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Comment by wu-ikkyu | Hacker News Reader

So the basic question is: why are wages stagnating in the face of increased productivity?

What is wrong with a simple, non-technical answer like: because the people at the top don't want to share?

The evidence is in your favor where the CEO compensation just went up, up, up even as they used every justification in the world to pay workers less. The workers whose actions generated the revenues.

https://www.epi.org/publication/ceo-pay-continues-to-rise/

In most companies I've worked, the CEO's mostly just made simple or random choices based on what data people under them were producing. The companies with established models could mostly run on autopilot. They have at times in between senior management or executives. There's also been little evidence their performance is tied to their pay much outside financial manipulations with many taking golden parachutes on way out of companies doing poorly. Add in the interlocking boards effect on compensation grants, you have every reason to believe the pay gap is an artificial construct by a privileged few to further enrich themselves at the expense of the many. These other explanations are either of little effect or smoke screens to keep people from attacking the root causes of what their doing.

It's not like they hide it when talking among themselves that this is a system designed for the exclusive benefit of the rich as much as they can make it. See the leaked Citigroup memos about the plutonomy and such that they tried to take off the Internet.

https://politicalgates.blogspot.com/2011/12/citigroup-pluton...

Particularly relevant is what's in report No 3 here showing economic inequality wasn't natural but artificial by folks like their clients:

https://rwer.wordpress.com/2012/03/14/the-plutonomy-reports/

It would be interesting to see how much CEO compensation has increased when you control for firm size. My guess is it's still increased but not as dramatically. Given growing firm size and industry consolidation it makes sense that CEOs would get paid more. There's fewer of them and their responsibilities are larger.

I also disagree that CEOs are unskilled. Try putting a random Ivy League graduate in charge of Goldman Sachs. I don't think they would succeed.

There's undoubtedly rising inequality, but I don't think there's a single cause, nor a simple solution.

That would be interesting as I expect the gap to be with larger firms with more politics and administrative overhead in general. Far as skill, I'm not saying they're unskilled so much as not that much more skilled than managers or specialists that make tiny fractions of what they make.

Goldman Sachs is so unusual I wouldn't use them for extrapolating general trends. They do hire tons of people much smarter than their CEO to do the work that leads to CEO's decisions but make way less. It fits my model as a data point. They do pay some of their clever employees small fortunes a lot more than some other companies, though. They also lobby Congress and infiltrate regulators which is how they negotiated the bailout. They're more scheming that most creating wage gaps. On a whole, nother level of creating problems. ;)

Btw, been a long time. Hope you've been doing well, Jeffrey.

Yep, I agree with those points. Thanks, I have been. I hope you have as well :)

Even if this is true, you're limiting your options by not trying to understand the technicalities behind it. Why don't the people at the top want to share? What are we even sharing? How does sharing happen? By what means does sharing occur?

The only reason you believe the people at the top don't want to share is because of centuries of thinking that has lead you to see the structure of the world in a way that this is useful. Summing up centuries of thought into a single phrase, and then throwing out the data and ideas that got you there is...risk at best.

"The study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or to evade truth, not to reveal it."

-Money: Whence it Came, Where it Went, John Kenneth Galbraith

>Why don't the people at the top want to share?

Ideology and power

>What are we even sharing?

Money

>How does sharing happen?

>By what means does sharing occur?

Computer databases

>The only reason you believe the people at the top don't want to share is because of centuries of thinking that has lead you to see the structure of the world in a way that this is useful.

The history of union busting in the US clearly shows that many people don't want to share their wealth.

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

But what is wealth, and how do you want to share it? It's not a zero sum game. Let's say a billionaire wants to part his ways with $500M. They need to:

1. Sell $500M of shares they are keeping, hence dropping the price of the companies they are invested in. Employees of these companies lose.

2. Give the $500M, but to whom? Can be to "the poor", but what will be generated this way? The people will be better off temporarily (some of them permanently, of course), but the money will randomly radiate away to the whole economy. But you can alternatively give the money by investing in e.g. startups, incubators, hence magnifying the potential success of ideas you believe in, and people who can statistically get things done better that the average person. The side effect is that you'll be probably richer from the new investments.

Money is not a static resource rotated around the world.

- It's a measure of capability/intelligence/luck/circumstances of birth.

- It can be generated out of (generally) 'getting things done'. Two people creating things out of nowhere are both richer.

- It's a magnifying glass you can use to advance ideas you believe in.

- It flows from those who spend it, to those who generate more than spending (so, by definition, are able generate more of it by using it - the statistically "rich")

>It's not a zero sum game

>1. Sell $500M of shares they are keeping, hence dropping the price of the companies they are invested in. Employees of these companies lose.

What you just described is a zero sum game.

>It's a measure of capability/intelligence/luck/circumstances of birth.

Capability and intelligence are starkly contrasted by luck and birth, and this is a problem. One creates meritocracy, the other monarchy

- It can be generated out of (generally) 'getting things done'. Two people creating things out of nowhere are both richer.

