https://www.cnn.com/interactive/2019/business/us-minimum-wag...
https://www.cnn.com/interactive/2019/business/us-minimum-wag...
This is just wrong: the article is not talking about inflation; it is talking about indexing the minimum wage to productivity. Eyeballing the graph from the original article (and projecting productivity back to 1949), if indexed to productivity, then minimum wage would be at ~$15.
Your subsequent criticisms have more merit, but the article addresses them as well. You may disagree with the article's arguments, but you should at least acknowledge them.
> It would be claimed that the productivity of minimum wage workers has not kept pace with average productivity growth, so that it would not be feasible for minimum wage workers to earn pay that rises in step with average productivity growth.
> There is some truth to this claim, but only at a superficial level. The productivity of any individual worker is determined not just by their skills and technology, but also by the institutional structure we put in place.
I earn fantastically at work, but any vote I make will always be against the political party that spouts the same nonsense.
The most durable way to build middle class wealth is entrepreneurship. And not the SV kind. Family-owned business have something very few publicly traded ones do... long time horizons. We've destroyed the ability for the middle class to do that outside a select coterie of sectors.
Small businesses are rare because the government has abdicated its antitrust responsibilities, ignoring companies that use anticompetitive practices like labor violations and price fixing that lock competitors out of the market.
Small businesses are also rare because of zoning codes and infrastructure policies that promote the use of cars. It used to be that commercial spaces and housing were evenly mixed, now businesses often need to be a mile or more away from anywhere people live, thus needing to be able to support very large customer bases, and the locations need enough land to fit empty parking lots big enough to support double or triple the actual capacity of the building itself, creating enormous artificial up-front capital costs for business ownership.
Try cutting hair in Florida if you think so.
> Small businesses are also rare because of zoning codes and infrastructure policies that promote the use of cars
Zoning codes and infrastructure policies are a form of regulation.
> government has abdicated its antitrust responsibilities
I agree with this part. A minimal regulatory regime along with a strong antitrust regime is pretty much ideal IMO.
> The US regulatory structure is extremely friendly to small businesses.
You can also see the quantity of regulations on this tracker. [1] I don't think you can describe this amount of regulatory complexity as "friendly" to small businesses.
In the food service industry, the most common type of small business, there are only 2400 federal regulations, and most of them concern common sense things, like "wipe tables after customers use them" and "cook chicken to 180°" and "don't let rats live under the oven". Take every type of food served in the US, every appliance, tool, utensil, or technique used by any commercial kitchen, and 2400 seems like a laughably small number of regulations.
That's an incorrect understanding of how laws and regulations work. Ignorantia juris non excusat.
> 2400 seems like a laughably small number of regulations.
I'd love to hear a food service operator's perspective. It may differ from yours.
I worked in the restaurant business, I know how thoelse regulations work. Not every one applies to every business. We didn't serve eggs, so we didn't need to Cara about all of the special rules for cooking eggs to temperature, maintaining separate tools and workstations, refrigerator temperatures, etc just for eggs. 5he same is true of all the other thousands of ingredients and food items we did not serve.
One might have one agency in charge of one thing and another one in charge of another, with no rhyme or reason to it. There is no way to find out all the regulations that apply to your specific business unless you 1) consult a very expensive lawyer or 2) read an authoritative, current reference specific to your field of endeavor. 2) is usually not an option if you're doing something uncommon or brand new.
In the end one's best bet as a business owner is consulting an experienced lawyer for everything that you do. They're usually pricy and charge down to the minute. Everything you don't check, is a potential compliance risk. Today some classes of severe violations, for example improperly withholding employee taxes, can even result in the corporate veil being pierced where you as the business owner now become personally liable for your business. And I'm not even getting into things like tech that have no legal certainty whatsoever.
All these legal and compliance costs are deadweight on the economy, they could have been used to invest in better equipment or to pay employees more, instead they are spent on lawyers. Some laws & regs are no doubt necessary, but anything beyond that is a net loss for everyone. The balance always seems to only land one way these days.
Could you expand on this a bit?
