https://www.epi.org/blog/wage-growth-has-been-dampening-infl...
https://insurancenewsnet.com/oarticle/inflation-continues-to...
Demographics and the security situation is changing this, and the establishment (for better and worse) is absolutely freaking out.
The world as we have lived it the past 30 years cannot exist if people doing labor can command a decent wage by USA standards, we’re going to have to recalibrate for a while
I’m not prescribing right or wrong to the situation, just what is
The wotld as a whole does not benefit from this arrangement.
I didn't create the system. Someone started this ball rolling 10k years ago.
I’m really excited to see the organizing efforts taking place in the US; without them, these workers won’t be able to secure better wages, better quality of life, and a seat at the table with the business. The CEO would just go buy yet another yacht (the CEO of Starbucks is worth $4B and owns a $120M mega yacht, for example).
If the value of automation were distributed differently it'd be great. If workers owned a company such as in a worker-cooperative structure, then the workers would be happy to focus less on stuff they don't like and focus on different things. Or a strong state could impose taxes on highly automated industries to fund a kind of universal basic income. But under our status quo, automation benefits the capitalists much more than the general population.
I think customers also benefit. If a janitor costs $100/day and that’s automated away to a robot with $20/day costs that $80 will be passed on to the customer (just like every other technology innovation).
But automation has really benefitted customers through lower prices and higher quality so it’s hard to expect that these robots would result in owners pocketing the savings over previous robots.
It's complicated.
Any jobs displaced will result in a multiple of new jobs created with the new opportunities it unlocks.
I’m not saying we’re in a post-scarcity situation yet, by any means, but it seems inevitable that if humanity continues in the same general direction, it’s only a matter of time before it happens. At which point, such a discussion is unavoidable.
Many of their complaints do seem grounded in truth, however. America's low hanging fruit blue collar jobs have moved to developing nations. The automotive industry doesn't have as many jobs paying what it used to.
There doesn't seem to be a lot of talk for the trade skill pipeline, which has me curious: why not?
Both plumbing and electrical work pay decently and offer a high degree of autonomy, yet these aren't hyped. Nursing can be learned at night school. Not everything requires a college degree or "book smarts".
There has to be something more at play, because the middle class is hollowing out. Maybe not enough of these jobs to go around? Or maybe that middle class can never be as big as it once was during the post war boom years that saw American manufacturing leading the world. Maybe every country gets fifty years tops before that crown moves on.
They're also not wrong in complaining about asset appreciation. Unaffordable housing and rent. These are real pressures. "Cheap housing" doesn't seem like a bone we can throw.
What do we do for these folks that can't get white collar work?
I think it’s because these jobs are “hard” in that they require more than a day of training and you can’t use your phone at work. There’s a weird habit with people I know that since they can get $15/hour working at a McJob that doesn’t challenge them physically or mentally that it’s “good enough.”
Long term planning is required to learn to weld and make $45/hour.
That's what people are complaining about. The hurdles are higher and more frequent than before. It's still there, but having your first home at 35 is vastly different from having it at 25. My friend group is filled with people privileged enough to work lucrative white collar jobs, and it's still a massive challenge despite earning more than 90% of all households.
Now imagine what happens when blue collars get saturated again. They can't beat white collar work during or after 25-35 without going off the beaten path, while white collar is struggling.
Cherry on top: households are getting less while doing more work per household.
America won't be regaining its 1940's unilateral industrial superpower status again.
Do we just say that the Silent and Boomer generations were a fluke?
Do politicians that promise to redistribute wealth get elected?
Does automation really save us? Or lead to greater inequality?
Yes we do, because yes, they were a fluke. The question is, can we re-create conditions approximately that good (without bombing the rest of the planet back to the stone age)? I must admit that I don't see a way to do so.
The downward pressure on their compensation will see the cost to build new homes come down and thus the market will trend towards affordable again? After all, like all things, the cost of a used home is a function of the cost of a new home.
Why shouldn't they? Somehow, with all of our progress, life gets more difficult.
Didn't it used to be possible for cashiers to support themselves?
Agreed. They were more frank about it back in the day.
