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>>The people to whom the prices are “unacceptably high” are the people at the top of the pyramid who would subsequently need to pay appropriate wages. I would h

>>The people to whom the prices are “unacceptably high” are the people at the top of the pyramid who would subsequently need to pay appropriate wages. I would hazard a guess that if you took the current wages of workers which have essentially stagnated and regressed for fifty years and raised them to where they would have been had they been increasing at their pre 1970s rate, and then compared that purchasing power to where prices are at now, all of a sudden the prices of things would not seem so out of whack. There are several things are wrong with this: Wages have grown at their fastest rate in history, globally, over the last 30 years: https://www.csmonitor.com/layout/set/amphtml/World/2016/0207/Progress-in-the-global-war-on-poverty https://www.csmonitor.com/layout/set/amphtml/World/2016/0207... It is only in the advanced economies where wage growth has slowed. And the slowdown is much less severe than commonly believed. I personally spent years promulgating this graph all over the internet: https://imgur.com/BlEiA9d https://imgur.com/BlEiA9d I wish someone had pointed out to me in what ways this graph is misleading. This article does a good job of doing that: http://www.brookings.edu/research/opinions/2014/12/22-sources-real-wage-stagnation-bosworth http://www.brookings.edu/research/opinions/2014/12/22-source... To summarize: 1. Wages are just one component of employment compensation. When the nonwage components - which have grown faster than wages - are factored in, you see the line track productivity growth much more closely. 2. Another factor creating the illusion of a growing gap between productivity and worker compensation is the use of different inflation indexes to measure productivity and worker compensation. The indexes largely mirrored each other before 1973, but diverged significantly since then, leading to inflation-adjusted worker compensation growth appearing artificially depressed compared to inflation-adjusted productivity growth. 3. Worker compensation growth has in fact slowed somewhat, and almost all of this slowdown can be explained by the commensurate slowdown in productivity growth in the US. >>investors are still getting ridiculous returns Investors are not getting ridiculous returns. If you look at labor's share of national income, it has largely remained the same if you exclude just one asset category: housing, where rent has increased faster than not just inflation, but income as well. See Figure 3: https://www.brookings.edu/wp-content/uploads/2016/07/2015a_rognlie.pdf https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r... And the solution to outsized gains due to housing scarcity is not to ban profiteering. It's to solve the housing scarcity problem. One study estimates that if just three cities - San Francisco, San Jose and New York - had limited the growth of their housing sector regulations to that of the median rate of all US cities, US GDP would have grown by 36 percent more between 1964 and 2009: https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388

AstralStorm 4y ago
Wages have not been tracking productivity though. The gap ever widens. Last time it tracked was in the 70s. No matter how you inflation adjust. Fossil fuel companies (Shell and BP at least) reaped billions USD windfall from all the issues with war.
- ETH_start 4y ago
  Employer compensation has almost tracked productivity.. Like I explained, the slight gap is due to a slight increase in capital's share of national income, and that is solely due to housing.
rcarr 4y ago
> Wages have grown at their fastest rate in history, globally, over the last 30 years: https://www.csmonitor.com/layout/set/amphtml/World/2016/0207 https://www.csmonitor.com/layout/set/amphtml/World/2016/0207... It is only in the advanced economies where wage growth has slowed. Exactly. Most likely as a direct response of MBA CEOs of advanced economies outsourcing manufacturing to foreign companies to increase their bottom line. Then a pandemic happens and you realise that you have no domestic manufacturers of medical equipment because government and enterprise have not fostered an environment of self sufficiency. And then academics scratch their heads and wonder why movements like Brexit gain traction. (For the record, I voted against Brexit although I am not sure how I would vote if the referendum was held again.). > 1. Wages are just one component of employment compensation. When the nonwage components - which have grown faster than wages - are factored in, you see the line track productivity growth much more closely. Maybe in America with its ludicrously expensive health system. In the UK with the NHS I'm not seeing anywhere near the increase in benefits to compensate for the loss in wages. And what real point is my pension when I can't afford to get on the housing ladder because my wages are too low to keep up with house price inflation? All of my pension will end up being subsumed by rent. If anything, the rise of freelance working shatters this argument because when you freelance you receive no benefits. Ask anyone in the EU who is earning decent wages and it is always the freelancers. > 2. Another factor creating the illusion of a growing gap between productivity and worker compensation is the use of different inflation indexes to measure productivity and worker compensation. The indexes largely mirrored each other before 1973, but diverged significantly since then, leading to inflation-adjusted worker compensation growth appearing artificially depressed compared to inflation-adjusted productivity growth. Again, I'm not buying this. If anything, most articles I read seem to use the lower CPI instead of RPI which I think is ridiculous. Perhaps the mismatch is to do with outsourcing manufacturing bases? Is productivity accurately measured? According to google: "Productivity measures the efficiency of a company's production process. It is calculated by dividing the outputs produced by a company by the inputs used in its production process." In an age where accountancy tricks are routinely used to minimise declared profits to shield against paying tax, are we 100% sure that the "outputs produced by a company" are accurately reflected in the statistics? >And the solution to outsized gains due to housing scarcity is not to ban profiteering. It's to solve the housing scarcity problem. Do not agree. Speak to any real estate agent and they will tell you that huge numbers of houses are being sold to foreign investors that then sit empty. There is zero point in building more houses if all the houses are just going to be sold to people with capital who don't even live in the country. You can build and build as much as you like but they will just snatch them up with above asking price offers fully in cash. First you have to ban people who don't live in a country for more than six months of the year from purchasing property. That in of itself might fix the problem. If it doesn't, then you need some kind of tax to make mass landlording an unprofitable business. If you don't, you just end up in the same situation where a few large companies with capital hoover up everything. You can't have an situation where a few giants effectively control everything with something as vital to survival as housing. There has to be appropriate regulation. An exponential tax on property ownership would be one such solution. And then finally, yes, build houses and ignore NIMBYs.

