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Comment by LMYahooTFY | Hacker News Reader

A large factor of the answer to this problem is in the second paragraph and the author glosses right over it:

"This state of things has left analysts stumped. For nearly a decade, the Federal Reserve has kept interest rates at extraordinarily low levels in order to initiate growth and rising demand, inflation, and ultimately higher wages. But the higher wages have been stubbornly slow to materialize."

Interest rates have been dropped into the ground, and it hasn't increased investment(growth). We have the highest savings in the history of capitalism and the lowest level of investment.

This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first.

And I think there is a lot to be said about Wall Street leaching most of the investors' money because it promises better returns than actual investment into actual things with utility.

Wall Street is 'supposed' to be the mechanism for recycling profits into investments so that this wheel keeps spinning. Does anyone honestly still believe it's functional?

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It's because the real unemployment rate is higher than the "official rate". U-6 is the best indicator. Workers are still being pulled into the labor force, hence why wages have not risen despite the labor market tightening. We still have a long way to go to "full employment", at which point wage inflation would accelerate.

Interest rates were held low because the Federal Reserve has limited tools to stoke demand (and heh, who doesn't love a good asset bubble amirite?). It therefore "pushes the string", attempting to use monetary policy when what is really necessary is Congress to act (higher taxes and government spending, or pushing wages up with legislation).

Call your representatives.

It's weird to me that there are all kinds of wacky theories in this thread except for you with the obvious answer: the supply of workers exceeds demand so the price (their wage) is not rising.

We had a really big recession in 2008-9 folks! You might have read about it? We've been recovering since mid 2010...adding 200k jobs per month or so. But these things take time.

Appreciate the kind words, but it's still much more complex then that.

Businesses get anchored to a certain wage cost. In the article, they mention businesses unable to fill roles at $9 or $17 per hour. Well, there may be unemployed people, but they're not willing to do those jobs at those rates. They're not the market clearing price for those roles. If you're offering a wage for months on end, and you can't fill the role, you aren't paying enough. Full stop.

Again, I want to stress that the curious macro nature of what we're seeing is because of a combination of poor statistics and business decisions. I'm sure we're not at full employment yet, and I'm sure business are not willing to pay more for labor until they absolutely have no choice, and I'm sure that time of reckoning is almost here. But not quite yet. Still more slack to pick up, as you mention.

" If you're offering a wage for months on end, and you can't fill the role, you aren't paying enough. Full stop."

I do think that's a big part. At local meetup groups, companies come pitch their job openings, and almost always say "we're having a hard time finding folks - and we're paying market rates!" I will sometimes counter with "if you're offering a rate and no one is taking you up on it, by definition, that's not the market rate". It might be in someone else's market, but not yours. The "market rate" for ipads was $499 for a long time, but that didn't mean HP could get $499 for their tablets.

If you're an employer in Canada, you just get together with your buddies, call up your local government official and "convince" him to launch a program where hundreds of thousands of minimum wage "Temporary" Foreign Workers (TFW's) are imported to fill the gap.

And if you're a jealous high employer of skilled personnel, you just do the same, and legislation has just recently been passed so skilled workers can now be imported just like TFW's.

Now, there will never be full employment across most of the job spectrum so salaries will never have to rise. Add in a top 3 in the world unaffordable housing market, and this is how you eliminate a middle class.

I did find it odd we have an entire article on wages and no mention of immigration. People, particularly on the low end, are not going to get raises if you import new workers faster than the economy can absorb them.

Well it is a fantastically controversial one so it's probably deliberately left out.

On a similar topic it irks me that in one breath people will talk of the power of future automation and in another support large scale migration.

Automation reduces demand for labour and its price falls.

In Canada the narrative is that increased population is "needed" to support social services, but inconvenient facts like certain classes of immigrants, who happen to be one of the largest demographics, pay no taxes when they arrive is not considered relevant to the discussion.

Managing future budgets is claimed to be the motivation for the immigration increase, but does not stand up to scrutiny, and the government is not open to questions on the subject as it would constitute hate speech.

Its the same in Australia

Helicopter families? Wife and kids get citizenship for free school/medical/dental/welfare and tax free capital gains on the house, husband doesn't get citizenship so doesn't have to pay Aus tax or even declare overseas income, and just wires $ for groceries and Mercedes?

Do you also have huge neighborhoods of million dollar houses and hundreds of thousands of dollars of cars in the driveway, but there's no tax base because everyone's income is below the poverty level?

>Do you also have huge neighborhoods of million dollar houses and hundreds of thousands of dollars of cars in the driveway, but there's no tax base because everyone's income is below the poverty level?

Wait, how does that work? I'm obviously doing something wrong...

It's the same issue as in the car market. The advertized numbers are wishful thinking. The final price on the deal is almost always better. But you don't see those numbers advertized, because those open positions/cars will be spotted quickly and thus the offer will be filled quickly. "Market rate" is a concept that only works when their is open outcry, meaning that offers and agreed deals are visible to other market participants.

The flip side of market rate is what employers can afford to pay while staying solvent. We are in the midst of a huge technology disruption affecting all aspects of retail and manufacturing.

What happens to the mom and pop coffee shop or the grocery store that charges more than Amazon Fresh?

Enployment has a bid and offer, both sides are reluctant to cross without desperation.

>What happens to the mom and pop coffee shop or the grocery store that charges more than Amazon Fresh?

Nothing. Amazon Fresh doesn't exist in most places.

>What happens to the mom and pop coffee shop or the grocery store that charges more than Amazon Fresh?

Coffee shops aren't known for being places to get cheap groceries; they're places where you get fancy drinks and/or snacks and hang out and talk to your friends or use the WiFi. In other words, coffee shops are selling an experience, not a fungible good.

If a coffee shop goes out of business because of an online seller, they must have been offering a really lousy experience.

>I will sometimes counter with "if you're offering a rate and no one is taking you up on it, by definition, that's not the market rate"

And what do they say to that? Blank stares? Acting like you're crazy? When I say stuff like that on boards like this, I usually have people arguing with me that no, there really is a "shortage" of workers.

> Well, there may be unemployed people, but they're not willing to do those jobs at those rates.

Yep. That is essentially the crux of it and also why there's a big trade off between unemployment vs a small basic income. With unemployment you collect while having free time and then lose that income stream as soon as you take the job, making the decision to take a job significantly less obvious. With a small (survival level) basic income, having a job means you make more money...period.

