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Comment by WalterBright | Hacker News Reader

The Law of Supply and Demand means that worker total compensation tends to track their productivity.

Yet, if you look at real wages over time, they're stagnating in pretty much every developed country. Productivity has gone up consistently while wages lag far behind. Where is all that value going to? Because it isn't certainly being left on the table.

The extra value goes to the government. Dealing with the huge mass of government sucks up a lot of value, not including the heavy taxes.

Take a look at the size of government over time. Where do you think the money comes from to pay for that?

Like your family with your dad’s military job?

Where do you think the money comes from to pay for the military?

> if you look at real wages over time, they're stagnating in pretty much every developed country.

If you look at real incomes over time, they've been stagnant since the dawn of time; or at least as far back as we have kept track.

There was once wage growth because wages started from zero. It wasn't that many years ago that people didn't sell labor, only things. As we have transitioned into a labor economy, wages started to become a larger portion of one's income. To the point that nowadays more or less 100% of the average person's income is from wages.

So, with incomes and wages now being effectively equivalent, there is no room for wages to grow further. To do that now, incomes would also need to rise, and that has never happened.

This doesn't make any sense to me. Wages have steadily raised at the same rate of productivity between the end of WWII and the 1970s. People started selling their labor centuries before that.

It started to some degree centuries before, but it was a slow road to see people fully embrace the new world of selling time. Selling things remained the norm for a long time after the first worker started working for wages. However, by the 1970s, nearly everyone was working for wages. The rate of self-employment has remained effectively stagnant since then. This period marks, for all intents and purposes, the limit of human labor productivity.

Productivity has continued to rise since, but on the back of automation, not as a result of humans becoming even more productive laborers.

> Productivity has gone up consistently while wages lag far behind.

This isn't true for the US. The chart that purports to show this is misleading. Essentially, there are problems with the usual chart: the two lines are indexed to different inflation measures, and the wages line excludes certain highly compensated occupations which have been experiencing significant earnings growth (probably because these occupations are where the productivity growth is happening).

Edit: Actually, even more issues. https://x.com/AwayBerk/status/1483564925213683719

Some of those charts tracked wages rather than total employee compensation. The latter was quite a bit more.

Yes, exactly.

It really doesn't, that's a crazy reach to make.

The LoS&D is always in play. In this case, entrepreneurs are always looking for a higher margin business. The effect of this is to lower those margins.

Nothing "crazy" about it.

The "unintended side effects" of government policies are nearly always the result of ignoring the LoS&D or pretending it doesn't exist.

The amount of things the "law" of supply and demand predicts is literally zero.

You obey it yourself. Have you ever bought anything that was on sale? Have you ever negotiated a price?

A "law" that predicts nothing? Yeah, pretty sure I obey it exactly.

Supply and demand is a framework you can use to write your hypothesis in. It's not a law that predicts things.

The reason collectivism fails every time is because they believe that the LoS&D does not exist.

Would you say that construction is way more productive today in USA than 40 years ago? It seems like stuff are more expensive and less productive at the same time today.

If you've ever tried to build a house in the US, you'll find out where the money goes. I have, and there's good reason why I am not in the construction business.

Oh, and check this out:

https://www.seattletimes.com/business/developer-martin-selig...

That's gotta hurt!

So you agree USA has problems? That is the point, the source of that inequality doesn't matter the inequality is still hurting you. There are seemingly less such problems in Europe.

Of course the USA has problems. I've pointed out several.

But inequality is not a problem. People wanting to make it big come to the USA. That's why the USA has the biggest, most successful, companies that drive the US gdp forward.

Inequality is only a problem for people who are envious.

Healthcare using regulations to block competition and line their pockets is a big source to that inequality, being forced to pay into that isn't envy.

But I get your point, inequality isn't a problem in itself, but seeing your money go to rich people for no good reason does feel very bad even if the problem is the corruption and not the inequality.

Healthcare problems are nearly all caused by heavy government involvement in every facet of it.

> seeing your money go to rich people for no good reason

Anyone can buy stocks and get their share. For example, NVDA. If you'd bought some, you'd have made quite a lot of bank, and made your friends unhappy with you because of the money you unfairly made for no good reason.

I know many ordinary schlubs who became multimillionaires by simply buying NVDA, MSFT, AMZN, AAPL, etc.

> Inequality is only a problem for people who are envious.

Or when you have to pass by homeless tent cities in your downtown. Or when you are the victim of crime because the kid pulling a gun on you is envious because their family is poor and you're rich.

Extreme inequality brings social strife in multiple layers, if you're individualistic you might not care for it but for a society it fosters resentment and erosion of social cohesion.

But I don't think you care about that in general.

> Extreme inequality brings social strife in multiple layers

This is the conventional wisdom, but I can't think of a revolt in a free market country.

> But I don't think you care about that in general.

My reading of history is that free markets bring the greatest prosperity to the greatest number of people. No other economic system comes close.

Cutting other people down to size because you're envious just makes things worse. It produces economic stagnation, and the demand for "equity" is endless and endlessly makes things worse.

It doesn't end well.

Be careful what you wish for.

Keep in mind that the most prosperous companies are in America and bring that prosperity to Americans and are the envy of the world.

> I can't think of a revolt in a free market country.

Lmao

Inequality is big problem. If you have a certain percentage of people with way more money than others, they skew markets to cater to them. You see this in real estate where new builds are mostly towards the higher end. You see this with cars where manufacturers are cutting the lower end models. You see it in health care where the only available options are the expensive ones.

This works well for companies because they can get higher margins. This works well for the people with money but other people are being left out. And with increasing inequality the number of people left out goes up.

Basically we are creating a world designed for the top x percent of people. And they are creating laws that favor themselves.

You cannot make it big in the auto business by targeting the 1%. Ferrari has never been a big company, and often teetered on bankruptcy.

The big money is targeting where the customers are - the middle class. That's why VW got so big. Why Ford and GM and Chrysler made so much money. Selling cars to the middle class. Tesla has also moved down market for the same reason.

How's Rolls Royce, Bentley, and Jaguar doing? Case closed.

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