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If productivity increases are driven by capital investments, why should the workers capture any of those benefits? For example, if I have a guy digging holes w

If productivity increases are driven by capital investments, why should the workers capture any of those benefits? For example, if I have a guy digging holes with a shovel, but then I buy a backhoe with an auger, he is now maybe 100x more productive than he was before, but should he get paid more because of that? His life is actually easier now, maybe he should get paid less?

whynotminot 2y ago
Are you saying wages should be tied only to the difficulty of the work and not the value the labor produces?
- IncreasePosts 2y ago
  No, but if the auger doesn't require any kind of specialized training to use (is mostly just point and click), I'd imagine it would be easier to find someone to do the work for you, versus finding someone to dig an equivalent amount of holes with a shovel.
- ketzo 2y ago
  The value that the work produces is not necessarily a property of the worker.
  - whynotminot 2y ago
    It may also not be a property of the ceo who bought the auger. If it’s obvious to everyone that augers are the way to go, he didn’t bring any specific insight to the table. Why does he get all the reward?
    - MichaelZuo 2y ago
      Who said anyone would ‘get all the reward’?
      - whynotminot 2y ago
        We’re talking about the resultant profit gain from productivity improvement, and how GP didn’t think the worker necessarily deserved any of the share of the value returned from that increase.
        MichaelZuo 2y ago
        So how does this relate to the notion of any party getting 100% of anything…?
        whynotminot 2y ago
        Huh? I don’t think anyone should get 100% of anything. In fact that’s largely the point I’m hoping is self apparent through my line of questioning (that productivity gains should result in bounty for everyone — for the leaders who had the good sense to buy augers, sure, but also the workers using the new tool, and of course the share holders who provided the capital). The whole point of this article we’re all commenting on is that it shows workers have been the ones left out in the cold since 1971 and that the high-wealth class in this country has been soaking up essentially the entirety of the resulting bounty from productivity increase.
        MichaelZuo 2y ago
        Your questioning a point raised by yourself? I just don’t see anyone else claiming it or even mentioning it prior to that comment.
        whynotminot 2y ago
        Alright I feel like you joined a conversation late and then didn’t want to scroll up the page to see where it started. I wasn’t even talking to you.
        MichaelZuo 2y ago
    - bongodongobob 2y ago
      Idk, because the company incentivized him to increase productivity?
bilbo0s 2y ago
This is actually a coherent and legitimate argument rooted in objective data. Often you don't really get that when supporting what is not a popular position. People who support unpopular positions generally ignore data. (As do many others. At least most people ignore any data that disagrees with them.) You've taken the basis of the supposition, productivity, quantified it. Attributed it. And argued that income should follow attribution. Bravo. You could do without the "should get paid less" part, as it puts part of your argument in the realm of subjectivity rather then objectivity for no real reason other than the tendency towards emotional responses I was mentioning earlier. ("Easier" life is completely subjective.) But the first part of this argument is really good.
- keybored 2y ago
  “Should get paid less” is the obvious value judgement from the employer’s perspective. Nothing subjective about it if we assume self-interest. And a socialist could have made the exact argument[1]. This is how capitalism progresses. I’m happy with the conclusion that we’ve reached. Bravos to all involved. [1] And maybe they are one.
  - bilbo0s 2y ago
    “Should get paid less” is the obvious value judgement from the employer’s perspective. Nothing subjective about it In the original comment, the argument of "should be paid less" was based not on an objective evaluation of productivity components on the part of the employer, but rather on a very much subjective evaluation of the employee's now "easier life".
JumpCrisscross 2y ago
> If productivity increases are driven by capital investments, why should the workers capture any of those benefits? Simply, there isn't a good reason. That's why we strictly regulate the labour market--we don't like the true price of labour. The broader reason: while there aren't fundamental reasons for the worker to capture that upside, there are great reasons for citizens to. (I'm using that term broadly.) For a variety of reasons, from Protestant morality to concerns about Communism, modern societies have preferred to reward citizens qua workers than citizens qua citizens.
- s1artibartfast 2y ago
  Also, I have a pet theory that an increasing ammount of labor is being used to produce and service capital and infrastructure itself, as we transitioned to a service and knowledge economy. If the real GDP growth is going to build, service, and maintain the backhoe, that doesnt result in more physical goods for consumers and additional compensation to workers is inflationary. If true, much if the GDP growth is illusory, composed of busywork. We aren't producing 250% more physical goods like housing and hamburgers per capita than in 1971.
jdsleppy 2y ago
Working the backhoe requires more skill than shoveling and can command a higher wage. You want to more carefully vet and care for the person driving your expensive equipment. Also you had an engineer to design the backhoe and factory workers to assemble it who are getting paid during this process. It's possible that the net wage per hole dug goes up as a result.
enragedcacti 2y ago
The basic Econ answer is that there is a limited supply of labor and firms will raise salaries in order to attract labor and capture more profit from the increased productivity. From that perspective your question is similar to "My product got 10x cheaper to make but customers still experience the same benefit so why should they pay less?" In both cases the simple capitalist theory answer is markets. You can see a corollary to this across the whole economy in the Baumol effect, where industries with no productivity gains see labor costs rise as a result of competition with more productive industries for scarce labor: https://en.wikipedia.org/wiki/Baumol_effect https://en.wikipedia.org/wiki/Baumol_effect Of course it turns out firms do have a lot of power over employees for various reasons which they use to suppress wages as much as possible but its still bounded. Another perspective is that workers are also consumers and an economy that doesn't increase compensation will have limited ways to capitalize on increased productivity because there will be little increase in domestic consumption. You can't really export a hole you dug so its good for everyone if workers see benefits from productivity gains: https://en.wikipedia.org/wiki/Demand-led_growth https://en.wikipedia.org/wiki/Demand-led_growth
keybored 2y ago
Exactly. There is no reason to pay them more. (It’s not based on how difficult it is either. It’s really based on the labor pool.) Then automate the job completely? Don’t need to pay anyone for that particular job. Then if you own the automization equipment to get rid of all the laborers? Don’t need to pay anyone. Oh, you have automated protecting your property with robots? Well. Now you own your own fiefdom completely.
- mmustapic 2y ago
  If all companies do that, who is going to buy their products?
  - p_l 2y ago
    It doesn't matter because the capital has grown and can be exfiltrated by then, periodically raising the stock price in the process as you "divest" the company of "unnecessary" parts. The big money is made by shuffling financial instruments around, it does not care about longevity or continued existence of a company, and the more the stock is part of ones compensation the more they are going to feel pressured to serve the goals of stock price not the company. And that goes double for the big investors holding the stock - whose Excel sheets are ultimately the boss of the board members, with the bones and offal for your auguries being analyst statements. So let's say that by great effort you got great profit this quarter. Hopefully through increased revenues, but often by scuttling efforts or otherwise cutting expenses. You beat EPS ratio. ...The stock price falls, with analysts saying that the higher EPS shows not enough growth, and that you are not good prospect because you need more clients of a specific kind. So the management will push for expanding that class of clients, maybe expansion elsewhere where normal calculus would say it's ill advised. But they are compensated according to stock price and resulting ROI when investors sell off that stock or use it as collateral, not according to how well the company is doing.
  - keybored 2y ago
    Once someone owns their fiefdom and can protect it with robots and everything is automated...? Then consumer capitalism obviously doesn’t matter any more.

