6 ms·

A big part of the problem is the fed that literally pursues a monetary policy that intends to suppress real wage growth. This is why wages are flat for 30 years

A big part of the problem is the fed that literally pursues a monetary policy that intends to suppress real wage growth. This is why wages are flat for 30 years.

rightbyte 3y ago
And now they also want people to be laid off.
- probelm 3y ago
  [flagged]
  - FirmwareBurner 3y ago
    >SWEs could halt the fiat economy tomorrow through collective action From my experience, modern SWEs are the workers' category least likely to get involved in any kind of collective action. They're too self centered and individualistic for that. Everyone's too busy trying to get "theirs", while kicking down the ladder beneath them, thinking they'll be the next Larry Page. It wasn't always like this though. I think the insane demand and crazy compensation levels in the last decade changed the mentality and inflated the egos, reducing compassion and empathy, turning SWEs in the new finance bros, except more introverted and doing less cocaine.
    - probelm 3y ago
      [flagged]
    - sofixa 3y ago
      > From my experience, modern SWEs are the workers' category least likely to get involved in any kind of collective action. They're too self centered and individualistic for that. Not to mention way too well paid, comfortable and with lots to lose. Why risk a very comfortable lifestyle for some noble goal that barely concerns you unless you have tons of empathy?
d3vmax 3y ago
Also, globalization and instant communication has ensured in many field, salaries stagnate due to cheaper labour from elsewhere. Similar to hardware manufacturing jobs.
meowtimemania 3y ago
what monetary policy suppresses wage growth? (I know little on this subject and am curious)
- boppo1 3y ago
  It's a little convoluted, but google 'dcf model', 'benchmark rates', and 'open market operations'. It's more than a single post to explain the mechanics, but you can grok it in a few afternoons. I'll attempt anyway: In order to figure out what activities we ought to allocate resources to, we compare their present values as a sum of future cash flows, each period 'discounted' by a rate. The rate is calculated based on the activities risks + a 'benchmark' or 'risk free' rate. Basically "this activity is risky, how much more should it pay than something totally without risk?" The closest thing we have to that is US debt. US bonds have a set face value and interest rate, but if you buy above/below the face value, the interest will be a higher or lower return on what you paid, 'yield'. US debt is the most active market in the world, so taking the 'yield' shows what rate the global market[0] is accepting 'risk free' investment. If the market is nervous, more bonds get bought because everyone wants 'safety'. But this drives up the bond price and lowers yield. Lower yields create an incentive to consider 'hey maybe we do something a little risky after all, it pays better.' Vice versa: if the market is buying risky stuff instead of safe bonds, yields go up and people think 'why do something risky if I can get that return with no risk'? BUT the Fed interferes in this market. They have unlimited power to buy/sell bonds and therefore establish price ceilings and floors[1]. For most of the past 20 years they created a high price floor, which means low yields. This forces society to allocate resources to risky activity with higher returns. In particular, when rates go down, cash flows in the future relatively contribute more to present value. With higher rates you look harder at the next 20 years. With lower rates, you look more at years 20+[2]. In practice it made any business that can 'promise the future' an attractive investment. Think Big Tech, VC startups, Tesla, Wework, Theranos. Meanwhile, businesses that are less risky and make goods and services now have to compete with those guys for ROI. If you have little hope of growth, and your business is established you have to raise prices or reduce costs somewhere. You can't control what you pay for raw materials/inputs, but you can control what you pay workers. To further illustrate: Google burns hundreds of billions on projects that never see daylight or get axed after a couple years. How did market forces decide that was a better use of resources than building (relatively) more hospitals and bridges? Fed yield interference. I'm not saying high rates are good, or low rates are bad. I'm saying rates that don't match market conditions are bad. [0] Explainer on the bond market for the uninitiated: Big companies can't safely keep a lot of cash as currency because FDIC insurance is meant for individuals and only covers 250k. Instead you buy something 'safe' and very easily tradeable or 'liquid'. In the past, this might have been gold. Now it's US debt, which works better than gold for this purpose (diff maturities, easier settlement, etc.) [1] These are decided by a committee of 12 individuals, the FOMC. [2]To see this for yourself, model out a dcf and then add a row where you divide each discounted cash flow by the present value, "contribution to PV". Then, set up a bar chart for this row and play with your discount rate to see how the "time-shape" of PV contributions changes.
lkrubner 3y ago
That's mostly the fault of the Republicans. After the crisis of 2008 we could have bounced back using either fiscal policy or monetary policy. Congress could have spent a few trillion in stimulus to get the economy back on track. By 2010 it was clear that the initial stimulus of $800 billion was not enough, so further stimulus spending should have been a high priority, but the Republicans blocked further fiscal action. That meant that the Fed had to do all the work, using monetary policy. We didn't get the kind of big stimulus spending we needed till 2020, when President Trump finally pushed through several trillion in stimulus spending in the face of the Covid-19 pandemic. But for years after 2008, the Fed had to do too much work, with monetary policy, because Congress was doing too little with fiscal policy. It would have been healthier for the economy if we'd had fiscal stimulus in the real economy rather than monetary stimulus in the financial economy. Wages would have gone up much more with fiscal stimulus.
- onetokeoverthe 3y ago
  [dead]
- junofan 3y ago
  There’s absolutely no way a multi-trillion stimulus bill was passing in 2008–2010. I don’t think it’s fair to place blame on one party or the other.
  - paulmd 3y ago
    It certainly wasn’t going to pass when rahm emanuel vetoed the idea right out of the gate
- slaw 3y ago
  Keep alive too big to die was bad idea. Fed should do nothing especially it shouldn't keep low interest rates for many years.
- rayiner 3y ago
  I'm not an economist, but it seems like the multi-trillion Trump stimulus had the exact effect (high inflation) that people were afraid of in 2008-2010. I'm even inclined to agree with you: inflation is better and healthier than the financial gimmickry we did in 2008-2010. But the pushback to that seems to be much broader than "Republicans." Biden's approval rating on the economy is at 36%, and it's just 52% among Democrats 18-44. Americans seem to really hate inflation.
huhtenberg 3y ago
> This is why wages are flat for 30 years. Current wages are at the 1993 levels? That's just not true.
- FirmwareBurner 3y ago
  Adjusted to purchasing power?
- giantg2 3y ago
  "Real" wages have a specific meaning. I'm sure that is what they meant. https://www.pewresearch.org/short-reads/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/short-reads/2018/08/07/for-most-...
  - huhtenberg 3y ago
    Then their reply in unrelated to the lament of the top comment (by jacoblambda) which was about salaries staying the same in absolute numbers and prices rising. Inflation-adjusted wages being flat mean that the quality of life linked to a specific job/profession stayed the same, which is absolutely perfectly fine.
    - medvezhenok 3y ago
      Quality of life might not have stayed the same; quality of life as reflected by the CPI stayed the same (which is different; CPI includes things like hedonic adjustments - and depending on the value you place on those, the result might be different). Averages also hide very real disparities: software engineers are much better off today than they would have been 30 years ago; truckers, on the other hand, are much worse off today.
deleted 3y ago
[deleted]
andrewjl 3y ago
Housing, healthcare, and education are the biggest drivers when it comes to cost of living. How does monetary policy drive healthcare and education costs? When it comes to housing, it's pretty clear how the Fed's monetary policy drove those costs in areas where it is scarce. Luckily counteracting that is simple given political will, at least in principle.