It's an aspect of the equation that nobody wants to talk about. In low cost of living areas you almost have an incentive to collect unemployment for stretches because of it.

Taking a low paying job can hurt future earnings, but generally I agree with you. I was once reviving enough unemployment that many full time jobs would have been a payout, at the same time unemployment was not even enough money to pay rent. However, taking a job to slow the bleeding would have been more appealing.

Ya, I agree that there is some stubbornness among employers to raise wages and that more jobs than typical are remaining unfilled as they hope to find someone at their $12 price point rather than just ponying up $14 (or whatever). Probably this is due to the unusually large recession we had. The fact is that employers could get away without raising wages for a really long time. No big surprise if it takes them a while to catch on that the end of that line is neigh.

But ya, mostly slack. Another 2 years or so. Maybe a bit more. The 2020 census could put the nail in the coffin. A shit ton of people get hired for those things.

> they hope to find someone at their $12 price point rather than just ponying up $14 (or whatever)

One of the issues is that it isn't just ponying up an extra $2/hr.

If a company already has, say, 10 employees at the $12/hr price point, they won't be too thrilled about a peer coming in at $14/hr. Most likely, in the short to medium term, they will have to be bumped to $14/hr, too.

So rather than being an extra $2/hr, it's actually an extra $2/hr + (10 * $2/hr) = $22/hr.

> $12 price point rather than just ponying up $14

that's interesting, but has anyone asked the question of whether the business can actually remain profitable if the rate was $14 rather than $12?

If the business can't earn a profit at the market rate for the labour required to run the business, then maybe they shouldn't be in business any more?

I mean lots businesses become viable if you only have to pay $1/hr.

In some cases maybe that's the trigger point where it makes it worthwhile to buy the products overseas (free shipping!) and deal with the uncertainty of when you'll receive it.

The current system sometimes seems designed to fail.

There's a lot of options other than simply offshoring.

Consider externalizing costs, almost no one has a servant pump gasoline for them, I would imagine you have to be very old for "self service gas station" vs "full service gas station" to mean anything to most Americans.

Another option is political corruption, I'll donate $ to your re-election campaign if you create a property tax free zone for my business.

Full service gas pumps are still mandatory in some states in the US.

The point is still valid in the states that aren't New Jersey or Oregon. In Nebraska, Washington, California, Iowa, Ohio and Kansas, all the places I have lived in or worked in my memory I have seen no gas station attendants.

This is largely because the cost and labor of operating the pump has been externalized by pushing onto the car operator.

Retail business do this with cash registers. How many of these jobs will simply disappear? What else can be fully automated?

The counter-point to this is that if people remain unemployed due to unwillingness to accept available jobs at the available pay...at what point do they have to re-examine their own market value?

If a significant portion of the population has a market value lower than the cost for them to have a reasonable quality of life isn't that some kind of fundamental failure condition for society/humanity?

Or is it a function of supply and demand simply changing the rate because we've been perfectly comfortable sending millions of jobs overseas?

As soon as the supply of people needing jobs is low enough that businesses have to pay more to hire...they will do so barring alternative options.

If you have to raise your wages it generally means your competitor also has to raise theirs, so yes, businesses can usually remain profitable.

And if your competition is foreign you're usually even better off -- wages in China have been rising a lot faster than wages in the States.

Corporate profits are up a bit as a % of revenue. Similar labor's share of national income is down a bit. A lot of businesses could afford to pay a bit more.

Just a bit though. There hasn't been some sort of sea change like a lot of people seem to think.

That could easily happen due to consolidation and averaging over sectors. In some sectors with high barriers to entry giants earn a lot, in other sectors, it's trench warfare with competition and <1% profit margins.

If not, then you don't have a business that's viable for the current market.

Or you need to invest in robot cashiers to replace the unemployed people who don't want the wage you're offering.

If that were possible, and in the business plan, you would have a viable business.

It's underway. And maybe it's a good plan, but you don't want to take that step, so you go out of business and your competitors fill in your place. (Consolidation is good for business, not so good for workers.)

> If you're offering a wage for months on end, and you can't fill the role, you aren't paying enough. Full stop.

Right. But don't forget that it's possible for a wage to simulatenously too low and too high.

It can be too low to higher anyone, but too high to be profitable to the employer. And in that case, the job is defunct.

I wonder if the discussion of wages captures everything. Particularly for those we expect to "draw back in" to the labor force. Will a few more dollars an hour change things, or is there something about the nature of the positions that makes them unappealing to people out of the labor force?

Also, companies do have a ceiling on how much they can pay without raising prices, and to the extent you want to pay people fairly, you would have to raise wages for all your employees.

I suspect the liberal arts majors in the C suites are waiting for AI to solve their labor problems. They don't understand how much labor is required to capture AI-caliber data.

It is true, but it's begging the question. Instead of "why are people unemployed?", it just becomes "why are business not hiring?"

Most of the replies are then trying to answer the second question, because the refraiming is very likely a good one.

… then why are employers struggling to fill positions, as per the article?

Given the choice between toiling and not being able to make ends meet, or playing videogames and not being able to make ends meet, Americans are choosing Halo. That's not complicated.

How do they make money playing video games?

They don’t. So what?

How do they live?

https://en.m.wikipedia.org/wiki/Hikikomori

http://www.theblaze.com/news/2017/04/24/the-number-of-millen...

> It's weird to me that there are all kinds of wacky theories in this thread except for you with the obvious answer: the supply of workers exceeds demand so the price (their wage) is not rising.

That's not why. Japan has had full employment for 20+ years. Their wages have steadily declined for 20+ years.

http://www.macrotrends.net/1377/u6-unemployment-rate

The U-6 rate is at pre-recession levels though? And it's only 1% away from pre-Dot Com levels?

In the UK the broad employment rate (including people not seeking work, students, homemakers etc) is the highest since the 70's. Yet wage growth has been much worse than in the US, and the rest of the EU barring Greece. So I think the story is a bit more complex than be explained by classic macroeconomic theory.

But if you are unemployed in the UK and relying on benefits to survive, if you try to negotiate salary and get turned down for a job offer your benefits will be sanctioned and you will have to rely on food banks for X weeks until the sanction expires, so negotiating on salary becomes a very risky proposition.