whynotminot 2y ago

Are you saying wages should be tied only to the difficulty of the work and not the value the labor produces?

IncreasePosts 2y ago
No, but if the auger doesn't require any kind of specialized training to use (is mostly just point and click), I'd imagine it would be easier to find someone to do the work for you, versus finding someone to dig an equivalent amount of holes with a shovel.
ketzo 2y ago
The value that the work produces is not necessarily a property of the worker.
- whynotminot 2y ago
  It may also not be a property of the ceo who bought the auger. If it’s obvious to everyone that augers are the way to go, he didn’t bring any specific insight to the table. Why does he get all the reward?
  - MichaelZuo 2y ago
    Who said anyone would ‘get all the reward’?
    - whynotminot 2y ago
      We’re talking about the resultant profit gain from productivity improvement, and how GP didn’t think the worker necessarily deserved any of the share of the value returned from that increase.
      - MichaelZuo 2y ago
        So how does this relate to the notion of any party getting 100% of anything…?
        whynotminot 2y ago
        Huh? I don’t think anyone should get 100% of anything. In fact that’s largely the point I’m hoping is self apparent through my line of questioning (that productivity gains should result in bounty for everyone — for the leaders who had the good sense to buy augers, sure, but also the workers using the new tool, and of course the share holders who provided the capital). The whole point of this article we’re all commenting on is that it shows workers have been the ones left out in the cold since 1971 and that the high-wealth class in this country has been soaking up essentially the entirety of the resulting bounty from productivity increase.
        MichaelZuo 2y ago
        Your questioning a point raised by yourself? I just don’t see anyone else claiming it or even mentioning it prior to that comment.
        whynotminot 2y ago
        Alright I feel like you joined a conversation late and then didn’t want to scroll up the page to see where it started. I wasn’t even talking to you.
        MichaelZuo 2y ago
  - bongodongobob 2y ago
    Idk, because the company incentivized him to increase productivity?