For example, free trade has undoubtedly lowered the cost of commodities for Americans, but at the same time has also cost manufacturing jobs. From a monetary perspective, there is no contention that America as a whole is richer because of free trade. But where has that wealth gone? Not much to the now-jobless manufacturing workers.
The economics profession deserves some blame. When evaluating a policy, economists often ask whether there society would reap a net benefit in "utility." But chiefly, economists often ignore questions about distribution -- which groups should benefit from policy? One reason might be because answers to distribution questions could be seen as "political" -- if you think labor should receive compensation for lost wages due to free trade, then people will question whether "leftist" politics biased your thinking.
Indeed, economics has a special name for changes that benefit society on net at the expense of another group of people -- a "Kaldor-Hicks improvement." A change is a Kaldor-Hicks improvement if the people made better off could, in theory, fully compensate those made worse off and still come out ahead. In practice, that compensation usually never happens. Uwe Reinhardt, who was an economics professor at Princeton, writes an absurd satirization of policies justified by the Kaldor-Hicks criterion:
> To highlight the tenuous ethical foundation of Kaldor's criterion, one might call it the unrequited-punch-in-the-nose criterion of social welfare. Suppose, for example, that I feel very aggressive today and therefore would like to punch you in the nose. An honest referee (an economist) asks me what 1 would be willing to pay for that privilege. Suppose the maximum I'd be willing to pay were $1,000. Next, the honest referee asks you how much you would have to be paid to receive that punch in the nose without hitting me back. Because you are strapped for cash, you might accept the punch for $600. The referee (our economist) is ecstatic, for (s)he perceives here the opportunity to enhance social welfare. Consequently, the deal is struck, you kindly present your precious nose, I punch, you bleed and hold out your hand in anticipation of my payment of $1,000. Alas, I walk away happily, along with my $1,000, which I refuse to surrender. Not to worry. The honest referee (our economist) will soothe you with the expert assurance that, according to Nicholas Kaldor, and in principle, we just have witnessed a major enhancement in social welfare, to the tune of $400, even though the expected $1,000 bribe is not actually paid. It is to be hoped that you have enough respect for the referee to accept this verdict gracefully, and you probably will, if you accept the benefit-cost analyses typically sold by economists to policy makers.
> Although this illustration may seem beastly and absurd, it can easily be adapted, with only minor modifications, to the context of environmental pollution, to health care or to many other situations in which public policy bestows benefits upon one group of people at the expense of others. One is struck by how readily and how uncritically many economists apply the Kaldorian criterion to their analyses of such policies -- particularly younger economists, many of whom no longer seem to explore very carefully the philosophical and ethical underpinnings of their profession and instead concentrate on mere analytic technique. [1]
(The whole paper is worth reading.)
So this is what the author might be criticising -- that policies have been evaluated mostly with consideration to whether society as a "whole" would benefit, with not much thought about who exactly benefits. Add to that the marginal utility of money -- that poorer people see a greater increase in happiness per dollar than the richer people -- and you could argue that those policies have caused a group of people, namely menial laborers, to experience significantly increased hardship than those nearer to the top of the economic ladder. The author's goal, then is to justify the "compensation" portion of a Kaldor-Hicks improvement -- according to them, wealth, wages, and healthcare should be redistributed to these workers who were made worse off -- at the benefit of everyone else.
This is not completely fair. There are countless innovations that have allowed these low skill jobs to have an increase in efficiency and productivity.
One example, when I was a teen and worked retail I remember we would all have to spend hours going around the store counting every product on the shelves in order to do our routine inventory checks because there was no other reasonable way to track that information. Now many stores have intelligent inventory tracking that requires little to no work from employees. The end result is that these employees are more efficient, stores need less workers, and stores can carry less inventory. Why isn't the benefit of that efficiency passed on to those employees who are now more efficient? How is that any different than a software developer receiving a higher salary because they are more efficient due to computers being more powerful?
It is, though, right? It is passed on to the employees who were responsible for the efficiency gains. Those employees who built those innovations — could be employees of retailer, or employees of the companies, say tech companies, for whom the retailer is a customer.