That is crazy. Negotiating Salary is just about the only place a worker as an advantage and can get ahead. I though all the anti-consumer and anti-employee laws were in the US.

Good point, also, there is a huge pool of skilled and unskilled workers in the EU to draw from, especially hard hit countries like Spain, Italy and Greece with stomach churningly high unemployment rates. Studies have claimed this has a negligible effect on wages, but I find it hard to believe.

>This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first.

This makes a lot of sense. I constantly get the feeling in the US that we don't actually "do" anything anymore. And I don't just mean manufacturing. You look around at the rest of the world and infrastructure programs are at the forefront of every expanding economy. China, India, Turkey. All pouring hundreds of billions into great works at home and abroad.

Where are the massive capital expenditures we saw in the 19th and 20th centuries? America has the largest population of highly skilled, financially endowed consumers on earth yet the most that any genius Venture Capitalist can figure out to do with these billions in free money from the fed is come up with a new skin for IRC.

"The best minds of my generation are thinking about how to make people click ads," said Jeffrey Hammerbacher.

For the last decade, the "best minds" (by one common measure) have been going to hedge funds - helping a small group turn money into more money. It's not a sustainable strategy, and countries that take a different approach will eventually become the economic leaders.

Peak Gametheory.

>You look around at the rest of the world and infrastructure programs are at the forefront of every expanding economy. China, India, Turkey. All pouring hundreds of billions into great works at home and abroad.

So is the US government! They poured $1,4 trillion into Iraq and Afghanistan.

insightful. care to explain what was the expected return on this investment?

To be greeted as liberators.

> Where are the massive capital expenditures we saw in the 19th and 20th centuries?

Those expenditures are still around: they built the roads, runways and skyscrapers that we all use today.

Why do developing countries spend a lot more on development than developed countries do? That's almost a tautology.

A lot of the infrastructure we use today is so old that it's crumbling, and has been for years. Few people are interested in doing anything to fix it.

During the last administration, we had a fake 'shovel-ready' infrastructure program to boost economic growth. I say fake, because mostly very-visible PR projects such as changes to roads and parks got funded. Not real infrastructure such as sewer plants, under-street pumping stations, painting the underside of bridges and other invisible but essential projects that have been 'shovel-ready' for a decade but still undone.

Biggest waste of public funds in a generation. And mostly used to build further infrastructure such as roads, burdening the maintenance budget even more. Instead of helping.

> Biggest waste of public funds in a generation

A certain little jaunt through the middle east would like to have a word with you.

Nearly all of that spending was simply added directly the national debt, very little actually came out of the general fund.

I'm sorry I'm taking your bait, but obviously it is the same waste of money whether you pay for it with cash or on your credit card.

Surely there are some negative side effects of more a trillion dollars of debt!

Ha! But did that accelerate our maintenance backlog? Never mind the money; its about the physical infrastructure we've got to keep up.

>Why do developing countries spend a lot more on development than developed countries do? That's almost a tautology.

I don't think it's as simple as "we're developed now". Is there some arbitrary set point at which a country is completely "developed" and we should just stop doing things? Why is there such an aversion in this society to "spending money" as if it's something that we are losing rather than simply putting people to work and generating economic output. The complete gridlock which has gripped the US over the past 40 years has left vast amounts of the population sick and dying with no hope for anything.

We do not need any more infrastructure because there is _enough_ infrastructure. And material goods, for that matter.

Do you want a limitless money sinkhole with largest positive externalities and quality of life effects? Try science.

"We do not need any more infrastructure because there is _enough_ infrastructure. And material goods, for that matter."

.... Kind of, and much of what we have could be upgraded. Some folks can't get clean water out of their taps (lead!), some folks have really crappy internet (dial-up or otherwise slow speeds). I'm pretty sure some areas could use an electrical grid upgrade. Railroad tracks laid long ago now block traffic and some crossings have a lot of accidents, and could be rerouted (some communities have done so, such as lafayette, Indiana). Many of our bridges are in disrepair.

Yes, but all those (except maybe internet) are routine maintenance-level tasks, as opposed to megaprojects.

Tell that to the hyperloop guys and watch them despair.

Happily. Who needs hyperloop when airline tickets are this cheap?

There are places around the edges that need major work. Our population is expanding, that means we need new houses for the new people. Once in a while houses burn down or is otherwise destroyed. Likewise water treatment plants need maintenance and upgrades, and sometimes we need a new one; but for the most part people have perfectly safe water.

On the whole though there are a lot of perfectly good roads and houses that just need a little work to keep them up. It is better to not build more than we need. I could tear down my perfectly good 2000 sq ft house and build a 4000 square ft house - but my current house is big enough for my needs so I'd rather sit back and relax.

There might be "enough" infrastructure, but it could be maintained a lot better. The power grid could also use some modernization. If you have money to sink you could also try building lots and lots of solar panels, batteries, and wind turbines.

Agree with the big-picture areas that you've highlighted, and it's not like there are not local issues that need addressing.

St. Petersburg shut down a sewage treatment plant last year, and in the same year spilled 200 million gallons of sewage into the bay. For that, the city faced an $820,000 fine, which seems incredibly light. Just Wednesday this week, the city spilled 50,000 gallons of 'mostly treated' sewage into the bay. I can't image that St. Petersburg is the only city with this type of problem; though, I hope I'm wrong.

> Where are the massive capital expenditures we saw in the 19th and 20th centuries?

we have been at "war" for 15 years

Not the US government, but Elon's gigafactory and SpaceX are fairly large technological and manufacturing developments.

You've summed up my feelings well: I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar. And yet I don't trust that the stock market numbers represents actual growth. It's propped up. When does this end?

> I can't afford to not be in the stock market as all other financial investments pay peanuts on the dollar

If the market crashes then cash outperformed. There is also a lot in terms of bonds, structured products and fund products between cash and equities.

You shouldn't necessarily be all equities. Look up "Risk Adjusted Return" and "Modern Portfolio Theory."

You can significantly lower variance (risk) and at the same time only slightly lower returns using diversification.

Eh, futzing with your asset allocation is significantly less important than budgeting well, managing your lifestyle/expenses, and making your career work out well. You can retire without beating inflation, let alone stock market indexes.

Retire without beating inflation? Does this involve saving 30% of your paycheck for 40 years?