If everyone has enough money the masses can create/buy assets to capitalize on rather than merely be worker bees.
"Nominal wage growth has been fast over the past year relative to the past few decades, but it has lagged far behind inflation, meaning that labor costs are dampening—not amplifying—price pressures"
This is not necessarily true since it doesn't take into account labor productivity. From the BLS:
"Unit labor costs in the nonfarm business sector increased 10.2 percent in the second quarter of 2022, reflecting a 5.7-percent increase in hourly compensation and a 4.1-percent decrease in productivity. Unit labor costs increased 9.3 percent over the last four quarters. This is the largest four-quarter increase in this measure since a 10.6-percent increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them."
From your second link:
"At the state level, we can do more and, frankly, we should have done it a long time ago. The 'Inflation Relief and Consumer Assistance Plan' (A.8481), which was introduced by Leader Barclay, would slash state sales tax for two years on everything from gas to groceries to utility bills. This would provide immediate and meaningful relief. The windfall in state sales tax revenue could easily be covered by surplus money from the federal government."
So during a period of inflation and rising interest rates, they are advocating fiscal stimulus financed by government debt. You think that is a good idea?
It's the opposite actually. The Fed is raising interest rates to contract the money supply, which will temper inflation. They acknowledge the negative impacts it will have to unemployment and wages, but if you read their press releases, you can tell it's clearly not their intent. Meanwhile, the MSM is spinning it as them wanting to stop wage growth to spark populist outrage and get more clicks.
It's a shame that everyone is intent on badmouthing one of the only somewhat competent parts of the government. The Fed is an easy target because they don't play petty politics. First Trump pressures the Fed to reverse quantitative tightening. Then, during the pandemic, the Republicans badmouth the Fed again for "printing money." Now, the left is criticizing them for "planning to sharply boost unemployment".
The NBER has never failed to call a recession on 2 quarters of negative growth in the past, including during the very same pandemic we are now exiting, which was also a pretty strange time. Past recessions have involved other circumstances, too.
It's literally called a recession because it is a time when the economy is receding. If I had said "depression" or "financial crisis" you could argue that we don't have one of those.
> Q: What is a recession? What is an expansion?
A: The NBER's traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months. The committee's view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another.
https://www.nber.org/research/business-cycle-dating/business...
By that definition, even Forbes agrees that we are not yet in a recession.
https://www.forbes.com/advisor/investing/are-we-in-a-recessi...
The only reason the definition of "recession" is such a hot button issue in the US is that it looks bad for a political party to preside over a recession. They happen. At least 4 of the last 6 presidents presided over one. Most of them aren't that bad. It's fine to admit that the US economy has receded over the last 6 months, which it demonstrably has.
EDIT: The NBER, by the way, uses many metrics to declare recessions, and they particularly overweight employment and payroll metrics. The US is currently doing very well by those measures, despite the obvious weakness in the economy. I am assuming the NBER also undervalues the effects of inflation because they don't know what to do about it. That is why most of the world uses an objective definition based on GDP growth.
> The NBER has never failed to call a recession on 2 quarters of negative growth in the past,
However, thus far, despite two quarters of GDP decline, they have not (and from their own definition, it is clear why they have not).
Business Insider believes the state of the job market to be the primary reason why.
https://markets.businessinsider.com/news/stocks/economy-nber...
> The NBER, by the way, uses many metrics to declare recessions, and they particularly overweight employment and payroll metrics
You may consider it overweighted, my point was merely that the use of a single metric is mostly a feature of pundits and not civic institutions like NBER, who you mentioned as arbiters of being-in-receession.
What was not responsible was dropping rates 75bps in 2019, the “mid-cycle adjustment” period referenced here. The economy was already roaring and it was widely acknowledged even at the time that this was unnecessary and a concession to political pressure.
https://www.forbes.com/advisor/investing/fed-funds-rate-hist...
Those politically-motivated cuts left the fed with no maneuvering room when (inevitably) a crisis did strike. And we’re still feeling the ramifications of that today, because now we get to do those rate increases during what’s already a recession, instead of during a booming 2019 economy.
