Supply and Demand Does a Poor Job of Explaining Depressed Wages(bloomberg.com)
bloomberg.com
Supply and Demand Does a Poor Job of Explaining Depressed Wages
https://www.bloomberg.com/view/articles/2018-04-05/supply-and-demand-does-a-poor-job-of-explaining-depressed-wages
133 comments
My summary of the article would be:
If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases and jobs were not loss. The conclusion was therefore that Supply and demand were broken.
Then then want on to say how they found a link between having a small number of employers in a field and lower wages.
If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases and jobs were not loss. The conclusion was therefore that Supply and demand were broken.
Then then want on to say how they found a link between having a small number of employers in a field and lower wages.
> The conclusion was therefore that Supply and demand were broken.
Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.
Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.
That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour.
You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.
You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.
> No one is going to say "I was willing to work for $6/hour but not for $7/hour".
I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage.
Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want.
> You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour.
That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential.
It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.
I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage.
Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want.
> You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour.
That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential.
It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.
> It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.
That is exactly the point I was trying to make and I think the article was trying to do the same. Unless you make the assumption that demand for labor is perfectly inelastic or is one of the very rare goods, like Veblen goods, that have a positive price elasticity of demand, raising the minimum wage would be expected to decrease the amount of labor demanded. If it doesn't, then one of those assumptions must be incorrect. Either labor has perfect or positive elasticity of demand (unlikely because very few things do, even things that most people would describe as absolute necessities) or there are more factors at play than just the law of demand.
That is exactly the point I was trying to make and I think the article was trying to do the same. Unless you make the assumption that demand for labor is perfectly inelastic or is one of the very rare goods, like Veblen goods, that have a positive price elasticity of demand, raising the minimum wage would be expected to decrease the amount of labor demanded. If it doesn't, then one of those assumptions must be incorrect. Either labor has perfect or positive elasticity of demand (unlikely because very few things do, even things that most people would describe as absolute necessities) or there are more factors at play than just the law of demand.
Sounds informally like a logical contradiction at work, thus the assumptions must be wrong
>>Except power itself is determined by supply and demand.
not necessarily. consider what would have happened if the workers were unionized, for example. You might still have had the same number of jobs, but a different distribution of profits to employees/owners.
not necessarily. consider what would have happened if the workers were unionized, for example. You might still have had the same number of jobs, but a different distribution of profits to employees/owners.
Unionization is a form of supply management (as is minimum wage[1]). A union does not change the rules of supply and demand, it exploits the rules of supply and demand for the benefit of the employees by artificially limiting the supply. With the reduced supply of workers, the power of the workers increases as I described in the final paragraph of my previous comment.
[1] https://news.ycombinator.com/item?id=16775810
[1] https://news.ycombinator.com/item?id=16775810
ok, we can define it like that. but its useful to distinguish between these different ways supply and demand can act then, under your definition. One is concerned with just the number of available jobs, and concerns the "efficient market" situation where employers simply can not increase wages and stay profitable. This is the more common
"supply and demand" notion, afaik. The other is artificial - workers can unionize, and what the employers can do is described in the article.
> One is concerned with just the number of available jobs
I am given the impression that you may still have some misconceptions about what supply and demand means. Supply and demand, in the labor market, does not mean the number of jobs available.
The best way I can describe supply and demand in a short comment on the internet is that supply and demand is about competition. The supply is those willing (and able) to offer something better to those who want what you have. In labour this could mean doing a better job, or simply offering to do it for less money. The demand is those willing (and able) to offer something better to suppliers. In labor this could mean a business offering free lunches, or simply more money.
When there is nobody willing to offer more, and nobody willing to give for less, you have reached equilibrium.
To be abundantly clear, someone saying that they have a job is not demand. For argument's sake, if we say all programmers are paid $30/hr. and a business wants to hire a programmer for $10/hr., there is no incentive for anyone to take that job. As far as supply and demand goes, that job does not exist.
I will point out that this is also why the formal definition of shortage, not the colloquial one you sometimes see used on HN, is a situation where an external mechanism, such as government intervention, prevents price from rising. The $10/hr. programming job does not increase the demand for programmers. It is not a shortage because the business couldn't find anyone at $10/hr. The business trying to offer $10/hr. is not in the market to begin with.
I am given the impression that you may still have some misconceptions about what supply and demand means. Supply and demand, in the labor market, does not mean the number of jobs available.
The best way I can describe supply and demand in a short comment on the internet is that supply and demand is about competition. The supply is those willing (and able) to offer something better to those who want what you have. In labour this could mean doing a better job, or simply offering to do it for less money. The demand is those willing (and able) to offer something better to suppliers. In labor this could mean a business offering free lunches, or simply more money.
When there is nobody willing to offer more, and nobody willing to give for less, you have reached equilibrium.
To be abundantly clear, someone saying that they have a job is not demand. For argument's sake, if we say all programmers are paid $30/hr. and a business wants to hire a programmer for $10/hr., there is no incentive for anyone to take that job. As far as supply and demand goes, that job does not exist.
I will point out that this is also why the formal definition of shortage, not the colloquial one you sometimes see used on HN, is a situation where an external mechanism, such as government intervention, prevents price from rising. The $10/hr. programming job does not increase the demand for programmers. It is not a shortage because the business couldn't find anyone at $10/hr. The business trying to offer $10/hr. is not in the market to begin with.
Exactly. The article implies that bargaining position is the deciding factor here.
Bargaining position is ENTIRELY defined by economics.
How many options does the company have to fill the role you are applying for? How many jobs do you have the ability to fill? What is the compensation level for those jobs?
In a pool of workers, on a sheer measurable and presentable skill set...do you stand out? Networking, creates a connection that helps you stand out so when a company is taking job applicants they have a supply of people who stand out and a supply of "general workforce". Standing out can just mean an existing relationship, a recommendation from a trusted person, or some other type of quality that makes you a preferred candidate. There is a more limited supply of "preferred" candidates and those folks will be more aggressively sought after (and compensated). We'd like for it to be all about skill, but businesses are run by people and many people place a high value on trust.
When it comes to the more general pool of candidates, that pool is a whole lot bigger and if you haven't worked your way into the preferred group for the company then you do have very little bargaining power...meaning there is an ample supply of people who can fill the role.
This article, despite the title...doesn't actually do anything to change the reality any more than publishing an article titled "2 + 2 is not actually 4" disproves it. The content has to prove the headline...and it doesn't.
How many options does the company have to fill the role you are applying for? How many jobs do you have the ability to fill? What is the compensation level for those jobs?
In a pool of workers, on a sheer measurable and presentable skill set...do you stand out? Networking, creates a connection that helps you stand out so when a company is taking job applicants they have a supply of people who stand out and a supply of "general workforce". Standing out can just mean an existing relationship, a recommendation from a trusted person, or some other type of quality that makes you a preferred candidate. There is a more limited supply of "preferred" candidates and those folks will be more aggressively sought after (and compensated). We'd like for it to be all about skill, but businesses are run by people and many people place a high value on trust.
When it comes to the more general pool of candidates, that pool is a whole lot bigger and if you haven't worked your way into the preferred group for the company then you do have very little bargaining power...meaning there is an ample supply of people who can fill the role.
This article, despite the title...doesn't actually do anything to change the reality any more than publishing an article titled "2 + 2 is not actually 4" disproves it. The content has to prove the headline...and it doesn't.
>Bargaining position is ENTIRELY defined by economics.
In theory it is, but I haven't seen much if any economic research that actually analyzes, say, desperation as a factor in aggregate wage levels.