bilbo0s 2y ago

This is actually a coherent and legitimate argument rooted in objective data. Often you don't really get that when supporting what is not a popular position. People who support unpopular positions generally ignore data. (As do many others. At least most people ignore any data that disagrees with them.) You've taken the basis of the supposition, productivity, quantified it. Attributed it. And argued that income should follow attribution. Bravo. You could do without the "should get paid less" part, as it puts part of your argument in the realm of subjectivity rather then objectivity for no real reason other than the tendency towards emotional responses I was mentioning earlier. ("Easier" life is completely subjective.) But the first part of this argument is really good.

keybored 2y ago
“Should get paid less” is the obvious value judgement from the employer’s perspective. Nothing subjective about it if we assume self-interest. And a socialist could have made the exact argument[1]. This is how capitalism progresses. I’m happy with the conclusion that we’ve reached. Bravos to all involved. [1] And maybe they are one.
- bilbo0s 2y ago
  “Should get paid less” is the obvious value judgement from the employer’s perspective. Nothing subjective about it In the original comment, the argument of "should be paid less" was based not on an objective evaluation of productivity components on the part of the employer, but rather on a very much subjective evaluation of the employee's now "easier life".

JumpCrisscross 2y ago

> If productivity increases are driven by capital investments, why should the workers capture any of those benefits? Simply, there isn't a good reason. That's why we strictly regulate the labour market--we don't like the true price of labour. The broader reason: while there aren't fundamental reasons for the worker to capture that upside, there are great reasons for citizens to. (I'm using that term broadly.) For a variety of reasons, from Protestant morality to concerns about Communism, modern societies have preferred to reward citizens qua workers than citizens qua citizens.

s1artibartfast 2y ago
Also, I have a pet theory that an increasing ammount of labor is being used to produce and service capital and infrastructure itself, as we transitioned to a service and knowledge economy. If the real GDP growth is going to build, service, and maintain the backhoe, that doesnt result in more physical goods for consumers and additional compensation to workers is inflationary. If true, much if the GDP growth is illusory, composed of busywork. We aren't producing 250% more physical goods like housing and hamburgers per capita than in 1971.

jdsleppy 2y ago

Working the backhoe requires more skill than shoveling and can command a higher wage. You want to more carefully vet and care for the person driving your expensive equipment. Also you had an engineer to design the backhoe and factory workers to assemble it who are getting paid during this process. It's possible that the net wage per hole dug goes up as a result.

enragedcacti 2y ago

The basic Econ answer is that there is a limited supply of labor and firms will raise salaries in order to attract labor and capture more profit from the increased productivity. From that perspective your question is similar to "My product got 10x cheaper to make but customers still experience the same benefit so why should they pay less?" In both cases the simple capitalist theory answer is markets. You can see a corollary to this across the whole economy in the Baumol effect, where industries with no productivity gains see labor costs rise as a result of competition with more productive industries for scarce labor: https://en.wikipedia.org/wiki/Baumol_effect https://en.wikipedia.org/wiki/Baumol_effect Of course it turns out firms do have a lot of power over employees for various reasons which they use to suppress wages as much as possible but its still bounded. Another perspective is that workers are also consumers and an economy that doesn't increase compensation will have limited ways to capitalize on increased productivity because there will be little increase in domestic consumption. You can't really export a hole you dug so its good for everyone if workers see benefits from productivity gains: https://en.wikipedia.org/wiki/Demand-led_growth https://en.wikipedia.org/wiki/Demand-led_growth

keybored 2y ago

Exactly. There is no reason to pay them more. (It’s not based on how difficult it is either. It’s really based on the labor pool.) Then automate the job completely? Don’t need to pay anyone for that particular job. Then if you own the automization equipment to get rid of all the laborers? Don’t need to pay anyone. Oh, you have automated protecting your property with robots? Well. Now you own your own fiefdom completely.

mmustapic 2y ago
If all companies do that, who is going to buy their products?
- p_l 2y ago
  It doesn't matter because the capital has grown and can be exfiltrated by then, periodically raising the stock price in the process as you "divest" the company of "unnecessary" parts. The big money is made by shuffling financial instruments around, it does not care about longevity or continued existence of a company, and the more the stock is part of ones compensation the more they are going to feel pressured to serve the goals of stock price not the company. And that goes double for the big investors holding the stock - whose Excel sheets are ultimately the boss of the board members, with the bones and offal for your auguries being analyst statements. So let's say that by great effort you got great profit this quarter. Hopefully through increased revenues, but often by scuttling efforts or otherwise cutting expenses. You beat EPS ratio. ...The stock price falls, with analysts saying that the higher EPS shows not enough growth, and that you are not good prospect because you need more clients of a specific kind. So the management will push for expanding that class of clients, maybe expansion elsewhere where normal calculus would say it's ill advised. But they are compensated according to stock price and resulting ROI when investors sell off that stock or use it as collateral, not according to how well the company is doing.
- keybored 2y ago
  Once someone owns their fiefdom and can protect it with robots and everything is automated...? Then consumer capitalism obviously doesn’t matter any more.