AstralStorm 4y ago

Wages have not been tracking productivity though. The gap ever widens. Last time it tracked was in the 70s. No matter how you inflation adjust. Fossil fuel companies (Shell and BP at least) reaped billions USD windfall from all the issues with war.

ETH_start 4y ago
Employer compensation has almost tracked productivity.. Like I explained, the slight gap is due to a slight increase in capital's share of national income, and that is solely due to housing.

rcarr 4y ago

> Wages have grown at their fastest rate in history, globally, over the last 30 years: https://www.csmonitor.com/layout/set/amphtml/World/2016/0207 https://www.csmonitor.com/layout/set/amphtml/World/2016/0207... It is only in the advanced economies where wage growth has slowed. Exactly. Most likely as a direct response of MBA CEOs of advanced economies outsourcing manufacturing to foreign companies to increase their bottom line. Then a pandemic happens and you realise that you have no domestic manufacturers of medical equipment because government and enterprise have not fostered an environment of self sufficiency. And then academics scratch their heads and wonder why movements like Brexit gain traction. (For the record, I voted against Brexit although I am not sure how I would vote if the referendum was held again.). > 1. Wages are just one component of employment compensation. When the nonwage components - which have grown faster than wages - are factored in, you see the line track productivity growth much more closely. Maybe in America with its ludicrously expensive health system. In the UK with the NHS I'm not seeing anywhere near the increase in benefits to compensate for the loss in wages. And what real point is my pension when I can't afford to get on the housing ladder because my wages are too low to keep up with house price inflation? All of my pension will end up being subsumed by rent. If anything, the rise of freelance working shatters this argument because when you freelance you receive no benefits. Ask anyone in the EU who is earning decent wages and it is always the freelancers. > 2. Another factor creating the illusion of a growing gap between productivity and worker compensation is the use of different inflation indexes to measure productivity and worker compensation. The indexes largely mirrored each other before 1973, but diverged significantly since then, leading to inflation-adjusted worker compensation growth appearing artificially depressed compared to inflation-adjusted productivity growth. Again, I'm not buying this. If anything, most articles I read seem to use the lower CPI instead of RPI which I think is ridiculous. Perhaps the mismatch is to do with outsourcing manufacturing bases? Is productivity accurately measured? According to google: "Productivity measures the efficiency of a company's production process. It is calculated by dividing the outputs produced by a company by the inputs used in its production process." In an age where accountancy tricks are routinely used to minimise declared profits to shield against paying tax, are we 100% sure that the "outputs produced by a company" are accurately reflected in the statistics? >And the solution to outsized gains due to housing scarcity is not to ban profiteering. It's to solve the housing scarcity problem. Do not agree. Speak to any real estate agent and they will tell you that huge numbers of houses are being sold to foreign investors that then sit empty. There is zero point in building more houses if all the houses are just going to be sold to people with capital who don't even live in the country. You can build and build as much as you like but they will just snatch them up with above asking price offers fully in cash. First you have to ban people who don't live in a country for more than six months of the year from purchasing property. That in of itself might fix the problem. If it doesn't, then you need some kind of tax to make mass landlording an unprofitable business. If you don't, you just end up in the same situation where a few large companies with capital hoover up everything. You can't have an situation where a few giants effectively control everything with something as vital to survival as housing. There has to be appropriate regulation. An exponential tax on property ownership would be one such solution. And then finally, yes, build houses and ignore NIMBYs.