This whole situation is a textbook lesson on “why you don’t lower rates while the economy is already roaring just to pump the president’s numbers a little further going into an election year”.
Dunno but maybe raising rates like a year ago to slow the chock now would have been appropriate? Like, I guess they knew all the QE would end up somewhere eventually flooding the market with cash?
Both of those moves look to me like overreactions inspired/emboldened by Bernanke's actions in 2007-8. Powell saw that slamming rates to 0 had helped to prevent a complete collapse of the financial system in 2008 and went with it. He didn't notice that Bernanke did a whole bunch of other stuff too, and that Bernanke was one of the world's foremost experts on the economics of the Great Depression, which certainly helped in 2008.
Is it entirely the fault of the 2019 rate cuts? No, but, we'd have been starting the 2020 games from a position of at least 2.25% interest (perhaps more like 3% if rate increases had continued) instead of 1.5%, that's 50-100% more room for the Fed to maneuver. What's more, it was a blatantly political and obviously stupid move even at the time, and widely acknowledged as such even at the time. There was no need for stimulus in 2019 when the economy was already roaring and it was "pro-cyclical", ie the opposite of the usual "anti-cyclical" policy.
(Also there's technically no reason that zero has to be a bound... the fed can pay you to take money, if it comes down to it. But all kinds of weird things start happening near zero and I think nobody really wants to fuck around and find out there.)
Anyway, we can also blame congress... the Fed has been begging for a decade for more active fiscal policy from Congress rather than forcing everything to be done via monetary policy. And that means more spending when times are tough, and less spending when times are good. When you're in the situation we were in 2008, it's irresponsible not to spend and leads to overexertion of monetary policy to compensate. But absolutely everything was stonewalled during the 2008-2016 period besides military spending. If Congress had engaged in more sustained stimulus and infrastructure spending during that period, the rates probably could have been pulled up a lot sooner (which is of course the balance to the spending).
And in contrast right now is probably not the ideal time for tons of spending either... but I think we are going to get the wonderful experience of "stagflation", inflation during a recession, so addressing one problem worsens the other. And there's really not any obvious tools to deal with that combination, besides just slowing the economy and letting inflation burn out.
The Bank of Canada even came right and out said that employers should definitely not raise wages quickly.
https://www.theglobeandmail.com/business/article-wage-negoti...
Sufficient tax increases for the well-off would have the same effect as punishing the working class, but that's never an option for some reason.
A poor or working-class person spends (nearly) all of their money on consumer goods. Give them 10% more money and they try to buy 10% more things.
Restricting money on the wealthy doesn’t reduce demand for GPUs for example, but restricting money on low-middle income people does. That lower demand for consumer goods is how you can slow inflation.
But by redistributing it to lower and middle class, it’s now being spent on consumer goods, increasing demand for the goods, causing inflation.
Would they?
From an economic perspective (not a social/fairness one), isn't it well studied that consumption (as percentage of income) is inversely proportional to higher/lower total income?
So raising tax on the well-off would be more akin to raising the prime rate (i.e. decreasing the amount of well-off capital that's reinvested elsewhere) with the added effect of increasing consumption by increasing federal government spending.
Note: I'm not opining on the justness of this, simply the mechanism.
"Sufficient" is the operative word here. There's a tremendous amount of non-productive rent-seeking, such as literal rents. These are a massive drag on our economy, because they shift investments towards non-productive use. More targeted tax increases to discourage the worst rent-seeking would help a lot, in addition to generating revenue and easing price pressures.
> “Don’t build that into longer term contracts. Don’t build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down.”
If you're going to account for inflation in a contract, I believe indexing is the preferred method anyway. Many government pensions - and some salaries - are indexed to inflation.
We have a lot of catching up to do, and incumbents designed this system so that healing the gap hurts the bottom line of voters, so there is simply no painless way out of it. We've all been paying towards a debt that is about to be realized.
And if I'm a union guy negotiating my next 3 year contract and I listen to Tiff and only get 8% this year, then 3% the next two years, is Tiff going to pay the difference when inflation isn't under control?