Much like the effect of raising the minimum wage on profits (ridiculously under researched), there are apparently some topics economists simply don't like looking at.
In theory it is, but I haven't seen much if any economic research that actually analyzes, say, desperation as a factor in aggregate wage levels.
Much like the effect of raising the minimum wage on profits (ridiculously under researched), there are apparently some topics economists simply don't like looking at.
IMO that is the type of thing that could/should be studied in conjunction with basic income.
Supply and demand does a great job of explaining depressed wages. We had two kinds supply shocks in the recent history in the labor market. One is women entering the workforce and the second is mass immigration.
Both coincided at the end of the 60s and 70s. Exactly since then wages are not correlated to productivity anymore and are basically stagnating.
Both coincided at the end of the 60s and 70s. Exactly since then wages are not correlated to productivity anymore and are basically stagnating.
Globalization occurred during this time, too, leading to a greater concentration of wealth in the cities.
Do you have data on this? Because I looked and couldn't find anything reliable going past ~1964.
Take one example. US manufacturing has become radically more productive over time:
https://i.imgur.com/exTxW1O.jpg
The primary reason the US lost so many manufacturing jobs since the peak, wasn't China, it was persistent gains in manufacturing productivity.
At the exact same time that is occuring, and while domestic economic growth slows, you import millions of low skill laborers into a declining or stagnant labor demand situation (for that type of labor). What is going to happen? It's obvious: wage suppression due to labor over-supply.
It is simple supply and demand.
Tech workers have gotten to see this up close & personal, as companies from IBM to Microsoft intentionally imported lower cost foreign engineer labor to undercut higher cost domestic engineers.
It's why the Koch brothers are such big fans of unlimited low-skill immigration (and why so many business Republicans love it, that by itself should throw up a red flag), the entire point is to hold wages down and hold down business costs to maximize corporate profitability.
This is also why almost no other developed nation allows unlimited or large amounts low-skill immigration, including Canada. Most developed nations use either a ridiculously strict approach to any immigration (eg Japan, and presently Scandinavia), or specifically operate a skill restricted / merit-based immigration system (eg Canada and Australia).
https://i.imgur.com/exTxW1O.jpg
The primary reason the US lost so many manufacturing jobs since the peak, wasn't China, it was persistent gains in manufacturing productivity.
At the exact same time that is occuring, and while domestic economic growth slows, you import millions of low skill laborers into a declining or stagnant labor demand situation (for that type of labor). What is going to happen? It's obvious: wage suppression due to labor over-supply.
It is simple supply and demand.
Tech workers have gotten to see this up close & personal, as companies from IBM to Microsoft intentionally imported lower cost foreign engineer labor to undercut higher cost domestic engineers.
It's why the Koch brothers are such big fans of unlimited low-skill immigration (and why so many business Republicans love it, that by itself should throw up a red flag), the entire point is to hold wages down and hold down business costs to maximize corporate profitability.
This is also why almost no other developed nation allows unlimited or large amounts low-skill immigration, including Canada. Most developed nations use either a ridiculously strict approach to any immigration (eg Japan, and presently Scandinavia), or specifically operate a skill restricted / merit-based immigration system (eg Canada and Australia).
Sure, possibly valid points. But the original comment made an explicit point that I can't verify because I cannot find wage data going back past 1964.
https://slatestarcodex.com/2018/02/19/technological-unemploy...
Look at the charts on labor force participation rate, and read his analysis. I'd say it is very carefully done.
Look at the charts on labor force participation rate, and read his analysis. I'd say it is very carefully done.
I first saw the plot here:
https://economics.stackexchange.com/questions/15558/producti...
https://economics.stackexchange.com/questions/15558/producti...
A correlation. :|
You blame women and immigrants, but a much more likely explanation is the decline of union participation in the private American workforce. They've been on the decline since the 1970s, and the more they've declined, the more that productivity has been captured by upper management and shareholders.
> You blame women and immigrants
That's a noticeable step into flamewar. Could you please not do that to the threads here? It isn't necessary to make your point, and in the long run it destroys the site.
Instead, please follow the guidelines at https://news.ycombinator.com/newsguidelines.html, including this one: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize."
(Your comment would be fine without that initial phrase.)
That's a noticeable step into flamewar. Could you please not do that to the threads here? It isn't necessary to make your point, and in the long run it destroys the site.
Instead, please follow the guidelines at https://news.ycombinator.com/newsguidelines.html, including this one: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize."
(Your comment would be fine without that initial phrase.)
That is still explained by supply and demand though. A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually). Unionized workers are usually able to make more money than they would in a non-unionized market because of that smaller supply of sellers relative to the demand.
However, as a Canadian who saw peak unionization in the mid-80s, long after wages also started stagnating in our country, and a country that still has relatively strong unionization even today (especially compared to the significant decline seen in the USA), I'm not sure that this explanation holds.
However, as a Canadian who saw peak unionization in the mid-80s, long after wages also started stagnating in our country, and a country that still has relatively strong unionization even today (especially compared to the significant decline seen in the USA), I'm not sure that this explanation holds.
A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually).
Closed-shop unions, you say? Do they still exist? I work in the UK, and I've worked in many workplaces where there were active unions, and the very idea that you'd have to be a member of the union to work there was laughable and, if I recall correctly, illegal.
In my experience, a union does not work by artificially constraining the labor pool. In every job I've ever had in which I could have joined a union, I only had the opportunity to join the union after I was employed. Before I was employed, I didn't even know there was a union there.
Closed-shop unions, you say? Do they still exist? I work in the UK, and I've worked in many workplaces where there were active unions, and the very idea that you'd have to be a member of the union to work there was laughable and, if I recall correctly, illegal.
In my experience, a union does not work by artificially constraining the labor pool. In every job I've ever had in which I could have joined a union, I only had the opportunity to join the union after I was employed. Before I was employed, I didn't even know there was a union there.
Closed-shop unions are typical where I live. My mistake on them being typical across the world.
However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. The only other supply is those who want to bargain on their own, and even then you're probably not going to find too many who are willing to severely undercut the union, unless the union is on the brink of collapse anyway.
The supply is still constrained. Although perhaps not to level it is in a closed shop.
However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. The only other supply is those who want to bargain on their own, and even then you're probably not going to find too many who are willing to severely undercut the union, unless the union is on the brink of collapse anyway.
The supply is still constrained. Although perhaps not to level it is in a closed shop.
However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union.
Even that is another interesting thing; the idea that one of my employers, past and present, might actively seek out union members to employ, is so strange to me (and completely unworkable; I think it might even be illegal). The supply was in no way affected by the union.
In jobs I've had in the past, any benefits or agreement the union negotiates applied to all employees, regardless of union membership status, and were placed into contracts without any reference to unions at all. Collective bargaining by the union for improved conditions and pay existed; every employee benefited, union and non-union alike.
I suppose the moral of this is just that unions work very differently where you live to where I live.
Even that is another interesting thing; the idea that one of my employers, past and present, might actively seek out union members to employ, is so strange to me (and completely unworkable; I think it might even be illegal). The supply was in no way affected by the union.
In jobs I've had in the past, any benefits or agreement the union negotiates applied to all employees, regardless of union membership status, and were placed into contracts without any reference to unions at all. Collective bargaining by the union for improved conditions and pay existed; every employee benefited, union and non-union alike.
I suppose the moral of this is just that unions work very differently where you live to where I live.
> In jobs I've had in the past, any benefits or agreement the union negotiates applied to all employees
Exactly. This means there is effectively one seller. A greater supply would mean that there are people lining up to do the job for less.