It can. Depends on how much you make and spend. You can retire with zero savings if you can control costs to beneath what social security pays you, but it'll be really rough.

You're talking about allocating some set portion of your savings as bonds or cash, and occasional rebalancing away from your higher returning investments to maintain the proportion?

At the most basic, yes.

Take a look at this chart, it explains it way quicker than words could.

http://cdn.financialsamurai.com/wp-content/uploads/2016/06/T...

Note dropping from 100% equities to 70% equity and 30% bonds drops your return by about a percent while dropping your risk (variance) by just over 4%.

Taking on additional risk leads to a higher expected return, but you can see that more and more risk leads to increasingly marginal amounts of additional return in exchange for large amounts of risk.

The comment I was responding to felt distraught that he had to be exposed to the heavy risk provided by only investing in equities, when he could sleep better at night using investment diversification (ie different types of investments, not different stocks) while still maintaining a great ROI (certainly better than the negative ROI of just hoarding cash).

>Interest rates have been dropped into the ground, and it hasn't increased investment(growth). We have the highest savings in the history of capitalism and the lowest level of investment.

Savings _rates_ in the US are actually low by historical standards: https://tradingeconomics.com/united-states/personal-savings (click the 'MAX' timespan toggle). Low interest rates discourage savings and encourage borrowing. One of the fundamentals of economics is that all other things being equal, in the long term savings is needed for growth: if we consume everything we produce, then nothing remains to be invested, so productivity won't increase. If we save more, then we have more to invest, and this greater investment will increase productivity more.

The key thing to note here is that it is investment of forgone consumption that produces value (at a simple level, compare saving some wheat seeds to plant next season vs eating them all as flour). Lowering interest rates, printing money and similar things don't achieve this: they can create _money_, but not necessarily value. What they can do is increase demand, to address temporary shortfalls in demand, which under a popular form of economic reasoning will produce more growth than letting demand slump. That demand-boosting approach is however meant to be used as an immediate solution to a temporary slump, not an ongoing thing, as few economists deny a long term positive relationship between savings rates and growth.

There've actually been attempts to model what the ideal savings rate would be: https://en.wikipedia.org/wiki/Golden_Rule_savings_rate. Such models seem to have little influence on interest rate policy, however.

100% Agree. And this is my 2 cents of WHY:

Basically all current investments are high-risk in the age we live in, because we are "at the brink of the chasm" on all fronts:

- general technology: ...the barriers to market are so low that a startup can spring to being at any moment and eat all your profits away

- (social) media / communication: anything can change anytime, today's Facebook can be tomorrow's Hi5

- biotech: we're getting closer to the "you can do it your garage stage" which will change everything

- world politics: India and China are big players now and their moves can no longer be predicted, also US internal politics is a cauldron of volatility, and in a decade or two we'll have the "New Africa" rising... good luck predicting anything

- ML/AI: we might be at the brink of f Singularity with superhuman-AI around the corner... but we have no idea whether it will be in 5 years or 100 years (!) ...this alone is enough to fuck up all worldwide future prediction on anything... when you're staring up from somewhere around the foot of an exponential curve everything looks like "wtf, nothing makes sense"

And also, the last economic "crisis" increased everyone's aversion to risk, kind of the opposite of what you'd need now to increase level of investment...

What needs to change is the attitude of people with money towards risk! I'd love to see people like Elon Musk succeed long-term, not because I like them or what they are doing, but because they are the only ones with an attitude that can create growth right now.

We should really re-learn thinking and working with volatility, maybe starting from what Nassim Taleb says in his Antifragile (https://www.amazon.com/Antifragile-Things-That-Disorder-Ince...) and his talks like How to Live in a World we Don't Understand (https://www.youtube.com/watch?v=iEnmjMgP_Jo - warning: he's a terrible speaker... and not a great writer either, so getting to the root of his ideas will take time). Maybe not. But current "risk reduction" attitude cannot work (hint why: even if you reduce Infinity by 20% you still have f Infinity!).

Labor income has stagnated because we have a glut of labor.

Corporate profitability continues to grow because of increased productivity (increasing the surplus), which they haven't shared with their investors, employees, or government (taxes).

Corporate savings continue to accrue because their (effective) tax rate is low.

Whatever can be said about (low) interest rates, its effect on wage stagnation is second-order, at best.

The solution to this is plain and simple wealth-tax that can only be avoided if their investment creates X% jobs.

There are corner cases to it but the underlying reasoning is, if your investment is just lying around accruing wealth, it's bullshit wealth.

So if I invest money into a manufacturing process and build an automated factory that can do with 100 people what used to take 500 people, and then I therefore lower costs to all the people buying things from me...that's now bad? And I get to pay an extra special wealth tax for my trouble?

LOL

Yes. You built an automated factory by accruing profits originally from workers. That profit either needs to be given back to the workers by compensation or taxation.

You specifically didn't do much. Your workers did. If they make you rich and lose their jobs in the process, you pay them back.

> You built an automated factory by accruing profits originally from workers

Did you? If the workers bought the factory, how are you involved? Didn't you enable them too?

Yes, workers with increased productivity almost always get paid more.

That's very clearly untrue. There are plenty of studies showing this is not the case.

Almost all workers are significantly more productive but wages have remained flat for a long time.

Mean productivity has increased while median wages have stayed flat. What people think is a story about wages decoupling from productivity is actually a story about the variation of productivity among workers getting higher.

You can tell this is true because labor's share of income (vs capital's share) has remained fairly constant. It's the distribution of this share between different workers that has changed.

Do you have any examples of these jobs that are now more vs less productive? I'd say the average Starbucks / fast food worker are significantly more productive while making less comparatively.

Labor's share of income vs capital's has not remained constant. Not even close.

Labor's share of income vs capital's has not remained constant. Not even close.

Sure it has:

https://taxfoundation.org/walkthrough-gross-domestic-income

No, it hasn't. Tax foundation is a conservative think tank, they're not a trustworthy source for this info.

https://fred.stlouisfed.org/series/W270RE1A156NBEA

Every time I engage with a libertarian (always a pointless endeavor) I feel like I have to take a shower after. Just.. ugh.

The graph in your link is reproduced almost exactly in the link I shared (as chart 1). It doesn't take into account non wage income and a few other things.

Yes, or you will have no one to buy this things from you when everyone will automate everything, then most people would have no job.

