Executives Play Down the Possibility of Raises(bloomberg.com)
bloomberg.com
Executives Play Down the Possibility of Raises
https://www.bloomberg.com/view/articles/2018-05-30/executives-comments-about-raises-are-not-what-they-seem
101 comments
>> A tight labor market causes the raises
Different economic theories can provide different explanations and the statement above is over-simplifying the situation (It should say 'can cause' raises). I'm not an economist. The labor theory of value (LTV) and other systems of thought would have a different take on this. Wages are not going up because various industries are bumping against hard systemic boundaries. I believe those are hard to see and not much appreciated or studied because they are not merely driven by supply and demand economics. Truckers are not being paid more because if they were, the rate-of-profit in that industry would not be sustainable anymore. But raising prices for logistics is not really an option for that industry, because as soon as you do that, other factors start to depress demand. What you end up with are maxed out industries where you either keep pay at todays levels, or go home and close shop.
It's complicated, but just 'A tight labor market causes the raises' does not even start to capture the situation. And it's not just greedy bankers that keep wages depressed. A tight labor market is not going to help increase wages. Not gonna happen because it's not seeing the whole picture.
Different economic theories can provide different explanations and the statement above is over-simplifying the situation (It should say 'can cause' raises). I'm not an economist. The labor theory of value (LTV) and other systems of thought would have a different take on this. Wages are not going up because various industries are bumping against hard systemic boundaries. I believe those are hard to see and not much appreciated or studied because they are not merely driven by supply and demand economics. Truckers are not being paid more because if they were, the rate-of-profit in that industry would not be sustainable anymore. But raising prices for logistics is not really an option for that industry, because as soon as you do that, other factors start to depress demand. What you end up with are maxed out industries where you either keep pay at todays levels, or go home and close shop.
It's complicated, but just 'A tight labor market causes the raises' does not even start to capture the situation. And it's not just greedy bankers that keep wages depressed. A tight labor market is not going to help increase wages. Not gonna happen because it's not seeing the whole picture.
The labor theory of value doesn't have any explanatory value, it's just a traditional belief that kept being rediscovered because it seems reasonable and value theories were hard.
There really isn't any reason to "teach the controversy": marginal substitution is the only correct theory of value and it is fundamentally incompatible with other intrinsic-value theories like the LTV.
It's certainly possible that raising labor prices can make a whole industry nonviable, depressing wages and eventually leading to cost-disease extinction, but there's no reason to think trucking is anything like that -- logistics generates an enormous amount of economic value to its customers and if the labor costs of shipping went up, they'd fork out.
You can already see this happen when fuel prices change: everyone adds a fuel surcharge and the customers suck it up.
There really isn't any reason to "teach the controversy": marginal substitution is the only correct theory of value and it is fundamentally incompatible with other intrinsic-value theories like the LTV.
It's certainly possible that raising labor prices can make a whole industry nonviable, depressing wages and eventually leading to cost-disease extinction, but there's no reason to think trucking is anything like that -- logistics generates an enormous amount of economic value to its customers and if the labor costs of shipping went up, they'd fork out.
You can already see this happen when fuel prices change: everyone adds a fuel surcharge and the customers suck it up.
"Truckers are not being paid more because if they were, the rate-of-profit in that industry would not be sustainable anymore. But raising prices for logistics is not really an option for that industry, because as soon as you do that, other factors start to depress demand."
I don't fully understand this, even if the rate-of-profit were sky high and could support higher wages, there is no incentive to do so without a tight labor market.
Once the labor market is tight enough wages are forced up. It's then up to the business to eat that cost or pass it along immediately. If overall logistics demand shrinks due to the higher cost, wages will still remain up unless the labor market shifts.
I don't fully understand this, even if the rate-of-profit were sky high and could support higher wages, there is no incentive to do so without a tight labor market.
Once the labor market is tight enough wages are forced up. It's then up to the business to eat that cost or pass it along immediately. If overall logistics demand shrinks due to the higher cost, wages will still remain up unless the labor market shifts.
"The point of the tax law was to lower the cost of employment and investment in the US. [...] The hope being that lower costs cause companies to value US labor more, which tightens the labor market."
The point of the tax cut was to get more money in the hands of owners of corporations. And, so far, it's working quite well. We won't see much wage growth for one big reason, the Fed has and will continue to raise interest rates at the slightest sign of inflation.