Supply doesn't mean all people who want to work. means those who are willing to compete. Someone who wants way more conditions than even the union was able to negotiate at this place of business is not supply.
Exactly. This means there is effectively one seller. A greater supply would mean that there are people lining up to do the job for less.
Supply doesn't mean all people who want to work. means those who are willing to compete. Someone who wants way more conditions than even the union was able to negotiate at this place of business is not supply.
I think I'm happy with this. Sounds a lot better than the race to the bottom I see in some countries.
I think also we see a lot less union activity than you do. I couldn't tell you who was in the union. The most prominent thing they do is put up some posters reminding people of employment law. I never saw them make wage negotiations and to a large extent, that's not what they do. So far as I could tell, they principally exist to provide another channel for enforcing employment law and ensuring safety standards in the workplace were being met, and in the even of unfair treatment provide an employee with support and legal representation. Maybe if they were heavily into negotiating wages and so on, it would be different (I think in some industries maybe they still do that), but I've never seen them do that in any company for which I've worked. Seems that unions do very different things in our respective countries; I expect them to protect me from illegal activity on the part of the powerful, rather than win anything for me.
I think also we see a lot less union activity than you do. I couldn't tell you who was in the union. The most prominent thing they do is put up some posters reminding people of employment law. I never saw them make wage negotiations and to a large extent, that's not what they do. So far as I could tell, they principally exist to provide another channel for enforcing employment law and ensuring safety standards in the workplace were being met, and in the even of unfair treatment provide an employee with support and legal representation. Maybe if they were heavily into negotiating wages and so on, it would be different (I think in some industries maybe they still do that), but I've never seen them do that in any company for which I've worked. Seems that unions do very different things in our respective countries; I expect them to protect me from illegal activity on the part of the powerful, rather than win anything for me.
[deleted]
Sticking to the supply-demand theme...decline in union participation could also come as a result of bad experiences with unions over leveraging their positions causing business to prefer non-union workers.
At the same time, as working conditions improved the benefits of participating in a union could be much less pronounced.
Meaning that demand for non-union workers increased, which were in ample supply.
To truly make a case for union participation you have to also make a case for how hiring union workers benefits a business. If that isn't plainly obvious, then the demand for union workers themselves will go down.
At the same time, as working conditions improved the benefits of participating in a union could be much less pronounced.
Meaning that demand for non-union workers increased, which were in ample supply.
To truly make a case for union participation you have to also make a case for how hiring union workers benefits a business. If that isn't plainly obvious, then the demand for union workers themselves will go down.
Also:
* Austerity (e.g. leaving pothole fixing in portland to anarchists) - which reduces aggregate demand for labor, and thus reduces overall wages.
* Benefits cuts - which increases low wage workers' reliance upon their wage income, and reduces their negotiating leverage.
This is why certain politicians are extremely concerned about "fiscal prudence" when it comes to government spending on wages, pensions or benefits, but lose their sense of fiscal prudence as soon as the topic is tax cuts or military spending. They're mainly just trying to inadvertently push corporate wage bills down.
* Austerity (e.g. leaving pothole fixing in portland to anarchists) - which reduces aggregate demand for labor, and thus reduces overall wages.
* Benefits cuts - which increases low wage workers' reliance upon their wage income, and reduces their negotiating leverage.
This is why certain politicians are extremely concerned about "fiscal prudence" when it comes to government spending on wages, pensions or benefits, but lose their sense of fiscal prudence as soon as the topic is tax cuts or military spending. They're mainly just trying to inadvertently push corporate wage bills down.
It should be pointed out that studies of small increases of minimum wage that show modest harm do not immediately tell us that huge increases of minimum wage will not cause greater harm. Remember that $15/hour is more than the median wage in much of the country.
These jobs that are worth less than $15 per hour are going to be the first to be replaced by machines so whatever happens we need a solution to give people at the bottom high(er) quality lives.
> we need a solution to give people at the bottom high(er) quality lives.
Training and safety nets, funded through tax revenues.
Keep in mind, the national minimum wage in Australia is currently $18.29. The entire US has been getting a discount on minimum wage labor for decades, and everyone is kicking and screaming now that those workers are having their wages ratcheted up to what they should be making when accounting for inflation [1] [2].
[1] http://www.pewresearch.org/fact-tank/2017/01/04/5-facts-abou...
[2] https://www.cnbc.com/2016/07/21/adjusted-for-inflation-the-f...
Training and safety nets, funded through tax revenues.
Keep in mind, the national minimum wage in Australia is currently $18.29. The entire US has been getting a discount on minimum wage labor for decades, and everyone is kicking and screaming now that those workers are having their wages ratcheted up to what they should be making when accounting for inflation [1] [2].
[1] http://www.pewresearch.org/fact-tank/2017/01/04/5-facts-abou...
[2] https://www.cnbc.com/2016/07/21/adjusted-for-inflation-the-f...
Not to discredit anything you've said, as on the whole I agree with you. But movie tickets are nearly twice as expensive in Australia. [0] [1]
And a popular videogame can be wildly more expensive. MLB The Show 2018 for instance is $60 in the US and $100 in AU. These prices are outside that which is explained by the current exchange rate.
Yes, you are being paid more. The price of living is also drastically higher there. I think there are better case-studies than Australia.
[0] https://www.screenaustralia.gov.au/fact-finders/cinema/indus...
[1] https://www.statista.com/statistics/187091/average-ticket-pr...
And a popular videogame can be wildly more expensive. MLB The Show 2018 for instance is $60 in the US and $100 in AU. These prices are outside that which is explained by the current exchange rate.
Yes, you are being paid more. The price of living is also drastically higher there. I think there are better case-studies than Australia.
[0] https://www.screenaustralia.gov.au/fact-finders/cinema/indus...
[1] https://www.statista.com/statistics/187091/average-ticket-pr...
> And a popular videogame can be wildly more expensive. MLB The Show 2018 for instance is $60 in the US and $100 in AU
That's actually easily explained by manufacturers tying their product to the US dollar. We're getting fucked by this in Canada, too. My favorite is when Apple laptops fluctuate by $200CAD in either direction while my salary stays the same.
Just look at a chart of your dollar against the USD. Movies are more local in a sense.
That's actually easily explained by manufacturers tying their product to the US dollar. We're getting fucked by this in Canada, too. My favorite is when Apple laptops fluctuate by $200CAD in either direction while my salary stays the same.
Just look at a chart of your dollar against the USD. Movies are more local in a sense.
It should be noted that Australia has a healthcare system substantially more equitable than the US, making the price of discretionary goods and services less of an issue. Real estate, education, and healthcare inflation is a thing (despite the price of TVs and tech coming down year after year) in the US (although I am aware of the steep cost of real estate in AU and NZ due to foreign buyers).
"Australia has a one of the strongest economies in the developed world. It survived the recent recession unscathed and hasn’t had a real recession in 20 years. And as Australian academics have noted, "Australia and New Zealand, with among the highest minimum wages in the world, have both low levels of unemployment and significantly lower levels of low paid employees.
Bankruptcies due to medical costs, which accounted for 60 percent of U.S. bankruptcies before the Affordable Care Act, are completely unknown there."
https://www.usnews.com/opinion/blogs/laura-chapin/2014/12/09...
"Australia has a one of the strongest economies in the developed world. It survived the recent recession unscathed and hasn’t had a real recession in 20 years. And as Australian academics have noted, "Australia and New Zealand, with among the highest minimum wages in the world, have both low levels of unemployment and significantly lower levels of low paid employees.
Bankruptcies due to medical costs, which accounted for 60 percent of U.S. bankruptcies before the Affordable Care Act, are completely unknown there."
https://www.usnews.com/opinion/blogs/laura-chapin/2014/12/09...
