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One of the biggest shocks to the competitiveness of American labor is cost disease. Because they share a currency with high value-add services clusters like the

One of the biggest shocks to the competitiveness of American labor is cost disease. Because they share a currency with high value-add services clusters like the Bay Area their prices are dragged upwards by the productivity gains of unrelated sectors, in an analogous mechanism to gentrification.

aleph_minus_one 1y ago
Not everybody has the capabilities that are necessary for the tech industry. So do your industrial production somewhere else in the USA where additionally the cost of living is low.
rahimnathwani 1y ago
Cost disease isn't driven by a shared currency, but by a common labor market. When hyper-productive sectors, say, tech in the Bay Area, start paying top dollar, everyone else in the same talent pool eventually needs to follow suit. Even industries with stagnant labour productivity, like K-12 education, have to hike their wages to attract and retain staff. They can't offset these higher costs with efficiency gains, and that's where the "disease" kicks in. If you think this is caused by a common currency, consider labour costs in developing countries which use the US dollar. Do those costs go up when labour productivity in the Bay Area goes up?
- Workaccount2 1y ago
  You are both right. A valuable dollar kills exports and high paying sectors brain-drain lower paying ones.
  - freeone3000 1y ago
    Is this even bad, though? High-margin, productive sectors paying high wages seems like a good thing?
    - Workaccount2 1y ago
      Well look at this US, we are in the end-game. The problem is the concentration of money and talent (the US trajectory is basically just software and finance now) leads to an inability to react to changing conditions and a deep dependence on foreign nations. If China did something wild and pulled the plug on all US exports, the great minds filled with years of software and finance would be pretty much useless for stabilizing the situation. You want a diversity of smart people in many industries.
      - freeone3000 1y ago
        The changing conditions are self-imposed. If I shoot myself in the foot, I do not blame my limbs for lack of adaptation to changing conditions.
        amdsn 1y ago
        >The changing conditions are self-imposed They are right now sure, but the scenario as quoted in the previous post could just as easily have risen from China's side as a response to some geopolitical drama and the US would have been just as unprepared for it as it was for the current self foot shooting. A strong manufacturing base is a national security asset and the US has mostly allowed it to rot out. Some niches have been propped up by defense spending like weapons design and manufacturing or military shipbuilding, but even those are downstream industries that need a general base to stand on that they no longer have and it shows.

aleph_minus_one 1y ago

Not everybody has the capabilities that are necessary for the tech industry. So do your industrial production somewhere else in the USA where additionally the cost of living is low.

rahimnathwani 1y ago

Cost disease isn't driven by a shared currency, but by a common labor market. When hyper-productive sectors, say, tech in the Bay Area, start paying top dollar, everyone else in the same talent pool eventually needs to follow suit. Even industries with stagnant labour productivity, like K-12 education, have to hike their wages to attract and retain staff. They can't offset these higher costs with efficiency gains, and that's where the "disease" kicks in. If you think this is caused by a common currency, consider labour costs in developing countries which use the US dollar. Do those costs go up when labour productivity in the Bay Area goes up?

Workaccount2 1y ago
You are both right. A valuable dollar kills exports and high paying sectors brain-drain lower paying ones.
- freeone3000 1y ago
  Is this even bad, though? High-margin, productive sectors paying high wages seems like a good thing?
  - Workaccount2 1y ago
    Well look at this US, we are in the end-game. The problem is the concentration of money and talent (the US trajectory is basically just software and finance now) leads to an inability to react to changing conditions and a deep dependence on foreign nations. If China did something wild and pulled the plug on all US exports, the great minds filled with years of software and finance would be pretty much useless for stabilizing the situation. You want a diversity of smart people in many industries.
    - freeone3000 1y ago
      The changing conditions are self-imposed. If I shoot myself in the foot, I do not blame my limbs for lack of adaptation to changing conditions.
      - amdsn 1y ago
        >The changing conditions are self-imposed They are right now sure, but the scenario as quoted in the previous post could just as easily have risen from China's side as a response to some geopolitical drama and the US would have been just as unprepared for it as it was for the current self foot shooting. A strong manufacturing base is a national security asset and the US has mostly allowed it to rot out. Some niches have been propped up by defense spending like weapons design and manufacturing or military shipbuilding, but even those are downstream industries that need a general base to stand on that they no longer have and it shows.