I think the parent commenter’s point is still valid that:
>>Someone stocking shelves in 2020 is about productive as someone stocking shelves in 1968.
I would phrase it slightly differently: “the skill of stocking shelves in 2020 has been as efficient as it has been in 1968”. It’s the skill of creating innovations in inventory tracking , better statistical modeling and predictions/estimates, and probably the advent of tracking all this in digital systems that has multiplied the efficiency at the macro level.
Employees who are stocking shelves have not been able to participate in those contributions.
>How is that any different than a software developer receiving a higher salary because they are more efficient due to computers being more powerful?
I'll admit software developers might be a bad example for that given question since they are responsible for some downstream efficiency, but the overall point still stands. Why do high skill jobs get to capture the value of their increased efficiency but low skills jobs don't?
Or take the programmers who worked on Walmart.com. They didn't invent the transistor, Linux, or Java. They just used them to build a crud app.
Likewise, the shelf stockers who work at Walmart didn't invent pasteurization, the tin can, or the grocery cart. They just move the cans around.
What does that have to do with the fact that programmers contribute (on an ongoing basis) to improved productivity, while shelf stockers do not?
Assume the app was developed in the past five years. Replay the last five years twice, with different circumstances: Once without the shelf stocker, and once without the programmer. In one case, the increased productivity still appears, in the other, it does not.
It seems to me that the person who is required for the addition of the increased productivity caused the increased productivity, while the person who is not required for it did not.
It certainly seems like the shelf stockers are more important to this process than the programmers. They still provide value without the programmers but the programmers are entirely dependent on the shelf stockers to provide value.
Why do the programmers therefore get to claim the entire surplus in productivity if they are dependent on the shelf stockers for that productivity boost to actually materialize?
I don’t know. That’s a really difficult problem to solve through legislation.
Ultimately though stocking shelves in 1968 Walmart is about as efficient as stocking shelves in 2020.
Like I mentioned in a comment above, who we consider made it happen is arbitrary. Walmart cannot exist without a functioning society. The daughter of Sam Walton never worked at Walmart, yet she gets more of that gain than any other individual.
For other products, it is even more arbitrary who gets the benefits. If facebook disappeared, another company would quickly take the role of social media leader. Likely not much would change from a productivity standpoint. Yet whoever happens to get the role of dominant social media ceo makes billions.
What makes you feel that Software developer salary is linked to computing power? In fact, even if we were to consider it a fair comparison, computing power, if measured by Moore's law has doubled every 2 years. Software Engineer salaries have lagged far far behind.
Honestly, I don't think there is any relation between developer salary and computational power. I was just reaching for a possible explanation for this[1] that fits with the theory that people are paid based on their productivity. It is my belief that people are paid based off the supply and demand for their labor. Productivity only serves as a ceiling for compensation and even then, that is only in the long term. Plenty of people are paid more than their production either over the short term or when productivity is difficult to measure. An employer's natural inclination is to pay people as far below their level of production as possible while still filling the job.
It is my belief that the reason that low skill wages have stagnated is not because their efficiency has stagnated. It is because their supply is outpacing their demand. The supply of software developers is not keeping up with demand so their wages are increasing. Neither has anything to do with productivity in my opinion.
[1] - https://lh6.googleusercontent.com/5n4R_Osks_fVsVmedxJKsp9zPu...
The SWE line in that graph grows by ~74%, and all other occupations by ~57%. So, the title seems probably correct, plus or minus the accuracy of my eyeball in reading those. But that's not how to present that…
(And also, the sin of not putting the Y axis min at 0, to exaggerate the effect.)
As a SWE myself, looking at the potential cost of housing if I ever decide to start a family, I'd mostly say SWE's wage growth hasn't kept pace. All other occupations are just getting hosed even harder. (My opinion here is that it's somewhat housing cost/supply: too little supply is driving the cost up, and wage increases are likely to just push that further. What is needed there is increases in the supply, moreso than wages, for housing specifically. For wages, I do think the minimum wage is too low, and has not kept pace. See also this graph: https://www.washingtonpost.com/business/2019/12/03/precariou... )
In regards to the cost of housing, I came across an adage a while back that has stuck with me, "Housing can either be affordable, or a great investment, not both". I think the real solution is a change in policy for housing to no longer be treated as a great investment. Not that I have high hopes of this ever coming about.
https://www.forbes.com/sites/scottbeyer/2016/08/12/tokyos-af...