Cost of living in AUS is decently higher than the US, and they have more exemption categories from minimum wage than the US.
Equivalently to your argument of picking the highest value you can find and claiming others getting a discount, maybe Australia is overpaying for labor, and has been getting less as a result.
Equivalently to your argument of picking the highest value you can find and claiming others getting a discount, maybe Australia is overpaying for labor, and has been getting less as a result.
I think this might be a misplaced assumption.
Historically I think it has turned out that machines/computers are really good at jobs that people think are hard, but really bad at jobs that people think are easy.
Machines are great at doing precision machining, which is hard for humans. But they're terrible at walking, which most people can do without difficulty.
Historically I think it has turned out that machines/computers are really good at jobs that people think are hard, but really bad at jobs that people think are easy.
Machines are great at doing precision machining, which is hard for humans. But they're terrible at walking, which most people can do without difficulty.
Right, but surely you don't believe that robotics is stuck where it is, we haven't quite figured out everything, but it's still a new field.
Far from it, but this is in response to a comment which explicitly said "These jobs that are worth less than $15 per hour are going to be the first to be replaced by machines". I don't think they'll necessarily be the first, and in some cases will come well after much more highly compensated positions have all but disappeared.
For example, waiting tables is a classic minimum wage job (in fact, in most states in the US, the minimum wage for waiters is actually less than the standard minimum wage because tip income is assumed to make up the difference), and I'm not seeing waiters being replaced in any significant capacity by robots in the near future.
And on the other hand, a difficult job like being a machinist is becoming increasingly obsolete. A master machinist will always be able to find high-paying work, but the market for apprentice or journeyman machinists is drying up very rapidly, because a single master machinist can set the template for a hundred CNC mills and lathes, to the point where the pipeline for master machinists is on life support.
For example, waiting tables is a classic minimum wage job (in fact, in most states in the US, the minimum wage for waiters is actually less than the standard minimum wage because tip income is assumed to make up the difference), and I'm not seeing waiters being replaced in any significant capacity by robots in the near future.
And on the other hand, a difficult job like being a machinist is becoming increasingly obsolete. A master machinist will always be able to find high-paying work, but the market for apprentice or journeyman machinists is drying up very rapidly, because a single master machinist can set the template for a hundred CNC mills and lathes, to the point where the pipeline for master machinists is on life support.
That's not obviously true, and not theoretically well justified. It depends on total workforce size and difficulty of optimizing. Wholly eliminating a $15/hr job is just about as valuable as eliminating 30% of the hours needed at a $100/hr job.
I don't understand this and your maths is wrong - it would be 15%? But also the $100 per hour job will just get more complex in a different way and will still take the same hours per day, at possibly some higher efficiency of output.
It's like saying because React has made people more efficient at building bug free user interfaces that we can all relax in our jobs as there is no IE6 to support. Instead we all know that the UI has just got more complex, interactive and shiny.
It's like saying because React has made people more efficient at building bug free user interfaces that we can all relax in our jobs as there is no IE6 to support. Instead we all know that the UI has just got more complex, interactive and shiny.
China has people sweeping the streets. Considering how dirty some cities are and how much trash can be found everywhere this isn't a totally unreasonable idea
Why? It makes more sense to automate a $40/hour worker, then a $8/hour one. It's why law offices still have janitors, but have largely replaced junior lawyers combing through the legal library with computers.
I would predict that there is a lot of work that would otherwise be done, if minimum wage was lower, that simply will not be done at all. Or it'll be done under the table.
That's probably true; downvotes are inappropriate. On the other hand, there is also a lot of work that would be done if the economy gets more aggregate demand from low-wage workers.
It'll always be cheaper to pay minimum wage to mop floors vs a $250,000+ "AI Mopping Machine" that requires a $55hr Tech to maintain.
True, until the AI mopping machine is 500$ and it us cheaper to throw it away and replace it when breaks.
It's like every time something new is created, everyone gasps at how expensive it is. Surprise, new technology costs more. I bet cars were prohibitively expensive when the first came out, but now you can get a used one for very cheap.
http://store.irobot.com/default/braava-floor-mopping-irobot-...
also janitors with large areas to clean have been operating mopping machines for 30+ years.
also janitors with large areas to clean have been operating mopping machines for 30+ years.
I'm largely in favor of a $15 minimum wage, but I agree that if we were going to do this on a national level as opposed to local it would be prudent to phase it in over time so that there is time for pulling back if trouble beings to emerge.
How do you decide what the appropriate level is, gut feeling? I'm afraid that debates over what the number should be obscures debate over the harder question of what is causing the minimum wage to have to keep increasing.
The question we should be asking is why are we devaluing the completed labor of the lowest wage classes?
The question we should be asking is why are we devaluing the completed labor of the lowest wage classes?
We 'must' decouple compensation from the actual value being created by workers because workers are far too productive with modern technology. If compensation was related in any way, even a very small way, to value of the work being done, wages would raise so fast that there would be enough jobs for everyone, people would work less and all those promises of the wonderful future technology would bring would actually happen. And that is unconscionable.
The idea is to progressively increase minimum wage, until it starts to affect unemployment rate. After that point, it may be a better policy to increase fiscal redistribution, through welfare, basic income, etc.
What the appropriate value for minimum wage is largely a social question not an economic one. I would stipulate, however, that whatever you think that value is it should probably be a real value, not nominal. The real value of our minimum wage has gone up here and there but it took a huge hit in the 80s and hasn't ever been adjusted back up to what it was before then.
>How do you decide what the appropriate level is, gut feeling?
I would keep raising it incrementally until inflation hits around 4-5%.
This is probably the simplest, most effective way of solving the income inequality problem. Minimum wage hikes cut in to the bottom line first and prices second. There's a lot of profit at the top that an just be redirected to the bottom by increasing the minimum wage - barely even affecting the middle classes.
>why are we devaluing the completed labor of the lowest wage classes?
So the value of their labor above and beyond which they are compensated for can be extracted and redistributed - mostly in the form of profits.
This is done via outsourcing (lowering the demand for domestic labor), austerity (e.g. leaving portland's pothole fixing to the anarchists) and slashing benefits like SNAP/ unemployment (lowering the negotiating leverage of workers).
I would keep raising it incrementally until inflation hits around 4-5%.
This is probably the simplest, most effective way of solving the income inequality problem. Minimum wage hikes cut in to the bottom line first and prices second. There's a lot of profit at the top that an just be redirected to the bottom by increasing the minimum wage - barely even affecting the middle classes.
>why are we devaluing the completed labor of the lowest wage classes?
So the value of their labor above and beyond which they are compensated for can be extracted and redistributed - mostly in the form of profits.
This is done via outsourcing (lowering the demand for domestic labor), austerity (e.g. leaving portland's pothole fixing to the anarchists) and slashing benefits like SNAP/ unemployment (lowering the negotiating leverage of workers).
> So the value of their labor above and beyond which they are compensated for can be extracted and redistributed - mostly in the form of profits.
I don't think that is the working model. The value of labor is decreased by government policy because it's believed that wages are sticky and decreasing the wage value will lead to greater employment macroeconomically.
Yes, the downstream effect is that we line the pockets of corporations and the already wealthy, but the justification and motivation for it is progressive social policy.
I don't think that is the working model. The value of labor is decreased by government policy because it's believed that wages are sticky and decreasing the wage value will lead to greater employment macroeconomically.
Yes, the downstream effect is that we line the pockets of corporations and the already wealthy, but the justification and motivation for it is progressive social policy.