It can also be generated out of nothing, and by destroying wealth a la broken window fallacy

> What you just described is a zero sum game.

Not if the amounts are different.

> Capability and intelligence are starkly contrasted by luck and birth, and this is a problem. One creates meritocracy, the other monarchy

Yes, and that is unfortunate. I don't have the numbers at hand, but at least in US, it's still on capability side, if I remember well. Not sure about Europe.

> It can also be generated out of nothing, and by destroying wealth a la broken window fallacy.

Sure, it can. Yet an interventional/evil government must be taken outside of this argument I think, just as e.g. thermonuclear war. The rules indeed break down then.

> Why don't the people at the top want to share?

There are people like that in every wealth bracket. The difference is, the people at the top are uniquely empowered to make it happen.

As Dana Meadows warned us over 40 years ago, the numerous "[more] success to the successful" feedback loops in our society have overcome the wealth-equalizing negative feedback loops, with the (predictable) result being runaway exponential wealth concentration.[1] Limits to Growth, despite its convenient "debunking" in the popular zeitgeist, is tracking well with real-world data.[2]

[1] 1h long, worth it: https://www.youtube.com/watch?v=HMmChiLZZHg

[2] http://sustainable.unimelb.edu.au/sites/default/files/docs/M..., via https://www.theguardian.com/commentisfree/2014/sep/02/limits...

(too late to edit)

[1] timecode link https://www.youtube.com/watch?v=HMmChiLZZHg&t=3m55s

direct link to the part on "success to the successful" loops https://www.youtube.com/watch?v=HMmChiLZZHg&t=18m48s

Again, many words for still a simple answer:

> Why don't the people at the top want to share?

Greed

That's not an answer, that's a tautology.

It really comes down to supply and demand. In areas where there is a shortage of supply of workers that have a particular skill that businesses value wages do rise. However, if there is plenty of supply for certain kinds of jobs then the market will not pay them as much.

I do think that automation/increased productivity plays a part if you automate things out where more people are now capable of doing a particular job it will deflate the wage of that role since there is a greater supply that can now perform that role.

Is there evidence that this explanation is more true now than in the past? It's probably worth at least examining whether they have become more capable of acting out that preference.

Sure, how about the massive wave of increasing power and centralization at the heart of where money/wages originate: the finance sector. As well as declining union participation rates

I don't have quantitative evidence, but I do feel there was a cultural shift in the 1970s-80s in the corporate world. "shareholder value" became the dominant view of what companies were for (rather than say, social value), activities that most corporate leaders would have been ashamed of in the past - extremely high compensation relative to their employees (100x or more), layoffs to cut costs even when profitable, etc. - became acceptable or even sources of pride.

I believe it may be related to a broader cultural shift towards individualism (see, e.g. http://www.hup.harvard.edu/catalog.php?isbn=9780674064362)

"they have become more capable of acting out that preference" is exactly the key point of such discussion - with increased automation, companies need more capital and less labor.

This means that the labor (ordinary workers) gets less leverage and capital (owners/managers) get more leverage, i.e., increased ability to ensure that they get a larger share of the pie.

The ancient dictator needed his slaves to work to build his pyramids. The feudal lord needed his serfs to work his fields. They needed to ensure that they are kept from rebelling but also can live well enough so that their numbers (and thus the lords' power) increase.

The industrial capitalist needs to keep the working class somewhat satisfied (bread and circuses?) - they are absolutely vital to his needs, and if they self-organize and start striking, he loses.

However, in the far future when everything is automated, whoever controls the means of production doesn't need the underclass in any way whatsoever. They may care about their community, but letting the underclass to starve or machinegunning them isn't an impossible "solution" anymore. Neither the slaver, nor the feudal lord, nor the industrialist could afford to eliminate everyone who's discontent, even if they physically could do so after crushing a rebellion - they needed their labor. In the future, that won't be the case; the only thing preventing a ruling regime having their robot army slaughter the unneccessariat is if they choose not to do so and choose to share the wealth instead.

> So the basic question is: why are wages stagnating in the face of increased productivity?

Wages are set by what people are willing to accept when compared with what people are willing to pay to perform a function. Wages really aren't related to productivity, except that increased productivity limits the number of hires.

In the same way that you most likely don't share all your income with others, employers do not share all their income with workers.

Because automation means that there is less need for other people in a business venture. We need more entrepreneurs automating niches and reeping all the rewards.

> because the people at the top don't want to share?

When people spend/invest money, they are sharing.

Spending is moreso exchanging, and investing is moreso like loaning.

They both have strings attached.

How about: they aren't?

Wages did stagnate for some time, but now they're growing again (http://money.cnn.com/2018/02/02/news/economy/january-jobs-re...).

That's a very narrow short term analysis, as compared to the broader long term analysis detailed in the discussion of this article. Also consider that your article's starting point is 2009, right after the massive global economic crash.

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