> Like so many other global first-world cities, Tokyo is experiencing explosive population growth, increasing by 1.6 million people since 2000. And unlike practically every U.S. city, it has almost no empty land. So it has responded through vertical growth, tearing down old structures and replacing them with high rises at a pace light-years ahead of anywhere in modern America. As FT’s Tokyo bureau chief Robin Harding wrote in the article, the city had 142,417 housing starts in 2014, which was “more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).” Compare this, also, with the roughly 20,000 new residential units approved annually in New York City, the 23,500 units started in Los Angeles County, and the measly 5,000 homes constructed in 2015 throughout the entire Bay Area. > This has stabilized Tokyo’s housing prices, wrote Harding, and has kept them far lower than in many U.S. cities.
It is not a contradiction to say the presentation doesn't help show the conclusion, and that the conclusion is (nonetheless) correct.
Though the disparity is somewhat justified in that the efficiency of software (neither in its running nor production) haw kept up with Moore's Law. In any case, owners and executives are funneling up the excess value created. It's there, you're just not getting it.
If by "hosed" you mean getting $120K salary right out of school, then I guess that's true. I'm just not sure I'd call that "getting hosed" though.
If you want to see what "getting hosed" means, go work as an SWE in Europe.
Yes, SWE's only get a piece of the pie but it's a pretty nice piece (Especially compared to everyone else). If you want more, go and bake your own pie.
If that’s “getting hosed”, I hope they never run out of water!!
We in the US once had a number of tax policies that were designed to disincentivize this kind of payout, and encourage companies to maintain full-time workforces with decent benefits, invest in R&D and facilities improvements etc. Other countries still have those policies. But we here in the US got rid of a lot of them. The result is that excess productivity benefits have been distributed in exactly the way you’d expect - with frankly alarming effects on our political stability.
Manual inventory is still done, often quarterly. Shrinkage will never disappear, and it needs to be accounted for regardless of smart or dumb inventory systems are:
* https://www.thebalancesmb.com/top-sources-of-retail-shrinkag...
* https://losspreventionmedia.com/how-to-calculate-shrinkage-i...
* https://paladinsecurity.com/security-prevention/prevent-shri...
* https://en.wikipedia.org/wiki/Shrinkage_(accounting)
An outside team (either in-house or third-party) is brought in so the regular employees aren't doing their own 'audits'.
Let's not get started on discussing the interpersonal communication skills needed to survive Thanksgiving/Black Friday.
And for all this, you're getting paid less than Joe W. Cash Register got way back when.
And cashiers still have to do math. Most places don't have automatic change dispensers, nor can a machinr account for a customer suddenly switching which bills they're going to give you. I understand that never having had to work one of those jobs is a source of pride in a lot of places, but in this thread, it just outs you as ignorant.
There’s a much higher barrier to entry as a software engineer than a shelf stacker. The breakdown of returns to labor vs capital will always favour capital (absent regulatory intervention or shortage of unskilled labor) for commodity-type work.
Because any teenager would be more efficient with automated inventory control. Teenager X didn't have to learn how to do something more complicated. The labor is interchangeable. It is a victory of capital.
Labor specialization and labor skills are what allow labor to collect more of the spoils. Otherwise, labor is interchangeable. The job must need you more than you need the job. Supply and demand.
On the computer power point: scaling has changed as Moore's law has died. It takes something more subtle to make modern systems sing. Something inaccessible to most teenagers without both aptitude and training.
I throw this number out there not for it to be taken seriously on its own purely because it’s “in the middle”, but to hopefully put into perspective how large this gap is, again naively assuming the “correct” number is somewhere between the two extremes.
I personally find it harder to imagine that the “correct” minimum wage is closer to $4.22 than it is to $14.11 or even $24, but that’s just me.