The overall median wage is misleading.
The median full-time wage is $50,000 per year. That's closer to $25 per hour.
If you include an 18 or 70 year old working a part-time job, you'll dramatically reduce that median income and present a false picture of true labor earning potential.
The median full-time wage is $50,000 per year. That's closer to $25 per hour.
If you include an 18 or 70 year old working a part-time job, you'll dramatically reduce that median income and present a false picture of true labor earning potential.
You've confused mean and median there, but the point I was making is that a $15 minimum in Santa Clara county, with a median wage of $29.20 will have a far different impact than in Fresno with a median wage of $16.10. And that's just in California.
This about the impact of a minimum that affects nearly HALF of all workers in an area. It's absurd to think that this will not cause serious disemployment effects.
(Nationally, median hourly wage is $18.12)
This about the impact of a minimum that affects nearly HALF of all workers in an area. It's absurd to think that this will not cause serious disemployment effects.
(Nationally, median hourly wage is $18.12)
More minimum wage studies are certainly welcome, but the fact that supply and demand models are remarkably poor matches for the labor market is certainly not new. Anyone with more familiarity with Labor Economics than your typical news show talking head should be aware of this.
One thing worth noting is that one of the clearest paths to earning higher wages and being more successful in a career lies in networking and learning how to leverage that network. In theory, the dominant tool for this should be LinkedIn.
But LinkedIn decided early on that serving professionals was less lucrative than serving companies. So the vast majority of products and capabilities that LinkedIn has shipped over the years has been to serve the needs and interests of companies. Sometimes at the expense of professionals (InMail spam).
There really isn't a tool out there that workers can use that addresses the power and knowledge asymmetries that exist today.
But LinkedIn decided early on that serving professionals was less lucrative than serving companies. So the vast majority of products and capabilities that LinkedIn has shipped over the years has been to serve the needs and interests of companies. Sometimes at the expense of professionals (InMail spam).
There really isn't a tool out there that workers can use that addresses the power and knowledge asymmetries that exist today.
I feel comfortable saying, without evidence, that LinkedIn is unlikely to be useful for workers living at the border of the minimum wage, or in general workers who would be likely to be affected directly by a change in the minimum wage.
I agree with you about the current iteration of LinkedIn. But that doesn't mean a different kind of product, focused on professional development, career management and networking couldn't be useful for folks.
I imagine that many people simply leverage Facebook, Twitter and other social networks for this today, in the absence of something for purpose-built.
I imagine that many people simply leverage Facebook, Twitter and other social networks for this today, in the absence of something for purpose-built.
This probably won't be a popular viewpoint, but I personally prefer the decentralized messy version of networking we mostly experience today vs. one big monolith that facilitates all relationships.
Typical Silicon Valley libertarianism - trying to solve critical policy issues with a new app instead of fixing the root cause.
I don't think you read the article at all. This has nothing to do about LinkedIn or networking. You have to be seriously deluded to think that LinkedIn or any other social media company, as well as general networking is the way to defeat our massive levels of income inequality. You're essentially telling bootless people to pull up their bootstraps by making friends with executives and managers. It's not that simple, and condensing the problem into what you're talking about is ignorant at best.
I did read the article, but I see how the LinkedIn comment is causing you to think of white collar executives.
The fact is that informal forms of networking are how people of all cultures and income levels have always advanced their mutual interests. One of the most effective ways to combat modern poverty is to provide people with mobile devices that enable them to better communicate and build relationships over time.
I'd ask you to consider what a more people-oriented piece of software might look like that would be accessible to as many people as possible and enable very specific use case, such as "I'm looking for a new job" or "I'm willing to be a mentor" that currently get lost in the noise of all-purpose social media.
The fact is that informal forms of networking are how people of all cultures and income levels have always advanced their mutual interests. One of the most effective ways to combat modern poverty is to provide people with mobile devices that enable them to better communicate and build relationships over time.
I'd ask you to consider what a more people-oriented piece of software might look like that would be accessible to as many people as possible and enable very specific use case, such as "I'm looking for a new job" or "I'm willing to be a mentor" that currently get lost in the noise of all-purpose social media.
Networking may help the individual get a better job (usually at the expense of someone else getting that job), but it doesn't fix anything about the larger problem, which is the failure of wages to keep up with the cost of living or respond to demand for labor.
I'm terrible at networking, and I feel it is the largest factor holding me back in my career. I have been coding off and on since I was 14, have a bachelors degree in IT, and have a year and a half of tech support experience, yet can't for the life of me get a job that pays over $25k.
Do you have any advice on how to get started networking? What do you feel most people bad at it lack?
Do you have any advice on how to get started networking? What do you feel most people bad at it lack?
Networking isn't a one way street or flow. Bob networks in hopes that others will look out for him and tell him about opportunities. But Bob never thinks about helping and sharing opportunities that others in his network might care about. Seek first to understand, then be understood. Seek first to serve, then be served. (And if your network isn't reciprocating opportunities, make sure you haven't networked with only self serving people.)
The world is not driven by economics (and its simplistic assumptions), it's driven by power relations and human nature.
Supply and demand is not the only thing to influence the job market -- power and knowledge asymmetries can do the same thing just as well.
Supply and demand is not the only thing to influence the job market -- power and knowledge asymmetries can do the same thing just as well.
I think this is getting into map vs. territory issues. This is certainly the domain of economics -- the particular simplifying model used by many economists does not appear to paint a complete picture.
By analogy, adapting a James Morrow quote: "Economics does have all the answers. The problem is that we don’t have all the economics".
Power and knowledge asymmetries are well within the domain that economics tries to encompass.
By analogy, adapting a James Morrow quote: "Economics does have all the answers. The problem is that we don’t have all the economics".
Power and knowledge asymmetries are well within the domain that economics tries to encompass.
[deleted]
Great use of map vs territory.
Exactly. Economics is not natural law but it operates in a framework that's completely human made. This framework is defined by moral values, practicality, whoever is in power and a lot of other factors.
We could easily have an economy where we just accept that nobody can own land or it's OK to take things by force. then economists would build their models around that framework.
We could easily have an economy where we just accept that nobody can own land or it's OK to take things by force. then economists would build their models around that framework.
Well, it's driven by the laws of this universe, ultimately. At the level of inanimate matter, that's thermodynamics and such. At our level, it's meta stuff like evolutionary processes.
There's power in there, for sure. There's instinct and emotion, too. There's thinking and reason also. It's an all of the above type of thing. But we tend to stick to the things that are most obvious to us individually.
The universe is a giant computer on a path to compute some kind of humongous outcome. We're just execution units carrying out subroutines. We may or may not have some freedom locally (that's another debate).
There's power in there, for sure. There's instinct and emotion, too. There's thinking and reason also. It's an all of the above type of thing. But we tend to stick to the things that are most obvious to us individually.
The universe is a giant computer on a path to compute some kind of humongous outcome. We're just execution units carrying out subroutines. We may or may not have some freedom locally (that's another debate).
What is the difference between economics and power relations?
Human nature I understand -- people have mental/emotional shortcuts that are not precise and accurate rational analysis.
Human nature I understand -- people have mental/emotional shortcuts that are not precise and accurate rational analysis.
>What is the difference between economics and power relations?
In an ideal world, economics would study power relations as they relate to money -- that's what the old economists (19th century and so) called "political economy".
In the present world, economics are a shallow ideology around the "free market", with naive abstractions and axioms. Usually these are mostly peddled by the media and "popularizer" economists at the masses, but what actual academic economists sell is not that much better.
