Wage Stagnation

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

s/Note/Not/? Or are you missing a "not" somewhere else?

Check out this chart to get a sense of it: http://www.aei.org/publication/chart-of-the-day-or-century/

I think there must be a psychological factor that makes people feel good about how our generation has it so hard? I would truly appreciate if someone could explain why.

https://www.census.gov/data/tables/time-series/demo/income-p...

For a reality check it sometimes helps to think how you used to live in the past. Maybe you spent $$$ on a hobby every week, had a fleet of vehicles, went on holidays, had spare rooms in your house. Or maybe you had friends that had all these things and worked a job where they were back home by six every day.

https://theanarchistlibrary.org/library/david-graeber-bullsh...

https://www.minneapolisfed.org/publications/the-region/where...

Fully 28% of households now have just one person living in them, more than double the rate from 1960 (13%), reports the US Census Bureau. As a result of continued shifts in household types and family dynamics, the average household size is 2.53 this year, down from 3.3 some 50 years ago.

Single person households aren’t just restricted to youth. In fact, almost one-third (29%) of adults aged 65 and older live alone. In a fairly dramatic shift, householders aged 65 and older outnumber those under the age of 30 by almost a 2:1 ratio (31 million and 15.8 million, respectively), whereas these householders had been at virtual parity in the late 1970s. (Households are occupied housing units, and householders are the people in whose name the housing units is rented or owned. They must be at least 15 years of age.)

* We use lines of credit to borrow for discretionary purchases, we lease cars, pay by subscription for things more.

I don't see whats wrong with this. Availability of credit has helped a lot. For instance, mortgages used to have much higher interest rates and shorter term

> * We have more gadgets. (Note that this has been proven to make people any happier.)

I thought we were talking about wages not happiness. What's the point of wages if you don't have access to goods?

https://www.marketingcharts.com/demographics-and-audiences-7...

Requests for citation are a little gauche, but if you tell me something is proven without any evidence you're kind of forcing my hand here.

The rest of your comment could probably do with more rigor as well. Can you quantify exactly how many more households have dual earners now? Likewise do you have any numbers pertaining to lease versus purchase statistics between 1970 and 2018?

From the data from the Fed, this is only partially true if you ignore non-cash compensation:

>...A job usually also involves other types of compensation, such as the employer’s contribution to retirement pensions, health and life insurance, paid vacation and other leave, and any taxes the employer pays on these benefits. These benefits are now a substantial part of the cost of an employee, and they appear to be growing. The top graph shows that labor compensation growth is frequently higher than real wage growth. We can make this point more clearly by using index values: In the bottom graph, we set both series at 100 in 1970 and let them run. Real compensation growth is significantly higher: the 60% increase looks much better than the 3% increase for real wages.

https://fredblog.stlouisfed.org/2016/09/wages-with-benefits/

A low-income earner is more likely put any extra money they acquire towards the local economy rather than, for example, lodging it in the Cayman Islands for storage. This is good for keeping the local economy healthy, from which may come the next person to create a technological breakthrough.

We generally want the median person to have money to spend with our businesses rather than slowly edging towards living in a slum.

I usually turn this question around: as a programmer, I'm responsible for a greater share of productivity than some people in different functions who are paid less. However, I do not work harder, do not sacrifice more, do not hate my job more - more likely the opposite, even. Why am I entitled to a larger share of profits than other people?

(I understand that the system generally "works better" this way. However, since we're talking about being entitled to something, I wonder if there's a moral argument that can be made.)

E.g Uber's executives are very well compensated, and are nothing but middle-men. Middle-men that are easily replaced, as demonstrated by the Uber clones in cities that banned Uber.

Are you saying the CEOs are solely responsible for this productivity gain?

With most salaried, white collar jobs your payscale is almost completely decoupled from your productivity. You are paid based on the market value of your skills and experience. You're essentially a commodity.

We see this in the software industry all the time: There's little salary difference between a "good" and "mediocre" programmer. The so-called "10x" engineer, myth or not, is likely to make just 10% more than their peers, if even that, not 1000% more.

Sure you can point to any individual employee and declare "you didn't invent or buy that computer that makes you work more efficiently, so why should you get more money?", but the CEO or shareholders didn't invent the computer either, and buying a PC is a fairly small expense, so why should they be the ones to benefit from the increased productivity?

Because they hold power and the regular employee doesn't. I think that's the only real explanation for this discrepancy: CEOs and shareholders have power, while the regular employee doesn't, and that power imbalance means more money goes to the CEO and shareholders.

If the median worker isn't responsible for the increased productivity, it follows trivially that you can do something to increase the median worker's productivity, earning higher profits, until all firms in your sector do it and you all end up having to compete for the increasingly productive workers by raising wages.

https://www.epi.org/publication/understanding-the-historic-d...