The point of the tax cut was to get more money in the hands of owners of corporations. And, so far, it's working quite well. We won't see much wage growth for one big reason, the Fed has and will continue to raise interest rates at the slightest sign of inflation.
Actually the point of the tax cut was to harmonize our corporate tax rates with the rest of the world, and take steps to eliminate the domicile arbitrage and general loopholing that creates an enormous amount of deadweight loss in our economy.
No, it wasn't. Corporate tax rates were fine, and absolutely nothing in the bill put an end to any of the other stuff.
'fine' is subjective. What they were definitely not though is harmonized with the rest of the world.
I don't see that as an issue, especially not one that justified adding a trillion dollars to the deficit for barely any benefit to most people.
It's an issue because it does two things:
1. Favors certain types of businesses that can more readily arbitrage their domicile (e.g. Apple, Google).
2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss.
If you look at the effective tax rates companies were paying before this change, they were more or less harmonized with the rest of the world[1]. What was not harmonized was the statutory rate. What this meant in practice is that big companies with the resources to exploit the loophole paid the low rates, and companies without those resources paid the high rates. And the resources that were expended by the companies to accomplish this were 100% unproductive. Harmonizing the statutory rate makes things fair, and eliminates the need to waste money on those types of accountants.
[1] https://www.cbo.gov/publication/52419
1. Favors certain types of businesses that can more readily arbitrage their domicile (e.g. Apple, Google).
2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss.
If you look at the effective tax rates companies were paying before this change, they were more or less harmonized with the rest of the world[1]. What was not harmonized was the statutory rate. What this meant in practice is that big companies with the resources to exploit the loophole paid the low rates, and companies without those resources paid the high rates. And the resources that were expended by the companies to accomplish this were 100% unproductive. Harmonizing the statutory rate makes things fair, and eliminates the need to waste money on those types of accountants.
[1] https://www.cbo.gov/publication/52419
"2. Creates an incentive for companies to pay accountants and lawyers a large amount of money to find ways to engage in #1. All of this money is, in economic terms, deadweight loss."
I would argue that is not an issue because that happens anyway. There is not, nor will there ever be a tax point where these huge companies don't attempt to get out of paying taxes.
I would argue that is not an issue because that happens anyway. There is not, nor will there ever be a tax point where these huge companies don't attempt to get out of paying taxes.
Not true. Complexity in the tax code incentivizes gaming expenditures. Companies invest in things that generate return. When the gain from investing in accountants exceeds the cost of those accountants and their sheltering strategies, they invest in it. A good tax code makes the gain to be had from loopholes smaller than the cost of implementing those loopholes. This corporate tax rate harmonization was one step among many more that ought to be taken along the path to doing that.
I thought this too, but it does appear that most economists believe that you should have no/very low corporate taxes. You should tax things you want to discourage, and you don't want to discourage business investment.
However, like everything else in our country -- what's superficially a good idea gets cut to pieces by private interests and it ends up benefiting them.
In a perfect world a corporate tax cut would be offset by hefty consumption taxes for the rich, and estate taxes. But that of course did not happen, and will not happen in a republican-controlled government.
However, like everything else in our country -- what's superficially a good idea gets cut to pieces by private interests and it ends up benefiting them.
In a perfect world a corporate tax cut would be offset by hefty consumption taxes for the rich, and estate taxes. But that of course did not happen, and will not happen in a republican-controlled government.
"Executives do not get to decide the pay level of employees."
No, but they get to set the payroll budget for different departments, and they get to put other incentives in place, like bonuses for managers that keep payroll down.
"A tight labor market causes the raises"
We already had a tight labor market. The conventional wisdom that tight labor markets lead to raises is being bucked. Economists have been pretty stumped at the fact that wages have not been rising.
"But none of that involves buttering up CEOs and getting them to pinky-swear that they're going to give out raises just because they can. The wage level is always "as low as they can get away with""
See, this is complete horseshit. Why the fuck did we give them the tax break, then? Why the fuck do we just take them on their word that they'll do something and give them tax breaks, and then tell workers that they have to beg and plead with their employers to actually fucking get it?
No, but they get to set the payroll budget for different departments, and they get to put other incentives in place, like bonuses for managers that keep payroll down.