In an ideal world, economics would study power relations as they relate to money -- that's what the old economists (19th century and so) called "political economy".
In the present world, economics are a shallow ideology around the "free market", with naive abstractions and axioms. Usually these are mostly peddled by the media and "popularizer" economists at the masses, but what actual academic economists sell is not that much better.
> In an ideal world, economics would study power relations as they relate to money -- that's what the old economists (19th century and so) called "political economy".
“Money” is overly restrictive, it's really all goods and services, and the old “political economy” is a substantial part of what eventually became the field of “political science”. It may not still be considered mainly in the scope of Economics departments, but then what used to be called “natural philosophy, while still studied, isn't part of scope of the Philosophy department.
“Money” is overly restrictive, it's really all goods and services, and the old “political economy” is a substantial part of what eventually became the field of “political science”. It may not still be considered mainly in the scope of Economics departments, but then what used to be called “natural philosophy, while still studied, isn't part of scope of the Philosophy department.
What economics courses have you taken that are remotely like this? Economics is extremely quantitative and is not some “shallow ideology”.
It's "extremely quantitative" non-predictions premised upon a shallow ideology.
I am reminded of this tweet from one of the Federal Bank guys [1]
> We were at maximum employment. We are now at maximumer employment.
> I thought the "tongue-in-cheekiness" of my tweet would be obvious. Allow me to translate: We keep saying we are at max employment and then all these people choose to work. It suggests we weren't really at max employment.
[1]: https://twitter.com/neelkashkari/status/972142317162369024
And more recent [2]
> 1. Yes it matters 2. Even more important is that we should now recognize our gauge of labor market slack is broken
>> What metric would you suggest instead?
> A combination of factors: prime age LFP and EPOP. Most importantly: when assessing supply and demand in a market, start by looking at the price. Wage growth has been surprisingly slow. Suggests more slack.
[2]: https://twitter.com/neelkashkari/status/978041558342791176
> We were at maximum employment. We are now at maximumer employment.
> I thought the "tongue-in-cheekiness" of my tweet would be obvious. Allow me to translate: We keep saying we are at max employment and then all these people choose to work. It suggests we weren't really at max employment.
[1]: https://twitter.com/neelkashkari/status/972142317162369024
And more recent [2]
> 1. Yes it matters 2. Even more important is that we should now recognize our gauge of labor market slack is broken
>> What metric would you suggest instead?
> A combination of factors: prime age LFP and EPOP. Most importantly: when assessing supply and demand in a market, start by looking at the price. Wage growth has been surprisingly slow. Suggests more slack.
[2]: https://twitter.com/neelkashkari/status/978041558342791176
Is it possible that low skill jobs are simply less valuable to the economy than before?
It is possible that low skill jobs are simply less valued to the economy. Because life must be made hard for those down, so it can be made easy for... urm... those who already have enough.
Point in case shows once more that that isn't even true.
Point in case shows once more that that isn't even true.
"Less valuable" is not a relevant concept when discussing the distribution of profits of the overall business. If the overall business is profitable, obviously the business could afford to pay workers more.
Traditional supply and demand economics implies open and equal information for buyer (employer) and seller (employee). For goods and services, there is transparency in the price of a product. In the labor relationship, the buyer (employer) holds almost all of the information that impacts price (wages).
- Employers know how many candidates they have for a position.
- Employers know what they have paid for that position in the past.
- Employers can often afford to wait longer to decide.
It should also be noted that the US taxes wages at a higher rate than investment or dividend earnings. This may distort the market as certain income streams are incentivized over others.
- Employers know how many candidates they have for a position.
- Employers know what they have paid for that position in the past.
- Employers can often afford to wait longer to decide.
It should also be noted that the US taxes wages at a higher rate than investment or dividend earnings. This may distort the market as certain income streams are incentivized over others.
There was this study that actually studied a minimum wage increase in Seattle that did not paint such a easy picture of wage hikes.
https://www.seattletimes.com/business/uw-study-finds-seattle...
https://www.seattletimes.com/business/uw-study-finds-seattle...
Of course. The fact that wages are suppressed is known and expected. The author fails to mention the theory of sticky wages. Why? The author is making a political statement about wage policy. In doing so lets you assume that wages should be related to supply and demand, but they are not. Wage levels are sticky and lag behind changes in the supply and demand for labor. Good news is that you can expect wages to increase in the relatively short-run, from which it seems the author (and most everyone) would benefit.
https://www.investopedia.com/terms/s/sticky-wage-theory.asp
https://www.investopedia.com/terms/s/sticky-wage-theory.asp
This doesn't seem like a very good analysis.
For one, it makes sweeping generalisations about the economy. It is not true that employers always have market power and employees don't. There are lots of areas where it's inverted. The most obvious example right now is AI researchers but software in general is and has been for a long time an employees market. By the same logic that this author uses to justify minimum wages because it's hard for employees to find new jobs in some sectors, you could justify maximum wages because it's hard for employers to find new employees in some sectors. But nobody would support that - it'd be absurd.
For one, it makes sweeping generalisations about the economy. It is not true that employers always have market power and employees don't. There are lots of areas where it's inverted. The most obvious example right now is AI researchers but software in general is and has been for a long time an employees market. By the same logic that this author uses to justify minimum wages because it's hard for employees to find new jobs in some sectors, you could justify maximum wages because it's hard for employers to find new employees in some sectors. But nobody would support that - it'd be absurd.
This is an interesting topic, but it is sad to see how people react to it.
A lot of comments here saying the whole system is broken.
An average poor man in the US probably lives better than kings lived in the past.
Food, water, food, hospitals, AC, heaters and such. These evil employers/entrepreneurs are the one creating it.
Life by every metric is getting better, can it be better? Maybe.
Now we could discuss how to improve the system, and its flaws, but this level of cynicism is hard to handle.
I guess by coming from a really poor reality it skews my view of the world.
A lot of comments here saying the whole system is broken.
An average poor man in the US probably lives better than kings lived in the past.
Food, water, food, hospitals, AC, heaters and such. These evil employers/entrepreneurs are the one creating it.
Life by every metric is getting better, can it be better? Maybe.
Now we could discuss how to improve the system, and its flaws, but this level of cynicism is hard to handle.
I guess by coming from a really poor reality it skews my view of the world.
> An average poor man in the US probably lives better than kings lived in the past.
IMO very far from truth.
An average poor man today _has more valuable stuff_ than a king in the past, but this doesn't translate into _living better_ because having a smartphone wont save me from the stress of disliking my boss, having cheap access to varied foods doesn't necessarily mean I have more significant relationships, the fact hospitals exist doesn't mean I can afford getting sick any more than a king, and nothing really changes the fact that I'm still poor relative to the people of today, which matters.
That being said, if we compare poverty today to poverty in the past, things are perhaps better now, sure.
IMO very far from truth.
An average poor man today _has more valuable stuff_ than a king in the past, but this doesn't translate into _living better_ because having a smartphone wont save me from the stress of disliking my boss, having cheap access to varied foods doesn't necessarily mean I have more significant relationships, the fact hospitals exist doesn't mean I can afford getting sick any more than a king, and nothing really changes the fact that I'm still poor relative to the people of today, which matters.
That being said, if we compare poverty today to poverty in the past, things are perhaps better now, sure.
> things are perhaps better now, sure
I really think you are forcing here, I said:
> probably lives better than kings
And I do conceded that I have not studied kings lives to know, so I am guessing, but the poor of the past for sure lived way worse then the current poor. No question. The world is a much better place to live, MUCH.
Now we can argue if should be better, based on distribution (rich are richer, than poor should also be richer) or inflation.