System works now because some of the money goes to middle and lower classes, not all is accumulated on the top. If you accumulate all the wealth in the top without any mechanism of distributing it in lower classes then whole system will collapse and you (as someone on top) will probably end up like in other revolutions in human history, hanging up from the tree.

What level of wealth inequality is necessary for revolution? How has that changed over time?

This is an interesting question. In general, if you leave a huge chunk of your population in miserable conditions, at some point they will say, with legitimate reason, that the current system is fucked up, and with no way to remedy that, will not obey the laws any more. e.g. the French and Russian revolutions, as well as Communist Chinese one, were caused by the huge tax burden being placed on the poor while the wealthy often paid very little, or used their political influence to get tax breaks, which left the state broke and unable to raise revenue. A weak state + unhappy populace == revolution. This is why the Chinese government is very concerned with keeping economic growth high. This is why India has 0% tax on farmers/agricultural goods (so the State can't be held responsible for their misery).

This is why Republican/Libertarian efforts to eliminate or reduce Government is so fucking scary. Of course there are legitimate reasons to be concerned with limiting govt. overreach. But the Govt. is a required political social entity and we've gotta keep going. Whats baffling to me is that so many wealthy people don't get this. If the Government goes away, their wealth is gonna get torched/taken.

Anyways to answer your question: I don't know what the proportion would be, but likely indicators would be... unemployment level and uninsured rates. People with no healthcare and no jobs/money === desperate people whose survival instincts will kick in.

Isn't the anarcho capitalist theory that they can hire their own private security to protect their wealth? I imagine it would be like multiple Mafias running things.

It's generally held that government is a local monopoly on violence. Anarchy is in these terms an unstable local minimum, and the first two thugs who agree not to plunder each other's pockets have started the cycle of government again. Generally I think corporations and (other) criminal organizations rely fairly heavily on the existence of some state, even a nominal one. Criminal activity when you are the law is simply bad governance. Either way, you can't construct a society based on a logical contradiction.

Are your indicators perhaps proxies for the cost/availability of basic foodstuffs?

Only the case if all goods are the result of automated factories, which isn't true.

And if it were, you wouldn't need anyone to buy anything - whatever you might want can be made by your factories.

> Only the case if all goods are the result of automated factories, which isn't true.

And which physical goods production can't be automated? Probably 99% can. There are first farms that are already fully automated, so whole chain along with transportation can be automated in future. You have any examples of whole industries that can't be automated? Because I can't think of any that can't, it's only matter of getting cheap technology to do that.

> And if it were, you wouldn't need anyone to buy anything - whatever you might want can be made by your factories

This is false, you don't have infinite amount of resources and for sure you don't have enough money and space to build factories for "whatever you might want".

I disagree. The aviation industry is pretty far ahead of the game in terms of automation - you book and check in online these days, much of a pilots work is automated, baggage handling is semi automated, yet the industry still needs loads of staff. You can automate 90% of a job, but in the end there is some stuff its just easier to get a human to do, or more to oversee.

Why just physical goods?

But in any case - A hand-made item? Which apparently adds worth..

> have any examples of whole industries that can't be automated?

depends what you mean - at what technology level?

Can modelling be automated? maybe. Can barista-ing be automated? Maybe. Can programming? To some degree..

> you don't have infinite amount of resources

luckily, most needs are finite.

> you don't have enough money and space to build factories

The premise is everything you want being automated. If space/land is not automated, that breaks the premise. So there is something you'd pay people to obtain - land rights. A short transfer of all land to the elites later, and you have enough space for anything.

> A hand-made item

This is just a marketing gimmick (in case of products that we have technology to produce also by machines) in the times we live in to make you pay more for a product.

> Why just physical goods?

Because you can automate production of almost all physical goods. A lot of services also, but to certain degree, simple tasks only, state space is just too big in case of more complex services for today technology.

> depends what you mean - at what technology level? Can modelling be automated? maybe. Can barista-ing be automated? Maybe. Can programming? To some degree..

That's why I was not writing about services but physical goods because in case of services it hugely depends, some can't be automated with our current understanding of the world around us.

> luckily, most needs are finite.

This is false.

'The world has enough for everyone's need, but not enough for everyone's greed.' - Gandhi

You need to take humans into the equation. Make everything for free because it's automated and you will see 7 billion orders for Ferrari, Lamborghini etc. You have enough factories to make those in 10 years? 20 years? 100 years? Take physics into equation and amount of factories/transportation for all the resources and parts to make those products, just those products, what about other things? This will not scale on earth.

> So there is something you'd pay people to obtain - land rights.

Most people on earth do not own any land at all.

> A short transfer of all land to the elites later, and you have enough space for anything.

Read history, this would end like it always do, elites that would try that would be eliminated and replaced with new elites from proletariat. Remember that elites are protected by police and law only because other people allow that, not because this is something written in stone. Earth was already ruled by kings, they owned most of the lands, look how it ended.

> This is just a marketing gimmick

as are entire industries. Human life is ultimately meaningless, so all human pursuits are too. Restricting this argument to utilitarian good begs the question - to what aim? Aesthetic good exist at the top of any manufacturing chain.

> Because you can automate production of almost all physical goods

But, wasn't the argument a "what if" scenario in which no-one could get jobs? So physical goods are all automated - just means jobs exist in other areas now.

> - Gandhi

I don't rate the guy, but it sounds like he's talking about the worlds current resources, not future resources.

> You have enough factories to make those in 10 years?

everything is automated, remember? So the factories are made by factory-factories...

> Read history

I don't buy this kind of prediction based on historical analysis.

> elites are protected by police

police have always been human - will this be true in the future?

> Earth was already ruled by kings, they owned most of the lands, look how it ended.

How?

In some ways, yes, it actually is bad. Depends on your perspective.

As a very simple example, imagine that you were able to fully automate, such that you required zero workers. Imagine further that all other businesses did the same.

If literally all imaginable human work was 100% automated then the cost of goods and services compared to today would be tiny. The poorest member of that society would live like a king from our present day world.

The problem is, the plebians would not be able to get a job to pay for the goods/services no matter how cheap they may become.

If you had robots making everything you could possibly want, why would you bother selling any of it to people who don't have any land, natural resources, or rare skills? They wouldn't have anything you want.

Why bother selling it at all? You could just give away the things for free. The marginal cost of an item is just the energy needed to produce it. With robots building solar panels or something like that, those costs are negligible.

