins of about 50% and net margins of about 30% [3]. I think the real explanation is Baumol's cost disease [4], which does come from labor cost, albeit indirectly. The tech industry is extremely high productivity, which is why they can afford to pay their not-very-numerous employees $500K+/year. But that means that you have to pay people in other industries more to keep them from becoming tech employees. Probably not as much more - programming has pretty high barriers to entry - but more than a middle-class worker used to make. Housing, healthcare, education, and childcare are essential services, which gives them the negotiating leverage needed to pass these labor cost increases along to consumers. Things like manufacturing, food service, and retail are not, which is why those industries are just going bankrupt. It's not really oversupply or undersupply of labor that matters here. It's productivity. To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways that one nurse could take care of hundreds of patients, or one teacher could teach tens of thousands of students. This is why things like telemedicine, machine-learning based diagnostics, mRNA vaccines, immunotherapies, MOOCs, online learning, 4-over-1 condos, etc are so appealing to investors. The problem is that these innovations haven't yet proven attractive enough to win in the marketplace, so we're stuck with conventional labor-intensive ways of servicing these industries for the foreseeable future. [1] https://finance.yahoo.com/quote/ANTM/financials?p=ANTM https://finance.yahoo.com/quote/ANTM/financials?p=ANTM [2] https://finance.yahoo.com/quote/HCA/financials?p=HCA https://finance.yahoo.com/quote/HCA/financials?p=HCA [3] https://finance.yahoo.com/quote/GOOG/financials?p=GOOG https://finance.yahoo.com/quote/GOOG/financials?p=GOOG [4] https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

mschuster91 5y ago
> Half of that $50B goes into "selling, general, and administrative" salaries And a lot of this overhead cost isn't necessary simply because the system is so horribly broken. And not just on the side of insurance expenses, but also on the benefits payout side. The US system has consistently shown to be more expensive for worse outcomes than other nations' systems. > To get prices of housing/healthcare/education/childcare down to reasonable levels, you need to invent ways [...] No you Americans don't need to invent anything new. Americans should just go and look how other countries operate, the typical American Exceptionalism attitude of "no one does anything better than the US" is the biggest problem the country has. Housing cost is inflated because rural areas are getting depopulated because of rotting infrastructure (e.g. broadband Internet, adequately funded schools, public transport, access to healthcare) and because employers for modern jobs are located in urban areas. Fixing that requires investment in mentioned infrastructure and incentives for companies to provide remote work for people living outside of urban areas. In some areas, foreign dark money and speculation (cough AirBnB) add to the mix, the former can be confiscated (which the US is beginning to do, at least against Russian assets) and the latter banned or at least severely taxed. Healthcare costs can be fixed by literally copying any of the other Western nations' healthcare model, and by providing access to more MD education to fix the supply side of doctors. Education costs aren't that inflated (actually, they are often enough so horribly underfunded that schools only run for four days so teachers can go and run side gigs, or teachers having to pay for supplies out of their already poor wages), but if cost savings were to be made there, I'd start with professional school sports teams and by providing food not out of school budgets but out of social services budgets. Childcare costs... well, there's supply and demand right there. When both parents have to work two or more jobs to barely make rent, they need childcare. A decent minimum wage that provides enough for a single income to live a decent life should fix the demand and knock out a whole lot of other poverty-related side effects in the process.