But people used to have dozens of kids and only a couple would live, that alone is enough to justify.
My grandparents had 7 kids in the middle of nowhere and none died.
I really think you are forcing here, I said:
> probably lives better than kings
And I do conceded that I have not studied kings lives to know, so I am guessing, but the poor of the past for sure lived way worse then the current poor. No question. The world is a much better place to live, MUCH.
Now we can argue if should be better, based on distribution (rich are richer, than poor should also be richer) or inflation.
But people used to have dozens of kids and only a couple would live, that alone is enough to justify.
My grandparents had 7 kids in the middle of nowhere and none died.
I'm don't think most of these conversations are really about material comfort, it's a proxy.
I believe most of this deep well of negativity is a reaction to the limited choices individuals perceive themselves to have due to market forces. When wages were a little higher, jobs were easier to find, and housing costs were far lower, people could choose their work, leave jobs, take pay-cuts, and reorient their lives in a more flexible manner. People are upset now because they're on a treadmill that they can't really imagine ever being able to get off, even if they never want to, which is a gloomy thing indeed. And it's not like skipping on A/C or avocado toasts will ever give people enough money to escape that.
I believe most of this deep well of negativity is a reaction to the limited choices individuals perceive themselves to have due to market forces. When wages were a little higher, jobs were easier to find, and housing costs were far lower, people could choose their work, leave jobs, take pay-cuts, and reorient their lives in a more flexible manner. People are upset now because they're on a treadmill that they can't really imagine ever being able to get off, even if they never want to, which is a gloomy thing indeed. And it's not like skipping on A/C or avocado toasts will ever give people enough money to escape that.
Yeah, but this kinda proves the point, these luxuries are not luxuries anymore, they became standard.
The way the world is portrait by many would make me think the rich are keeping the AC for themselves, and actually they only keep cutting edge technologies, which will be in mass market if proven necessary, as cellphones.
Can you believe a "poor" person can have the same cellphone as Bill Gates, there isn't a ultra expensive phone that only they can afford, this is huge.
Now isn't what you pointed out more of a human psychological issue than a economic one?
The way the world is portrait by many would make me think the rich are keeping the AC for themselves, and actually they only keep cutting edge technologies, which will be in mass market if proven necessary, as cellphones.
Can you believe a "poor" person can have the same cellphone as Bill Gates, there isn't a ultra expensive phone that only they can afford, this is huge.
Now isn't what you pointed out more of a human psychological issue than a economic one?
I think many poorer Americans would gladly trade some of those luxuries for freedoms. The market has made some luxury a commodity (which is good) but it has regressed in terms of security and individual freedom of employment (at least for the poor), making free time and choice of lifestyle a luxury.
As a hyperbolic example to prove the point, would you rather work 40 hours a week at a job you hate, and have a cell phone, or work 20 hours a week at a job you like, and not have one? Neither answer is wrong and some people would choose each, but I think current employment conditions largely cater to the former.
As a hyperbolic example to prove the point, would you rather work 40 hours a week at a job you hate, and have a cell phone, or work 20 hours a week at a job you like, and not have one? Neither answer is wrong and some people would choose each, but I think current employment conditions largely cater to the former.
Yes, I agree, I was blown away on how much Americans work, it makes me think is this a reason why this place is so great.
It seems to be in the culture, which is better than a being lazy IMO.
But also raises the question: Are americans happy with it?
A lot of countries have protections for the employees, in Brazil you can't work too many extra hours, even if you want to. I know people that work 60-80hrs a week in the US, and they want to.
It seems to be in the culture, which is better than a being lazy IMO.
But also raises the question: Are americans happy with it?
A lot of countries have protections for the employees, in Brazil you can't work too many extra hours, even if you want to. I know people that work 60-80hrs a week in the US, and they want to.
I find myself becoming increasingly worried about the future. My quality of life _right now_ is pretty good. But last year, I was part of a massive layoff (whole company shut down with no notice) and I found myself out of work for months. And I'm competitive: I have a master's degree in CS, decades of experience, up-to-date "skills" in a market that is supposedly facing a talent shortage - yet I found myself rejected out-of-hand, sometimes without even an interview, from dozens of positions that I was 100+% qualified for. I can't help but wonder - if it's this bad for _me_, how bad must it be for people who have aren't quite as squeaky clean as I am?
Yes, you live better than people 100 years ago. But what about 40 or 20 years ago?
Is it easier for an average person to buy a home or car than it was for their parents? Do they work more or less from their parents? Is it easier to have and raise kids?
Is it easier for an average person to buy a home or car than it was for their parents? Do they work more or less from their parents? Is it easier to have and raise kids?
Well, I think those are localized issues.
For instance, in Brazil its way easier today to buy a car than it was in the past.
But houses are diff, the place I grew up in saw a 50x price increase. It is hard to buy houses there.
To the point where renting is a better investment than buying (not a absolute, obviously), and makes you think that people overvalue property there, the interest rates are insane.
But most statistics are going downward trend, crime for instance, its going down in all developed countries.
For instance, in Brazil its way easier today to buy a car than it was in the past.
But houses are diff, the place I grew up in saw a 50x price increase. It is hard to buy houses there.
To the point where renting is a better investment than buying (not a absolute, obviously), and makes you think that people overvalue property there, the interest rates are insane.
But most statistics are going downward trend, crime for instance, its going down in all developed countries.
> Life by every metric is getting better, can it be better? Maybe.
Not with that attitude!
> Now we could discuss how to improve the system, and its flaws, but this level of cynicism is hard to handle.
Agreed, we need to identify the problems and then be optimistic about solutions.
Not with that attitude!
> Now we could discuss how to improve the system, and its flaws, but this level of cynicism is hard to handle.
Agreed, we need to identify the problems and then be optimistic about solutions.
You are right, I was a bit cynical there myself.
But then again, I can't refrain from the fact that is way better today, I talk to older people and see how thing worked and it does look way better than it was.
It seems that people are expecting life not to be filled with suffering, which is the case unfortunately, and it becomes harder to see the good parts.
But then again, I can't refrain from the fact that is way better today, I talk to older people and see how thing worked and it does look way better than it was.
It seems that people are expecting life not to be filled with suffering, which is the case unfortunately, and it becomes harder to see the good parts.
Discussing wages with supply & demand and not taking into account the worldwide labor supply. At some point, it is more profitable for companies to move overseas.
> find that in areas where there are fewer employers in an industry, workers in that industry earn lower wages.
> [...]
> Together with the evidence on minimum wage, this new evidence suggests that the competitive supply-and-demand model of labor markets is fundamentally broken.
How does that contradict supply and demand? Less employers = less supply of jobs = oversupply of workers = downward pressure on salaries.
> [...]
> Together with the evidence on minimum wage, this new evidence suggests that the competitive supply-and-demand model of labor markets is fundamentally broken.
How does that contradict supply and demand? Less employers = less supply of jobs = oversupply of workers = downward pressure on salaries.
One thing I've learned is that the right wing will always tons more money and resources than the left in the US. This is an example of how effective the right wing message machine can be, having been a loud opponent of minimum wage increases for what are increasingly bogus reasons.
I miss the times when I thought Supply and Demand could explain wages. In a fully globalized economy I expect it would be more useful to do comparative GDP studies to understand the use of labor capital and its ability to fund production.
Exactly, supply and demand is pretty easy for people to grep (including myself) when explained in a simple cartoon or econ 1010 class. It’s current application in a globalized market is anything but transparent, which makes it even harder to properly identify manipulative forces in the market.
That's because depressed wages are caused by the drive for ever increasing profits.