A big part of the problem is the fed that literally pursues a monetary policy that intends to suppress real wage growth. This is why wages are flat for 30 years.

rightbyte 3y ago

And now they also want people to be laid off.

probelm 3y ago
[flagged]
- FirmwareBurner 3y ago
  >SWEs could halt the fiat economy tomorrow through collective action From my experience, modern SWEs are the workers' category least likely to get involved in any kind of collective action. They're too self centered and individualistic for that. Everyone's too busy trying to get "theirs", while kicking down the ladder beneath them, thinking they'll be the next Larry Page. It wasn't always like this though. I think the insane demand and crazy compensation levels in the last decade changed the mentality and inflated the egos, reducing compassion and empathy, turning SWEs in the new finance bros, except more introverted and doing less cocaine.
  - probelm 3y ago
    [flagged]
  - sofixa 3y ago
    > From my experience, modern SWEs are the workers' category least likely to get involved in any kind of collective action. They're too self centered and individualistic for that. Not to mention way too well paid, comfortable and with lots to lose. Why risk a very comfortable lifestyle for some noble goal that barely concerns you unless you have tons of empathy?

d3vmax 3y ago

Also, globalization and instant communication has ensured in many field, salaries stagnate due to cheaper labour from elsewhere. Similar to hardware manufacturing jobs.

meowtimemania 3y ago

what monetary policy suppresses wage growth? (I know little on this subject and am curious)