Because it still takes effort to give things away for free and as a robot owner, natural resources, land, rare skills can't be automated away.

Effort is a human skill, which the premise states is already automated. As are rare skills.

If you can even automate giving things away without worrying about people hacking/stealing/vandalizing your robots, then wouldn't it also be likely for you to spend all your resources on combat robots to take resources/land from other robot owners instead of wasting them on people that aren't giving you anything you want?

Why would the elite worry about that, life is good in a monopoly, no need to upset the balance.

Because resources don't last forever? Nor are they distributed among the land equally (for example oil,rare earth elements, uranium).

Those are all current resources. The general currency is "energy" and "materials", and even materials are based on the energy in creating them (I don't think REEs are that rare, but they are hard to process).

There is no research to even suggest that we are going to be able to synthesize one type of matter to another arbitrary type without expending an absurd amount of energy, making it useless to do.

The idea that you could do something like that is even more outlandish than having robots that could automate everything a human could.

> one type of matter to another arbitrary type

But I didn't say this.

Certain materials can be substituted for another, but for high energy costs in making them.

Why would you give it away for free? Also, you're forgetting the cost of raw materials.

>If literally all imaginable human work was 100% automated then the cost of goods and services compared to today would be tiny

Well, that assumption is pretty general and doesn't account for natural resources/raw materials, energy inputs required for production, or other factors. It would also vary per sector, such that the statement is far from universally true.

>The poorest member of that society would live like a king from our present day world

But, regardless, there would be some cost for goods. How do you propose the now 100% unemployed population pay for anything, let alone "live like kings"?

The answer is that you would need to devise a method of wealth distribution that is orthogonal to capitalism. Say, for instance, a tax that subsidizes everyone else. That, of course, would not be capitalism.

The point is that wage labor is fundamental to capitalism. Somewhere between our present state and 100% automation, a capitalist system requires so much intervention that it breaks down.

I think taxing property ownership is the only natural conclusion i can draw from such an ultimate end-state. If you own any property, you pay a tax, and that tax is fed to those who do not own property, in such a way that they survive.

The cost would be low, but since nobody would have a job the prices would be astronomical. Multiply people's purchasing power by a million, great, but a million times zero is still zero.

>The poorest member of that society would live like a king from our present day world.

You forget things such as: meaningful work, respect from society, crime, cultural differences between the poor and the rich, interclass upward mobility (see any sociology textbook), intellectual stimulation.

No, capitalism would eat itself, you can't run an economy without consumers.

One could say it would hang itself by its own rope.

I think at that point we could say we "finished" capitalism and we'd have to move on to another system to keep society functioning.

Sounds like a post-scarcity utopia to me, depending on how large the set of "all businesses" is and what we do with the surplus in production :)

Ha! Sign me up.

Actually, I like the idea of work. But, at some point, we will have to "artificially" employ people or, of course, implement a UBI. But, even with the latter, we'll have to re-imagine our relationship to work and its role as a source of self-worth.

There's this idea that without work, we'd all just instantly self-actualize and write poetry or paint masterpieces. Not sure why we imagine this vs. the more likely reality that we'd instead sit around sharing cat memes, making heinous YouTube comments, and generally getting dumber.

I'm not sure if society is really ready for a post-work world.

I'd rather people sat around watching cat videos than we forced them to dig holes and fill them in again.

Well, that "artificial" employment I mentioned would presumably be at least somewhat fulfilling--i.e. pretty much what you see today. By artificial, I didn't mean running in hamster wheels or digging holes. I meant more that we employ people for jobs that we could technically automate.

Of course, that's not ideal either. My main point was that a UBI (or not having to work) wouldn't be the instant panacea that some suggest, leading to a sudden heightening of the human race as we are collectively released to pursue our higher purposes.

On the other hand, I'd sooner they dig the holes, than make more youtube videos..

Why? For penitence?

Less crap on the internet, the less shit youtube recommendation engine has to fling at me.

It's not bad. If I had my way (and implementation weren't impractical), you would still pay a special tax, specifically balanced to cover for the unemployment benefits of the 400 workers you fired (or never hired in the first place).

Of course not all of them will be unemployed, so you only have to pay for 100 + (unemployment rate) × 400 people.

If the cost of your efficiency increase is not too high, you get to pocket the difference.

Unless your automation is as expensive as hundreds of workers, this will likely still be a large sum.

What if I don't build the actual factory. What if I just have the idea about how to improve the process and publish a paper about it. Then someone else actually builds the factory?

Then who pays the tax?

What if I invent a whole new product category that obsoletes a whole industry? Not a lot of people manufacturing typewriters anymore.

What if I invent a cheaper way to ship goods from China making it easier to shift manufacturing there? Who pays the tax then?

What if I'm an employee at the factory and I figure out a better way of doing things so that I can take on additional responsibility so when Bob (the guy next to me) retires we don't have to hire a replacement? Then do I pay?

And how long does this tax last? Forever? Are people still paying taxes for all the farmers we don't have to have anymore?

How confident are you that you can really write tax rules that make sense for the infinite number of scenarios via which productivity is enhanced in a modern economy?

I said myself that implementation wouldn't be practical, so this is more of a thought experiment. But in all these cases, I think the person who profits from the change should also bear the cost it has on others. So if you invent a way to increase productivity, there is no need to pay; but if your employer uses it to make their workers redundant, they should provide for their continued livelihood. Of course this doesn't really work when a different industry is obliterated (which is why this is impractical).

> And how long does this tax last? Forever? Are people still paying taxes for all the farmers we don't have to have anymore?

Assume for a moment that being a farmer were hereditary and they couldn't do anything else anyone would find of value. Then when you replace all of them by machines, you make huge profit, but also leave hundreds of people without income. In such a case, I think it only fair that the farmers and their descendants be provided for indefinitely.

That this tips the scale against automation is not exactly bad: if the farmers have to be provided for anyway, additionally maintaining machines to do work they could do just as well is a further cost that should be weighted against the benefits.

However, in reality most people can learn to do other work, so automation can still end up a net positive, even when the needs of the displaced workers are taken into account.

I guess the problem will solve itself when workers will either employ themselves as revolutionaries and looters, or the beneficiaries of automation pay the equivalent of this tax to prevent this from happening.