Yes but the workers have a drive for increasing profits too, and there are more of them. So that's not really a good explanation.
More workers only equates to more leverage if they can collectively exert control to suppress production, like via a strike.
Apart from that, more workers who are mostly interchangeable have lower leverage to increase their wages.
Apart from that, more workers who are mostly interchangeable have lower leverage to increase their wages.
Workers have less power to increase wages than corporations have to increase revenue and profits.
This has occurred, arguably, because of right to work laws and the reduction in organized labor (which previously negotiated wages with more power).
This has occurred, arguably, because of right to work laws and the reduction in organized labor (which previously negotiated wages with more power).
Is that true? A corporation that relies on 50,000+ employees to deliver a service or product, and those employees collectively stop working?
I don't entirely grok your question, but it sometimes does take walkouts to exert force to obtain wage concessions (teacher strikes, pilot strikes, etc).
Teachers striking in several states are exerting enough force to obtain meaningful wage increases.
http://nymag.com/daily/intelligencer/2018/04/the-teachers-st...
https://www.wsj.com/articles/why-teachers-strikes-are-becomi...
Teachers striking in several states are exerting enough force to obtain meaningful wage increases.
http://nymag.com/daily/intelligencer/2018/04/the-teachers-st...
https://www.wsj.com/articles/why-teachers-strikes-are-becomi...
It's not a _complete_ explanation, but I agree with @grecy and have to expand on your response.
> the workers have a drive for increasing profits too
Whereas companies tend to have increasing profits as their only and primary goal, for workers it is not their only drive or the only factor they need to consider. If jobs leave my city, I can't just pack up and follow them; I need to think about my family, my kids, their school, their friends, my house, etc.
Companies are much more flexible because as entities they don't have the same moral obligation people have towards other people and themselves.
This is especially true for big companies. The bigger the company gets the more impersonal it becomes, and the more leverage it has because individual employees contribute less and they can invest more resources into hiring.
> the workers have a drive for increasing profits too
Whereas companies tend to have increasing profits as their only and primary goal, for workers it is not their only drive or the only factor they need to consider. If jobs leave my city, I can't just pack up and follow them; I need to think about my family, my kids, their school, their friends, my house, etc.
Companies are much more flexible because as entities they don't have the same moral obligation people have towards other people and themselves.
This is especially true for big companies. The bigger the company gets the more impersonal it becomes, and the more leverage it has because individual employees contribute less and they can invest more resources into hiring.
This is where an understanding of power structures and hierarchies helps.
Exactly. Drive for profits doesn't have much explanatory power.
Introducing any very significant productivity increasing tools seems to result in depressed wages. It happened when we moved to factory production, resulting in entire families working 16 hour days 6 days a week to barely earn a subsistence living. And it's happening with computers.
When your employees produce 8% more each year, it's easy to justify giving them 5% raises. What happens when your employees produce 80% more every year? You can't stomach the idea of giving them raises commensurate with that, so you just tell yourself 'its the machine doing the real work, they don't deserve anything' and raises stop.
When your employees produce 8% more each year, it's easy to justify giving them 5% raises. What happens when your employees produce 80% more every year? You can't stomach the idea of giving them raises commensurate with that, so you just tell yourself 'its the machine doing the real work, they don't deserve anything' and raises stop.
I do not think that any theory that does not include the distorting effects of central banks and governmental regulation will provide the answers they are looking for...
Greed explains it well.
tl;dr Depressed wages are better explained by employers' ever more powerful bargaining position
....which is dictated my the supply of employers
thanks for the tldr.
thanks for the tldr.
Except it isn’t, it because of the way labor and employers have different costs when an employee leaves, meaning each side has a different equation for how important it is to not sever the employment arrangement.
If an employee loses their job, they lose 100% of their income, and for many they are unable to survive this. If an employer loses an employee, they only lose 1/n of their production, where n is the number of employees they have. They can handle that reduction while they look for a new employee way more than the employee can.
That is what prevents the market from being efficient.
If an employee loses their job, they lose 100% of their income, and for many they are unable to survive this. If an employer loses an employee, they only lose 1/n of their production, where n is the number of employees they have. They can handle that reduction while they look for a new employee way more than the employee can.
That is what prevents the market from being efficient.
> That is what prevents the market from being efficient
The problem is, nobody really wants labor markets to be efficient. Efficient labor markets mean that we would pay workers the subsistence wages, because, why they should be paid more?
That's the thing, labor is not like other commodities, say apples or computers. You want to make the price of other commodities to be as low as possible, and everybody (all humans in society) wins. But for price of labor this is not true.
The problem is, nobody really wants labor markets to be efficient. Efficient labor markets mean that we would pay workers the subsistence wages, because, why they should be paid more?
That's the thing, labor is not like other commodities, say apples or computers. You want to make the price of other commodities to be as low as possible, and everybody (all humans in society) wins. But for price of labor this is not true.
That isn’t true; an efficient market doesn’t imply that we will pay workers subsistence wages. Market rate has nothing to do with what a person needs to survive.
The rate would be set based on competition with other employers for employees; you pay enough to keep a worker from getting a job at another employer.
So the answer to the question, “why would you pay more?” is, “so they don’t start working for someone else instead”
Now, the market system doesn’t work for employment because of the reason I stated in my original comment, but it isn’t related to the ‘minimum wages needed to survive’
The rate would be set based on competition with other employers for employees; you pay enough to keep a worker from getting a job at another employer.
So the answer to the question, “why would you pay more?” is, “so they don’t start working for someone else instead”
Now, the market system doesn’t work for employment because of the reason I stated in my original comment, but it isn’t related to the ‘minimum wages needed to survive’
That assumes all employees are equal which in any non-factory-churn-operation company is not going to be true.
Even if all employees aren’t equal it will still be some fraction of total productivity that is lost, which is always going to be less than the 100% lost by an employee.
That's only part of the equation. Survival often necessitates taking a sub-optimal deal. Employees are very more likely to be forced into this position than an employer, who can often survive with reduced staff.
I don't think you can assert that S&D is the only factor, certainly labor law has an effect on the bargaining positions
That's very naive and narrow.
The power of monopolies is actually inversely proportional to the "supply" of such entities.
The power of monopolies is actually inversely proportional to the "supply" of such entities.
Supply and demand does a poor job at explaining anything. The price changed.. why? Was it because it moved toward an equilibrium, from the equilibrium, has the demand curve shifted, has the supply curve shifted?
The problems of general equilibrium approach are quite succinctly described in Keen: Debunking Economics. And compared to approach in Blatt: Dynamic Economic Systems, it's a disaster - too many parameters and assumptions for too little explaining power. It was a pretty decent way to describe the world when Walras came up with it; but it should have been obsoleted years ago.
The problems of general equilibrium approach are quite succinctly described in Keen: Debunking Economics. And compared to approach in Blatt: Dynamic Economic Systems, it's a disaster - too many parameters and assumptions for too little explaining power. It was a pretty decent way to describe the world when Walras came up with it; but it should have been obsoleted years ago.
Except power itself is determined by supply and demand. Employers have gained more power precisely because of the increased labor supply (more women, more robots, more foreign workers) that is also responsible for stagnant wages.
The power, of course, comes from the need for others to have association with that person/business. In the current market, if one employee doesn't like the terms and conditions of the job, there are many others who will be quite happy to take their spot. This gives the employer leverage as employees want to be employed.
However, if there were actually more employers than employees, then the reverse would be true. Employees would be free to treat employers however they wanted, and force them to pay more money, without repercussion since if the employer walks away, there would be many more willing to take the worker. This gives the leverage to the employees as employers want employees.