boppo1 3y ago
It's a little convoluted, but google 'dcf model', 'benchmark rates', and 'open market operations'. It's more than a single post to explain the mechanics, but you can grok it in a few afternoons. I'll attempt anyway: In order to figure out what activities we ought to allocate resources to, we compare their present values as a sum of future cash flows, each period 'discounted' by a rate. The rate is calculated based on the activities risks + a 'benchmark' or 'risk free' rate. Basically "this activity is risky, how much more should it pay than something totally without risk?" The closest thing we have to that is US debt. US bonds have a set face value and interest rate, but if you buy above/below the face value, the interest will be a higher or lower return on what you paid, 'yield'. US debt is the most active market in the world, so taking the 'yield' shows what rate the global market[0] is accepting 'risk free' investment. If the market is nervous, more bonds get bought because everyone wants 'safety'. But this drives up the bond price and lowers yield. Lower yields create an incentive to consider 'hey maybe we do something a little risky after all, it pays better.' Vice versa: if the market is buying risky stuff instead of safe bonds, yields go up and people think 'why do something risky if I can get that return with no risk'? BUT the Fed interferes in this market. They have unlimited power to buy/sell bonds and therefore establish price ceilings and floors[1]. For most of the past 20 years they created a high price floor, which means low yields. This forces society to allocate resources to risky activity with higher returns. In particular, when rates go down, cash flows in the future relatively contribute more to present value. With higher rates you look harder at the next 20 years. With lower rates, you look more at years 20+[2]. In practice it made any business that can 'promise the future' an attractive investment. Think Big Tech, VC startups, Tesla, Wework, Theranos. Meanwhile, businesses that are less risky and make goods and services now have to compete with those guys for ROI. If you have little hope of growth, and your business is established you have to raise prices or reduce costs somewhere. You can't control what you pay for raw materials/inputs, but you can control what you pay workers. To further illustrate: Google burns hundreds of billions on projects that never see daylight or get axed after a couple years. How did market forces decide that was a better use of resources than building (relatively) more hospitals and bridges? Fed yield interference. I'm not saying high rates are good, or low rates are bad. I'm saying rates that don't match market conditions are bad. [0] Explainer on the bond market for the uninitiated: Big companies can't safely keep a lot of cash as currency because FDIC insurance is meant for individuals and only covers 250k. Instead you buy something 'safe' and very easily tradeable or 'liquid'. In the past, this might have been gold. Now it's US debt, which works better than gold for this purpose (diff maturities, easier settlement, etc.) [1] These are decided by a committee of 12 individuals, the FOMC. [2]To see this for yourself, model out a dcf and then add a row where you divide each discounted cash flow by the present value, "contribution to PV". Then, set up a bar chart for this row and play with your discount rate to see how the "time-shape" of PV contributions changes.

lkrubner 3y ago

That's mostly the fault of the Republicans. After the crisis of 2008 we could have bounced back using either fiscal policy or monetary policy. Congress could have spent a few trillion in stimulus to get the economy back on track. By 2010 it was clear that the initial stimulus of $800 billion was not enough, so further stimulus spending should have been a high priority, but the Republicans blocked further fiscal action. That meant that the Fed had to do all the work, using monetary policy. We didn't get the kind of big stimulus spending we needed till 2020, when President Trump finally pushed through several trillion in stimulus spending in the face of the Covid-19 pandemic. But for years after 2008, the Fed had to do too much work, with monetary policy, because Congress was doing too little with fiscal policy. It would have been healthier for the economy if we'd had fiscal stimulus in the real economy rather than monetary stimulus in the financial economy. Wages would have gone up much more with fiscal stimulus.

onetokeoverthe 3y ago
[dead]
junofan 3y ago
There’s absolutely no way a multi-trillion stimulus bill was passing in 2008–2010. I don’t think it’s fair to place blame on one party or the other.
- paulmd 3y ago
  It certainly wasn’t going to pass when rahm emanuel vetoed the idea right out of the gate
slaw 3y ago
Keep alive too big to die was bad idea. Fed should do nothing especially it shouldn't keep low interest rates for many years.
rayiner 3y ago
I'm not an economist, but it seems like the multi-trillion Trump stimulus had the exact effect (high inflation) that people were afraid of in 2008-2010. I'm even inclined to agree with you: inflation is better and healthier than the financial gimmickry we did in 2008-2010. But the pushback to that seems to be much broader than "Republicans." Biden's approval rating on the economy is at 36%, and it's just 52% among Democrats 18-44. Americans seem to really hate inflation.

huhtenberg 3y ago

> This is why wages are flat for 30 years. Current wages are at the 1993 levels? That's just not true.

FirmwareBurner 3y ago
Adjusted to purchasing power?
giantg2 3y ago
"Real" wages have a specific meaning. I'm sure that is what they meant. https://www.pewresearch.org/short-reads/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/short-reads/2018/08/07/for-most-...
- huhtenberg 3y ago
  Then their reply in unrelated to the lament of the top comment (by jacoblambda) which was about salaries staying the same in absolute numbers and prices rising. Inflation-adjusted wages being flat mean that the quality of life linked to a specific job/profession stayed the same, which is absolutely perfectly fine.
  - medvezhenok 3y ago
    Quality of life might not have stayed the same; quality of life as reflected by the CPI stayed the same (which is different; CPI includes things like hedonic adjustments - and depending on the value you place on those, the result might be different). Averages also hide very real disparities: software engineers are much better off today than they would have been 30 years ago; truckers, on the other hand, are much worse off today.

deleted 3y ago

[deleted]

andrewjl 3y ago

Housing, healthcare, and education are the biggest drivers when it comes to cost of living. How does monetary policy drive healthcare and education costs? When it comes to housing, it's pretty clear how the Fed's monetary policy drove those costs in areas where it is scarce. Luckily counteracting that is simple given political will, at least in principle.