4 ms·

Cowan talks about a "reset". Perhaps part of the "reset" will be putting some of benefits of productivity back in everyone's pocket.

a3n 11y ago
I think the productivity reset has already happened, but not in the way you (or I) would hope. That's why wages and confidence of individuals are stagnant, while corporations and stocks are doing well. "The recession is over" is true for corporations, but is open to debate for lots of individuals.
csense 11y ago
The real issue here is globalization. In the post-WW2 years, US workers had a monopoly on labor provided to US firms, and thus were able to extract some of their firms' economic surplus (either through unionization or the threat of unionization). Company owners shared some of their profits with their workers because they had no other choice. Now that trade borders are relatively open, companies have the option of looking elsewhere. US workers can no longer extract the surplus because if they attempt to, their company will simply relocate operations to a different country. It's an either-or proposition: You can have free global trade, or you can have a job market that pays high wages to workers of average skill. You want both, but it's impossible; so we have to make a choice. We've chosen free global trade, and (as the article notes) there's a slow adjustment time in institutions. Figuring it began in the 1970's with Nixon opening up China, it took about 25 years to really be felt (in the dotcom bust, financial crisis and subsequent slow recovery).
- digikata 11y ago
  Globalization plays it's part, but I think the real root cause is the shift in business philosophy to systematically squeeze margins for short term goals. Worker salaries are one vulnerable facet there, but between businesses margins are tighter too. It basically optimizes efficiency & profits today, but edges out a number of avenues for better long term growth - larger investments in new products within companies as well as the worker pay & savings (which in turn hurts for example self-funded small business starts). In theory, tighter margins means better purchasing power for everyone, but somehow that excess from the squeeze seems to be unevenly sticky as capital flows past the upper wealth brackets.
  - pcurve 11y ago
    I agree with both of you, and both are equally valid reasons because ultimately they're cause & effect. I would also blame regulatory & policy screw-ups by government and central banks that cause gross mis-allocation of resources as huge contributor.
- oxymoron 11y ago
  There are other factors here: Automation. East asia remains the manufacturing powerhouse of the world, but even that region is losing production jobs in absolute numbers. Low skilled labour opportunities are disappearing everywhere. Transport. Free trade doesn't cause a sudden loss of jobs to abroad. Cheap and effiecient logistics did. The incentives for moving jobs abroad is there with or without trade treaties. Regulation and incentives. Not sure if it remains the case but most of the major US tech companies including the likes of Microsoft, Dell and Intel used to be headquartered on Ireland due to tax incentives. Unions. Love 'em or hate 'em, they do cause disturbances in the market equilibriums. --- All of this has happened without treaties with either the EU nor the pacific countries. Some automotive factories may have ended up in Mexico, but NAFTA is hardly the reason that the US is where it's at.
  - gonzo 11y ago
    > Automation > ... > Transport Now combine them. There was an article on HN yesterday about autonomous semi trucks. about the only thing that will stop this is the cost of energy, which is all but artificially low right now. If/when it climbs, the economy is in for the mother of all "resets".
  - collyw 11y ago
    I would still say its more down to misallocation of capital. As someone else pointed out, you only need to look around you to see that there is no shortage of work needing done. Are your streets clean? Are all the roads in perfect condition? Has everyone got good healthcare?

a3n 11y ago

I think the productivity reset has already happened, but not in the way you (or I) would hope. That's why wages and confidence of individuals are stagnant, while corporations and stocks are doing well. "The recession is over" is true for corporations, but is open to debate for lots of individuals.

csense 11y ago

The real issue here is globalization. In the post-WW2 years, US workers had a monopoly on labor provided to US firms, and thus were able to extract some of their firms' economic surplus (either through unionization or the threat of unionization). Company owners shared some of their profits with their workers because they had no other choice. Now that trade borders are relatively open, companies have the option of looking elsewhere. US workers can no longer extract the surplus because if they attempt to, their company will simply relocate operations to a different country. It's an either-or proposition: You can have free global trade, or you can have a job market that pays high wages to workers of average skill. You want both, but it's impossible; so we have to make a choice. We've chosen free global trade, and (as the article notes) there's a slow adjustment time in institutions. Figuring it began in the 1970's with Nixon opening up China, it took about 25 years to really be felt (in the dotcom bust, financial crisis and subsequent slow recovery).

digikata 11y ago
Globalization plays it's part, but I think the real root cause is the shift in business philosophy to systematically squeeze margins for short term goals. Worker salaries are one vulnerable facet there, but between businesses margins are tighter too. It basically optimizes efficiency & profits today, but edges out a number of avenues for better long term growth - larger investments in new products within companies as well as the worker pay & savings (which in turn hurts for example self-funded small business starts). In theory, tighter margins means better purchasing power for everyone, but somehow that excess from the squeeze seems to be unevenly sticky as capital flows past the upper wealth brackets.
- pcurve 11y ago
  I agree with both of you, and both are equally valid reasons because ultimately they're cause & effect. I would also blame regulatory & policy screw-ups by government and central banks that cause gross mis-allocation of resources as huge contributor.
oxymoron 11y ago
There are other factors here: Automation. East asia remains the manufacturing powerhouse of the world, but even that region is losing production jobs in absolute numbers. Low skilled labour opportunities are disappearing everywhere. Transport. Free trade doesn't cause a sudden loss of jobs to abroad. Cheap and effiecient logistics did. The incentives for moving jobs abroad is there with or without trade treaties. Regulation and incentives. Not sure if it remains the case but most of the major US tech companies including the likes of Microsoft, Dell and Intel used to be headquartered on Ireland due to tax incentives. Unions. Love 'em or hate 'em, they do cause disturbances in the market equilibriums. --- All of this has happened without treaties with either the EU nor the pacific countries. Some automotive factories may have ended up in Mexico, but NAFTA is hardly the reason that the US is where it's at.
- gonzo 11y ago
  > Automation > ... > Transport Now combine them. There was an article on HN yesterday about autonomous semi trucks. about the only thing that will stop this is the cost of energy, which is all but artificially low right now. If/when it climbs, the economy is in for the mother of all "resets".
- collyw 11y ago
  I would still say its more down to misallocation of capital. As someone else pointed out, you only need to look around you to see that there is no shortage of work needing done. Are your streets clean? Are all the roads in perfect condition? Has everyone got good healthcare?