Here is a more complete picture, with words and discussion and multiple graphs too: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
There’s a story to tell here, but you’re not showing it.
Roughly, the way it "should" work is that if Company A and Company B are in the same industry, and Company A is more productive than Company B, free market forces cause Company A to pay more than Company B, thus improving their ability to compete for workers. Generalize this to an entire industry of competing companies, and then to an entire economy.
Refuting the (willful) abuse of statistics is like trying to refute numerology with reason.
Even here there is a definitive and deliberate bump right during the beginning of the COVID times. I don't believe that's an artifact. Somehow this analysis is saying people are vastly better in August than they were in February.
I think that "average" in most of the different versions is useless. The millionaire and billionaire classes can be so over-represented they can draw the rest up. It doesn't answer if all of society is actually becoming more well off or just the cream continuing to rise.
If I could go to my landlord and trade them a months' worth of health insurance benefits for rent, then you'd be on to something. If you could find a way to separate out the part of "total compensation" that actually contributes to income, such as stock grants & such, then we could talk. But, just "total compensation" doesn't cut it.
If you really want to get a true picture of how screwed the American worker is, take a look at housing and education costs over time, as well. Both have increased faster than inflation, and vastly outpaced wage growth; yet everyone needs a home, and a college degree is practically a requirement for any vaguely middle-class career.
If you want to look at the "value" of, say, an employer's group health insurance plan to me, what you really need to look at is the difference between buying the exact same coverage as an individual versus participating in the group plan. This is not an analysis that can typically be performed, because insurance companies don't want you to be able to compare on price like that. But, assuming you could, if I got, say, a $100 discount per month, and I was going to buy that coverage anyway, then, sure, you'd have a good case for calling that +$100 on my balance sheet.
Over time, which is what we are talking about here, the choice of the employer to put money into benefits in order to create an attractive compensation package means they are not putting money into wages (assuming for simplicity that those are the only two buckets to consider). So wages can stagnate while total compensation goes up.
Yes you can conclude from this that your take home pay is stagnant, what you can't conclude is that there hasn't been an increase in compensation. And if you are trying to determine if compensation is correlated with productivity gains (i.e. the original article) then you can't just pretend those benefits aren't part of the compensation equation.
Again, I literally don't care what my employer spends its money on in this calculation, other than my paycheck, and discounts on things I would use anyway such as health insurance they pass along from bulk buying. So, you can't say, "well, if they didn't offer insurance, and instead passed along savings in your paycheck, then your income would increase." Yes, I still need to buy insurance, so only the discount I get from obtaining it via my employer is relevant -- my literal bottom line does not change. (Actually, my bottom line is worse in this scenario because I don't get the tax break, but let's just ignore that). And, if a benefit isn't something I would use (let's say a childcare allowance, if I don't have children), that also goes on the company balance sheet and could potentially increase my "total compensation," but literally does nothing for me, hence its value to me is $0.
You seem to be talking past my point, which is that the American worker is getting screwed from all sides by stagnating wages and skyrocketing healthcare, housing, and education costs. In America, for most employees, those expenses come out of wages, so wages are what we ought to be concerned with.
It was the first thing I thought when opening this, and as so often, it was the case.
Similarly I do not understand your assertion that the author is "cherrypicking troughs and peaks". from tfa:
> Until 1968, the minimum wage not only kept pace with inflation, it rose in step with productivity growth. The logic is straightforward; we expect that wages in general will rise in step with productivity growth. For workers at the bottom to share in the overall improvement in society’s living standards, the minimum wage should also rise with productivity.
Is their assertion regarding 1968 and minimum wage factually incorrect?
Total compensation includes the value of benefits and the (so-called) employer contribution to taxes. Total compensation can be up to 40% more than salary.
Which is to say, insurance these days might be worth vastly more than it was in 1968, since Healthcare costs have skyrocketed for the uninsured.
Note there was an article on the HN front page just in the past week or so about how Amazon warehouse workers were getting more repetitive stress injuries because partial warehouse automation allowed them to fulfill 3x the number of items per hour than before these systems were put in place.