"A tight labor market causes the raises"
We already had a tight labor market. The conventional wisdom that tight labor markets lead to raises is being bucked. Economists have been pretty stumped at the fact that wages have not been rising.
"But none of that involves buttering up CEOs and getting them to pinky-swear that they're going to give out raises just because they can. The wage level is always "as low as they can get away with""
See, this is complete horseshit. Why the fuck did we give them the tax break, then? Why the fuck do we just take them on their word that they'll do something and give them tax breaks, and then tell workers that they have to beg and plead with their employers to actually fucking get it?
tight labor market causes the raises
Exactly. Trump's immigration policy has a much better chance of increasing wages than any tax reform which will barely make a difference at the margins. Not coincidentally, it's also much less popular with the corporate politicians.
Exactly. Trump's immigration policy has a much better chance of increasing wages than any tax reform which will barely make a difference at the margins. Not coincidentally, it's also much less popular with the corporate politicians.
Is there any verifiable time in history when such a complicated multi-actor system actually did increase wages? Or is this the cold fusion of government policy?
Certainly during the biggest period of US wage growth ushered in by the Internal Revenue Act of 1954. Income in excess of $400K/yr taxed at 90% ensured that businesses invested as management and shareholders weren't permitted to capture earnings.
>Certainly during the biggest period of US wage growth ushered in by the Internal Revenue Act of 1954.
It also helped that the world was destroyed and the US was the only developed country with sufficient manufacturing capacity. High taxes or not, that sort of environment is not going to happen anytime soon.
>Income in excess of $400K/yr taxed at 90% ensured that businesses invested as management and shareholders weren't permitted to capture earnings.
But CEOs and executives rarely have high income/base pay. They're incentivized by the owners of the company via performance linked bonuses, payment via stock options, long term incentive bonuses, etc.
It also helped that the world was destroyed and the US was the only developed country with sufficient manufacturing capacity. High taxes or not, that sort of environment is not going to happen anytime soon.
>Income in excess of $400K/yr taxed at 90% ensured that businesses invested as management and shareholders weren't permitted to capture earnings.
But CEOs and executives rarely have high income/base pay. They're incentivized by the owners of the company via performance linked bonuses, payment via stock options, long term incentive bonuses, etc.
It’s my limited understanding that full employment / tight labor market is intrinsically linked to wage growth, and then by extension, inflation.
> intrinsically linked to wage growth, and then by extension, inflation.
Not necessarily. While it is linked to wage growth, the increase in employment (and consumption) doesn't necessarily lead to overall inflation. It depends on the economy's capacity to absorb the extra consumption.
It might be the case that the additional consumption, particularly after a bust cycle with excess capacity, might lead to lower per-unit costs due to the utilization of fully depreciated assets and no need for additional capital investments.
This is usually captured in the NAIRU: non-accelerating inflation rate of unemployment. Or the minimum level of unemployment that does not cause inflation to increase.
Not necessarily. While it is linked to wage growth, the increase in employment (and consumption) doesn't necessarily lead to overall inflation. It depends on the economy's capacity to absorb the extra consumption.
It might be the case that the additional consumption, particularly after a bust cycle with excess capacity, might lead to lower per-unit costs due to the utilization of fully depreciated assets and no need for additional capital investments.
This is usually captured in the NAIRU: non-accelerating inflation rate of unemployment. Or the minimum level of unemployment that does not cause inflation to increase.
No, not at all. There is no evidence that tax cuts lead to higher wages or economic growth. It's been studied and debunked to death but it never dies.
It’s not just that there is no evidence supporting the trickle-down fantasy, or that the fantasy has been debunked on the basis of this lack of evidence. In fact, the exact opposite has been shown with evidence—that tax cuts do not lead to economic growth[0].
[0]: https://www.theatlantic.com/business/archive/2012/09/tax-cut...
[0]: https://www.theatlantic.com/business/archive/2012/09/tax-cut...
The point isn't to have a tax cut but to reform the particular anti-employment/anti-investment distorted incentives the US corporate tax system had.
At some point the US finances are going to have to be stabilized by increasing taxes or perhaps spending not so much on military white elephants, but a non-progressive tax on spending overseas profits in the US is not the right way to do it.
At some point the US finances are going to have to be stabilized by increasing taxes or perhaps spending not so much on military white elephants, but a non-progressive tax on spending overseas profits in the US is not the right way to do it.