The most likely inference, a priori, for where this process has broken down is: employers aren't having to compete for workers very hard any more, so competition doesn't push labor prices up.

The work of other people? Is productivity increments the result of some people working harder instead of and increment in technology and knowledge?

Other people? The rich? Or even machines? There are several questions raised here.

Even if we go with the presumption that the rich are simply more productive/useful and "deserve their income", that still doesn't answer the question of why inequality is increasing.

Did the rich simply start to get significantly better than the rest around 1980? Instant evolution? Or perhap the economy is becoming "winner take all". The more you control the more you CAN control. For example, the big tech co's have huge patent portfolios in which to sue any upstarts from entering their turf. Their big competitors have their own giant portfolios to defend against each other's patent claims via counter-suits. Thus, smallbies are essentially locked out, forced into niches.

Even if we assume they deserve their big incomes, it could still pose a risk to democracy as the rich buy influence. The Supreme Court more or less has concluded money is free speech, meaning the rich (and corporations) can speak louder than the rest. Their point of view gets splattered everywhere and counter arguments from regular folks get drowned out. And there is campaign donations, which is legalized bribery, which the Court also upheld. The rich can use their influence to get even more politicians and judges in play which favor the rich, creating a runaway train of influence. "Slippery Slope" is often considered a debate fallacy, but we are sliding into inequality in practice. Sliding does sometimes actually happen. Unions are being gradually stripped of power by politicians and the courts, for example.

Therefore, even if one accepts that the rich deserve most their money, their spending power may have the practical side-effect of undermining democracy and equal representation.

And, how many mansions, Maseratis and swimming pools does one "need" to be sufficiently rewarded? 7?, 20?, 82? I thought it really telling that John McCain lost track of how many mansions he owned.

If we assume it's machines that have generated the increased total wealth, then obviously machines don't want nor need money (although I'm working on a Greed-A-Tron). So who gets it? The owners of the machines typically do, but are we just rewarding them for simply owning more machines than you and I? Owner take all?

It’s clearly seen in farm workers. Large agri businesses say that unless they have cheap imported labor, they can’t afford workers. But that does not stand. In their current economic model cheap labor is necessary, but it’s not inherently necessary.

The late 1990s to early 2000s anti-WTO leftists understood this, Perot understood this, but they were vanquished by non labor interests.

I really want to see the same charts for coastal vs inland China and Mexico. Did a rising tide lift all boats there or not?

[1] https://www.imf.org/external/pubs/ft/fandd/2015/03/pdf/jaumo...

Productivity has a precise economic definition - ratio of output to inputs - and correlates highly to standard of living. We don’t fully understand how and why technology advances, but we measure increased technology through a variable called the solow residual. Economic policy can help lead to technology breakthroughs that increase productivity and the standard of living. It’s very shortsighted to dismiss economics out of hand as something we don’t understand. A lot of it is politically motivated but let’s face it politics is what happens when groups of people get together and try to collaborate. There’s a lot of important work to be done around productivity economics and I’m glad it’s getting more mainstream coverage

But our community was largely self-sufficient. We didn't have Walmart yet and its associated trade deficits which contributed to the national debt. I'll admit that we were dependent on the nearby military base, BUT that was during the Cold War. Had the base closed (as it probably should have after the Berlin Wall fell, say 1990), I think my home town would have survived on ranching, timber and mining (none of which I support by the way, as Idaho's environment is under constant attack).

Yes I see the contradictions in what I am saying. But I also believe that we could have had a more sustainable future had we faced facts and started the process of transitioning to a 21st century economy earlier. That might have even led to Gore being elected instead of Bush. So it's complicated, and not always easy to discern cause from effect. It's all been 20 years delayed, but there is work in green energy here today.

My feeling is that the American worker HAD MORE LEVERAGE then - in terms of being able to walk onto any construction job, or specialize in a 2 year education trade, or even get free college in many states. We still had unions. We didn't have the welfare cuts that happened under Clinton or the 100,000 factories shut down under GW Bush yet. Quality of life and the feeling of making one's own way was higher then.

If we want to fix our economy, we need to get organized and take a bigger piece of the pie for workers (perhaps we should call them makers or producers), rather than giving it to people who already have money. We can moan and complain about this simple fact from all political angles, but until we start electing people who understand how this works, our long slow decline will continue.

It's also impossible to compete on price with bigger competitors. How can a small business compete with Costco? Technology has allowed the bigger players to wring out all the efficiencies bringing margins down to as low as possible, so it's only viable to start businesses that have higher margins, such as professional services.