Wow! Gotcha! Turns out modern economies are complex. Who knew?

But our economic system is literally grinding to a halt, which means it's not exactly perfect. I for one welcome suggestions, even if they're only slightly less imperfect.

how about a flat tax for re-education for obsolete workers instead?

There's a slight problem with the labor force such that if you let people select their own major, there are currently about twice as many state-U education major grads as there are K12 openings per year, at least in my state. This is why you can hire a newly graduated teacher for $17K/yr while still turning away all but the upper half of applicants.

Of course you could only fund the re-education of certain job fields, centrally controlled economy style, but that never worked well for the Soviets and you'd likely end up with political goals like flooding the programming market with really bad programmers who none the less work for $7.25/hr (or less) because of the "shortage". It might be possible to actually destroy economic sectors by flooding them with unqualified people. Would you go to the hospital if you knew the doctors were intentionally uneducated?

The problem with re education is it isn't likely to be any more successful in the long run than non-re education. Its the same people with the same brainpower operating off the same observed signals. If a quarter of the population was improperly educated the last time they went to school, the result of re-education is virtually certain to be a quarter of the population being differently improperly educated. Its sort of like handing out money to rebuild housing in flood plains, you know you're just going to be handing out more money to the same people in a couple years.

If we automate most of the manufacturing and other low skill jobs then you will be left with part of society that do not have predispositions/are not smart enough for creative/high skill jobs. And this accounts for a LOT of people. Education will not help in that, this are the people that couldn't get through education system in the first place, that's why they don't have any/low education.

A lot of service jobs are driven out by high cost of doing business; entrenched existing businesses are the source of re-election funding.

My neighbor bakes nice cookies. I have programmer money. You can guess whats supposed to happen here, but legally can't happen. Some education might help a little with WRT food safety, but it doesn't matter because the purpose of the government is to prevent her from going into the cookie baking business and compete with existing processed food factories.

The ultimate micro-brew isn't some multinational corporation spending lots of money on branding, but its the guy down the block. That of course is incredibly illegal, because the multinational corporation decides whats legal or illegal.

My wife's favorite hairdresser became unemployed due to the cost of health insurance; for awhile she cut hair at home on the side, but the .gov comes down heavy on that for obvious financial reasons.

Some sort of ideal world for lower IQ / lower functioning people would require better government. Rather than the government existing solely to protect Nabisco Inc sales, you'd have to refocus it entirely on safety and small business support services so my neighbor can sell cookies.

If my neighbor did all the homemade baked goods for my entire subdivision, I'm not entirely sure she's be poor, either. If she ran a 50% profit margin and everyone in my subdivision dropped $2/day for baked goods service (like she'd hand deliver you a hot loaf of bread every day?) that would be 6012500*0.50=$180K profit per year, not bad for an area where the median household income is a hair under $60K. Of course the purpose of the government it to annihilate small businesses in favor of large businesses.

Your examples are poorly chosen, but the general argument that government regulations exist to protect entrenched business interests is nonsense. Regulations exist for consumer protection, and regulatory compliance is highly unlikely to be the biggest barrier to entry in any business category.

They may have originally been created to protect consumers, but they've been manipulated and lobbied for so long that they now exist to protect entrenched business interests.

Repeating the argument does not make it more correct. If you're trying to contradict the idea that government regulations are not a large barrier to entry you might show some evidence, preferably in the form of a peer-reviewed study. Your study should also compare the externalized costs of not having said regulations. Even better would be to admit that you've been drawn into a ridiculous position and exit the conversation with as much grace as you can muster.

"contradict...not...barrier" is a triple negative, too much work for me.

Samuel Johnson springs to mind, but if you'd like, substitute "contradict the argument of my previous post". I would prefer that phrasing, but I've often been disappointed at the tendency of people to take issue with small ambiguities or details at the expense of the actual argument.

No need for any ability to avoid it. You could replace nearly all federal taxation with a 50 basis point net asset value annual tax.

I for one would rather pay 0.5% of my book value than the vastly larger amount in income taxes I pay. And it's a small enough value I think even extremely thin margin businesses could probably afford it.

Everyone on HN says "People would just flee" but in the end almost all the value in the US is real assets i.e. you can't move a physical building overseas.

Except that -- as a practical matter -- identifying all assets and assigning a dollar-amount to each one requires enormous overhead and intervention.

This is even more true when you consider the incentives people have for hiding assets and cheating the system, and their ability to do it over many years or even cooperatively.

That's one major benefit of the income tax option, that measurement is actually easier, even when you consider all of those non-wage incomes.

This is absolutely true, I was thinking you could certainly structure it differently than the annual tax system we have now, and certainly in similar property taxes there's an assessment problem.

I don't have any answers for those things, but it's an interesting thought experiment - what would such a thing look like for relatively easily valued assets vs very difficult to value assets, etc

Perhaps you could simply structure it as a transactional cost, but of course, that causes overhead on every transaction. Backdating would be ruinous and cause people a strong incentive to transact often which is probably perverse.

Also, the US already has you pay taxes on any wealth you expatriate.

Only really a problem if you intend to return.

Do you have any links or books on the topic or this specific calculation? Sounds very interesting.

To be honest I just back of the enveloped it, taking into account the stated revenue for the entire federal government and the putative value of all real, physical or financial assets in the continental US. It would be somewhere in that order of magnitude for sure.

I think the larger question is the implication that (assuming we moved to a purely wealth tax), there's a minimum rate of return on wealth - this is already functionally true, but it sets an interesting floor to the return on investment for an asset.

I'm by no means a financial wizard, I'm sure there are huge flaws in the idea I can't see after an hour's thought, I was just playing with the idea, but it seems like it solves a lot of the problems inherent in income taxation - different entities (people, corporations, foreign investors, etc) being taxed at different rates, the relative spending ratios of various income brackets, etc.

It follows essentially a similar line of thought as the land value taxes, except of course applying to all assets.

Sitting on money isn't profitable either. Equity investment is a risk, and simply saving it is a loss (due to inflation). It's just that businesses don't _need_ to spend more on payroll to be successful, or they don't see the relationship of that investment to payoff vs. any other investment they could make. And to be fair, it _is_ rather fluffy. How many more dollars do you need to pay on a position to get 10x return? Can you even quantify that at the level of a single business? If you pay a lot, but have a shitty workplace culture, you may be just as unproductive as a place that pays less, but has a great culture.