There is evidence, its just that the evidence is weak and mere co-relations. All of macro economic theory is like that - just models explaining aggregate human behavior. Anything people propose can probably be shown to work in some model or another.
On the flip side, higher taxes also don't "lead to" any wage increases or economic growth. Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful. Most of it goes towards war and to pay government contractors invoicing a $200 "military spec" screwdriver.
On the flip side, higher taxes also don't "lead to" any wage increases or economic growth. Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful. Most of it goes towards war and to pay government contractors invoicing a $200 "military spec" screwdriver.
> Given the massive waste and inefficiency in most government programs, very little of our taxes actually go to anything useful.
There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth. These days even the old fuddy duddies at the IMF have been forced to admit that higher taxes don't lower growth [1] and that many times the fiscal multipler is greater than 1 [2]. Certainly from 2008-2015, despite all the austerity hawks going on and on about inefficient government spending, actual evidence indicates the fiscal multipler was nearly 2!
[1] https://www.independent.co.uk/news/world/politics/inequality...
[2] https://www.washingtonpost.com/news/wonk/wp/2013/01/03/an-am...
There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth. These days even the old fuddy duddies at the IMF have been forced to admit that higher taxes don't lower growth [1] and that many times the fiscal multipler is greater than 1 [2]. Certainly from 2008-2015, despite all the austerity hawks going on and on about inefficient government spending, actual evidence indicates the fiscal multipler was nearly 2!
[1] https://www.independent.co.uk/news/world/politics/inequality...
[2] https://www.washingtonpost.com/news/wonk/wp/2013/01/03/an-am...
If you wanted to, you could fill a cup of water by dumping a gallon bucket on top of it. The point here is that the government has never been efficient in allocating resources.
Also FYI: I'm not a representative or a supporter of the IMF. The fact that some of their people have said things which didn't turn out to be true doesn't concern me. In fact I'd probably expect that most bold predictions don't come true, especially on economic matters.
Also FYI: I'm not a representative or a supporter of the IMF. The fact that some of their people have said things which didn't turn out to be true doesn't concern me. In fact I'd probably expect that most bold predictions don't come true, especially on economic matters.
This is ideology and attempted political point-scoring, not evidence.
There aren’t even a preponderance of correlative data that shows a link between tax cuts and economic growth—except where economic growth is defined as a disproportionate increase in wealth concentration in ever smaller percentages of the population. The opposite has been shown—and quite conclusively—with decades of data (that tax cuts do not spur economic growth).
Moreover, seeing as how you’re dragging out the old government waste trope—its notable that you conveniently neglect to directly indict those on the receiving end of this “waste”. It cannot be solely the government’s fault that private corporate contractors happily pocket this waste. If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices? If the government is paying too much and wasting public funds on contractors, doesn’t the fault lie with those submitting the bids/invoices? If there is nothing at all wrong with their bids, and we want to say it’s acceptable to bid any amount so long as the bidding is, say, fairly open to all comers, then how exactly can the government be guilty of “waste”? Seems every time the government is criticized for waste, it’s always a one-sided critique. Meanwhile, attempting to reign in this alleged waste with regulations, bid caps, stronger negotiating power, or some form of (gasp!) price control mechanism for public projects is rather uniformly met with charges of abuse of power, not playing by the rules, crippling free markets, or some other such nonsense. If there is waste, it starts with exorbitant bids/invoices for that $200 screwdriver. Seems to me the government is simply playing by the rules and paying what is demanded. There’d be a shit storm if they didn’t.
There aren’t even a preponderance of correlative data that shows a link between tax cuts and economic growth—except where economic growth is defined as a disproportionate increase in wealth concentration in ever smaller percentages of the population. The opposite has been shown—and quite conclusively—with decades of data (that tax cuts do not spur economic growth).