Also: https://www2.gov.scot/About/Performance/scotPerforms/indicat...

I will be controversial and argue that the male sex compounds their income at a greater rate than the female sex principally because their genetical nature causes investment activity contra females which generally consume. Therefore With more women in the labor markets, there has been a drag on wages.

And it seems that tech displaces the middle income jobs. ( https://economics.mit.edu/files/11563 ) Which of course puts a downward pressure on wages, which probably contributes to the decline of labor share of income, but this effect is no as big as using a different deflator, nor is the technological change well correlated with the aforementioned decoupling.

One of the Big Questions not covered by the article is: how competitive have labor markets been over time?

Let's say I make widgets for $10 an hour, and make 100 widgets per hour. That's $0.10 per widget.

Then, a new tool comes along, and allows me to make 200 widgets per hour. The cost of a widget is now $0.05 per widget.

Who "deserves" this extra profit? Yes, my employer paid the expense for the new tool, but this is (more or less) a one-off expense. They will recoup this cost, and eventually the increased productivity will be pure profit,.

I, on the other hand, am still spending eight hours a day making widgets. My time is now worth twice as much as it was, but I'm still being paid the old rate.

The issue we're seeing with wage stagnation is that companies are making one-time investments and recouping increased profits forever, while employees are working just as hard, but seeing no increased benefit.

And that's just from a simple math perspective. This discussion entirely ignores the fact that when you employ someone, you are essentially renting a human being, and in order for our society to function, that cost must have a floor. Society as a whole suffers when you are able to rent a person for less than it costs to live.

'Productivity' in wage stagnation discussions is implicitly 'labor productivity', which is technically a "partial productivity" measure judging the amount of output generated by a unit of labor. It's not the same as overall output of value. It also isn't the same as "labor portion" in the equation you sketched, though, because capital expenditures like space or technology that increase worker efficiency still constitute labor productivity gains.

(The 'labor portion' there seems closer to what Marxists look at in the labor theory of value - the amount of time and effort expended by labor, isolated from other factors. You're right that that doesn't end up tracking productivity or wages.)

The idea that wages trend with labor productivity, then, is that anything increasing labor productivity increases the output value of an hour's work, which ought to increase the amount of money a worker can demand for their time. They won't capture the full rise in value output, because some of it will be consumed by capital expenses promoting that efficiency, but their wages should trend in the same direction.

Less hypothetically: let's say Cyberdyne's powered exoskeletons become standard for bricklayers, who can then work 20% faster. Since there are plenty of bricks to lay, buying an extra hour of bricklaying now creates more value, and remains profitable at a higher cost. Bricklayers won't simply collect all the extra output value because the amortized cost of the suits has to be covered, but we'd still expect them to get a raise. And if the new tech increased productivity at a lower capital cost per unit than existing tech, the percentage of output captured by labor could even rise.

Now, there can be out increases that don't involve labor productivity, anything from automating away jobs to finding cheap new sources of raw materials. People sometimes confuse the terms and compare GDP or overall productivity to wages, in which case you're right that there's no intrinsic linkage. (Although in the long run, labor's percentage returns tend to outweigh fixed-value changes like trade agreements.) But looking specifically at labor productivity, which should track wages, we still find a close trend seems to abruptly break around 1970.

https://books.google.com/ngrams/graph?content=Chinese+manufa...

"This surprises me, because the dramatic shift in 1973 made me expect to see a single cause (and multifactorial trends should be rare in general, maybe, I think). It looks like there are two reasons why 1973 seems more important than it is...."

So your entire thing is that it's a race to the bottom? What is the purpose of it all then, and how do you think this goes for the next two or three decades?

This should be the case, but minimum wage laws completely screw up the market. The unintended consequences of minimum wage result in almost the opposite effect of what they are intended to achieve. They keep wages artificial low, and increases in minimum wage push the costs of all goods and services upwards, as well as cause disemployment.

Wages have been "accidentally" coupled to minimum wage policies which is why there is less correlation with productivity. How this article can be so long and barely mention its effects baffles me.

But the quick remark and the way you phrased it makes it seem like you just have something against women in the workplace, I'm guessing you feel threatened in some way. I don't think it would be a stretch to assume that you think the abolition of slavery also affected wages similarly.

https://ourworldindata.org/female-labor-supply

At 1948 the US had around 25% women in the work force. By 1973 that number is around 50%. The article say that wages increased proportionally with production between 1948 to 1973, and only after 1973 started to drop.

There is just no relation between those two graphs that support the claim that that one caused the other.

I mean if you are ~2.5 times more productive but the wage can't increase due to other reasons, why not take different actions to consider employee happiness just just employer profits?