Unfortunately dollars for employees doesn't necessarily translate to return as well as, say, hiring a process manager or automation engineer to try to eliminate the effects of a bad employee.

>> Unfortunately dollars for employees doesn't necessarily translate to return as well as, say, hiring a process manager or automation engineer to try to eliminate the effects of a bad employee.

Like I said, there are corner cases. But most businesses would rather fire an unproductive employee than keep them around just for tax breaks.

I wish. Getting bad apples fire at anything but a retail store or a McDonald is very nearly impossible. And since bad employees attract bad employees, a lot of companies find themselves in a position where they're hiring like crazy and productivity isn't going up. Often, they're oblivious to the root cause.

Seems like the cure is worse than the disease. In addition to incentivizing investments that create more jobs at the expense of those that create less (using robots, software, and all that), the government must now evaluate and track how many jobs all investment vehicles create.

Also, queue massive new industry that specializes in creative job accounting/number fixing in 3, 2, 1...

Yes, also more work for the tax lawyers, accountants, and lobbyists as the tax code becomes that much more complex.

>> Seems like the cure is worse than the disease. In addition to incentivizing investments that create more jobs at the expense of those that create less

Here's the thing. There is still more money to be made by hiring fewer employees (because employee payroll cost > tax break).

Will it slow some things down? Sure. But it will also disincentivize the current slaughtering of humans.

>> Also, queue massive new industry that specializes in creative job accounting/number fixing in 3, 2, 1...

What do you think the current set of laws do? >>

Oddly enough, Amazon is apparently the only major corporation utterly committed to spending every nickel it earns. Creating plenty of jobs in the process. Keeps the money moving.

I'd not thought to couch it in these terms, but yeah, committing to 4% operating margins is essentially committing to spend all their revenues.

Not sure how much it keeps the money moving, but I'm sure it encourages investment and growth.

That sounds not at all plain not simple.

Ah, so either take the risk or get taxed? Kind of bold.

It's basically a choice between:

1. Hire more people and get a tax break

2. Innovate and hire less people and have smaller payrolls

Both are win-win for companies and customers and employees.

Today, it is just point 2.

Man oh man could you ever game a tax like that. Start a small company and hire your own family at minimum wage would be cheaper than just paying the tax.

That would introduce a ton of perverse incentives.

>> That would introduce a ton of perverse incentives.

That will also solve the unemployment problem and incentivize people to start small businesses. The family members will also have a choice between working minimum wage for their own business or seek a higher paying job, pushing wages higher and higher.

Sounds good to me.

You are seeing what happens to a workforce that lacks any kind of EFFECTIVE collective bargaining system.

That's blatantly not the issue, as supported by the actual facts of the global economy.

The French have seen their wages grow at 1/4 to 1/2 the typical rate of American wage growth for the last decade. They do not lack for collective bargaining.

The American median wage is higher than the German median wage. The Germans do not lack for collective bargaining.

The American economy and median wage has outperformed: France, Germany, Spain, Italy, Finland, Britain, among many other developed nations.

The American median wage is also higher than: Sweden, Finland, Netherlands, Germany, France.

The American median wage is so high, nations such as Britain barely qualify as matching up with our poorest states.

So much for your theory.

Wages aren't everything. Many of these countries actually provide stuff for taxes. Living in Norway, I can go to school for a nominal amount. Health care is included in taxes, and doctor's office visits are reasonably priced. Folks working at low-paying jobs tend to be much better off, plus there is an actual safety net. Public transportation is vastly better overall.

There is a strong union presence here - both for normal employees and management. There are also actual laws to protect workers. This includes things like paid vacation, paid time off if you are sick (more if you have children), paid leave after having children (some of which can be split between the parents). Everyone is entitled to a job contract - even for temp jobs or fast food workers. Not all of the costs for the benefits is paid for by the employers: Healthcare is a tax, vacation pay is withheld from the employee's wages and paid the next year, and the government (taxes) pay for sick or parental leave.

Nope, it isn't perfect, but it surely isn't representative of the picture you paint because the one you paint leaves out the quality of life stuff.

All of those countries have cheap or free higher education and healthcare. Perhaps they don't need wages as high since their government chooses to cover two of the largest expenses an average person will encounter in their lives.

That makes no sense. Taxes come from wages. When the gov't gives you something, it's paid for with the money they received from you through taxes.

But by banding together, and pooling the money from the average and the very wealthy, most people are able to get education and services that they would otherwise be unable to afford.

They could pool their wages without a union.

This is referring to taxes.

I'm pretty sure that not only does this guy have no sources, but is outright wrong in the case of Germans.

The American Salary is higher that Germans, but Germans also work less hours on average (with higher productivity mind you, but that's not important at the moment). It actually comes out to Germans having a better median wage.

https://www.quora.com/Are-Germans-content-to-earn-19-less-th... (I wish I had a better source, but I can't find the original data that I made this conclusion before with).

So much for your lies. It takes a second to disprove everything you said. http://www.pewresearch.org/fact-tank/2014/10/09/for-most-wor...

I'll leave the rest as an exercise to the reader.

Comparing the gross salaries of employees between countries is meaningless. You are e.g. comparing after employer taxes, which have large differences between countries.

To meaningfully compare countries you need to either compare the gross wage costs per employee that a company actually faces or compare the net income of employees after all taxes. And correct for purchasing power of course.

The other poster is comparing wage growth, not gross salaries.

Which has exactly the same sort of problem. If a government reduces employer taxes and increases employee taxes, you have a magical free gross wage growth.

You can't make incomparable values comparable by reducing them to a ratio, except in special cases.

Please provide sources for your claims.

adventured has a point and a very valid one monetary-wise

Not sure exactly what that point would be, but if you refer to :

https://en.wikipedia.org/wiki/Monetarism

then he doesn't have a point at all.

source please

You've absolutely nailed it

'This is the wheel of capitalism literally coming to a halt because the oligarchs are staring each other down waiting for someone to go first.'

IMO, you need more inflation to make it too costly to just stockpile money.

Interest rates were kept low to bail out wall street, banks, auto industry, housing industry, etc. It was used to reinflate stock, housing, etc bubbles.

If low interest rates boosted wages, the japanese worker would be the highest paid worker in the world. Instead, the japanese wage has declined for 20+ years.

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