Moreover, seeing as how you’re dragging out the old government waste trope—its notable that you conveniently neglect to directly indict those on the receiving end of this “waste”. It cannot be solely the government’s fault that private corporate contractors happily pocket this waste. If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices? If the government is paying too much and wasting public funds on contractors, doesn’t the fault lie with those submitting the bids/invoices? If there is nothing at all wrong with their bids, and we want to say it’s acceptable to bid any amount so long as the bidding is, say, fairly open to all comers, then how exactly can the government be guilty of “waste”? Seems every time the government is criticized for waste, it’s always a one-sided critique. Meanwhile, attempting to reign in this alleged waste with regulations, bid caps, stronger negotiating power, or some form of (gasp!) price control mechanism for public projects is rather uniformly met with charges of abuse of power, not playing by the rules, crippling free markets, or some other such nonsense. If there is waste, it starts with exorbitant bids/invoices for that $200 screwdriver. Seems to me the government is simply playing by the rules and paying what is demanded. There’d be a shit storm if they didn’t.
>There aren’t even a preponderance of correlative data that shows a link between tax cuts and economic growth—except where economic growth is defined as a disproportionate increase in wealth concentration in ever smaller percentages of the population.
I can re-define economic growth to mean the size of my checking account. Income inequality has its own definition. You re-defining it to mean something its not doesn't mean much.
>Moreover, seeing as how you’re dragging out the old government waste trope
Its not a trope. Your personal ideology might or might not allow you to recognize this. I would recommend keeping an open mind.
>its notable that you conveniently neglect to directly indict those on the receiving end of this “waste”.
Once you create the means for someone to obtain wealth, you cannot fault the individual for maximizing their gains under a capitalist system. Look, if you don't believe that the government does a very poor job of allocating resources, then our disconnect is large enough that realistically no consensus can be reached. The motivations of the people lobbying for their piece of the government pie only exist in a context where (1) people are greedy and (2) the government has tons of money to spend. We can't do anything about #1, but maybe something about #2.
>The opposite has been shown—and quite conclusively—with decades of data (that tax cuts do not spur economic growth).
Nothing of the sort has been conclusively demonstrated, primarily because macro economics deals with aggregate human behavior - and humans are not automations. To every example of a low-tax low-growth economy is a counter example of high-tax still low-growth economy.
I can re-define economic growth to mean the size of my checking account. Income inequality has its own definition. You re-defining it to mean something its not doesn't mean much.
>Moreover, seeing as how you’re dragging out the old government waste trope
Its not a trope. Your personal ideology might or might not allow you to recognize this. I would recommend keeping an open mind.
>its notable that you conveniently neglect to directly indict those on the receiving end of this “waste”.
Once you create the means for someone to obtain wealth, you cannot fault the individual for maximizing their gains under a capitalist system. Look, if you don't believe that the government does a very poor job of allocating resources, then our disconnect is large enough that realistically no consensus can be reached. The motivations of the people lobbying for their piece of the government pie only exist in a context where (1) people are greedy and (2) the government has tons of money to spend. We can't do anything about #1, but maybe something about #2.
>The opposite has been shown—and quite conclusively—with decades of data (that tax cuts do not spur economic growth).
Nothing of the sort has been conclusively demonstrated, primarily because macro economics deals with aggregate human behavior - and humans are not automations. To every example of a low-tax low-growth economy is a counter example of high-tax still low-growth economy.
> To every example of a low-tax low-growth economy is a counter example of high-tax still low-growth economy.
Despite decades of evidence demonstrating how government spending can produce enormous growth (see eg. the lil' ol' Great Depression, Europe after WW2, China -- really all of East Asia), despite conclusive recent research showing the post-GFC failure of austerity, ideologues will never revisit their outdated ideas. At this point you might as well admit that data and evidence doesn't matter at all and you aren't actually interested in the real world, just your own axiomatic fantasy.
Despite decades of evidence demonstrating how government spending can produce enormous growth (see eg. the lil' ol' Great Depression, Europe after WW2, China -- really all of East Asia), despite conclusive recent research showing the post-GFC failure of austerity, ideologues will never revisit their outdated ideas. At this point you might as well admit that data and evidence doesn't matter at all and you aren't actually interested in the real world, just your own axiomatic fantasy.
Oh, you mean the period when countries were dropping their top marginal taxes?
https://ourworldindata.org/grapher/top-mrts-on-individual-in...
Its obvious who is living in a fantasy. I prefer to be skeptical of both sides. You are free to chose your own path. Goodbye!
https://ourworldindata.org/grapher/top-mrts-on-individual-in...
Its obvious who is living in a fantasy. I prefer to be skeptical of both sides. You are free to chose your own path. Goodbye!
Do you realize this period when top marginal rates began (and continued) dropping overlaps the period when economic growth began (and continued) dropping, as well?
It’s almost like dropping those top marginal rates did nothing to spur growth. I mean, it’s like one might actually have to entertain the idea that lowering taxation doesn’t actually lead to massive reinvestment of capital or wage and economic growth we’re promised every time it happens. Or perhaps—just maybe—economic growth isn’t something we can even realistically anticipate to obtain as a constant.
It’s almost like dropping those top marginal rates did nothing to spur growth. I mean, it’s like one might actually have to entertain the idea that lowering taxation doesn’t actually lead to massive reinvestment of capital or wage and economic growth we’re promised every time it happens. Or perhaps—just maybe—economic growth isn’t something we can even realistically anticipate to obtain as a constant.
> I can re-define economic growth to mean the size of my checking account. Income inequality has its own definition. You re-defining it to mean something its not doesn't mean much.
You do realize you’re stating exactly what I did in slightly different wording? Specifically that the only manner in which lowering taxes is proven as a cause of economic growth is when economic growth is defined as growing individual bank accounts of an increasingly smaller proportion of the population?
> Its not a trope. Your personal ideology might or might not allow you to recognize this. I would recommend keeping an open mind.
It most certainly is a trope. It is a motif, a recurrent theme used by many who criticize government spending. What exactly do you think a trope is? Suggesting one keep an open mind has nothing at all todo with recognizing a discursive trope.
> Once you create the means for someone to obtain wealth, you cannot fault the individual for maximizing their gains under a capitalist system.
Nothing in my comment faults individuals for maximizing their potential gains under a capitalist system. In fact, i don’t fault individuals because, under a capitalist system, one is required to operate in that way or starve to death. Recognizing and calling this out is not the same thing as blaming people for doing it.
> Look, if you don't believe that the government does a very poor job of allocating resources, then our disconnect is large enough that realistically no consensus can be reached.
You are rejecting the possibility of understanding and/or consensus based on your own ideological tenet, not any sort of evidence or discussion of facts. For you, “that the government does a very poor job of allocating resources” is an axiom, a political/ideological article of faith. This is in no way proven, yet you’re establishing an impasse by refusing to engage with the possibility that could be false.
> The motivations of the people lobbying for their piece of the government pie only exist in a context where (1) people are greedy and (2) the government has tons of money to spend. We can't do anything about #1, but maybe something about #2.
You do realize the people—who are allegedly not to be faulted for being “greedy” as a foundational concept of living in a capitalist system—are submitting bids/invoices for their piece of the pie voluntarily, right? If you do, on what sensible grounds can you criticize the government for paying up? The government is obeying the rules of this capitalist system. Even if it always was required to choose the cheapest bid, one could still allege that is waste. At which point, your ideology is blaming the government for “wasting” resources when there are no other options, and—with no evidence provided—concludes the answer is to starve the government of resources to use for the public good. You appear to believe you can eliminate waste not by targeting where the waste is procured (and where the rates are set) but by targeting who pays for it. That’s some pretty interesting mental gymnastics there.
> Nothing of the sort has been conclusively demonstrated, primarily because macro economics deals with aggregate human behavior - and humans are not automations. To every example of a low-tax low-growth economy is a counter example of high-tax still low-growth economy.
Yes, it most certainly has. Here’s 65 years of data to get you started: https://www.theatlantic.com/business/archive/2012/09/tax-cut...
A sibling commenter has provided other links in their posts.
Is there proof that raising taxes causes economic growth? No. That claim is not made. Is there proof that cutting taxes harms economic growth? No. What is shown is that cutting taxes does not spur economic growth, as those who advocate for that idea claim.
Where are the examples and serious data that show cutting taxes and starving the government of resources leads to high economic growth? You’re claiming it’s out there, so where is it? Where’s the low-tax, high-growth country? How long does that last? How much demonstrable growth is triggered as a result of each cut in taxes? How much of that growth is actually a product of the lower taxes?
You do realize you’re stating exactly what I did in slightly different wording? Specifically that the only manner in which lowering taxes is proven as a cause of economic growth is when economic growth is defined as growing individual bank accounts of an increasingly smaller proportion of the population?
> Its not a trope. Your personal ideology might or might not allow you to recognize this. I would recommend keeping an open mind.
It most certainly is a trope. It is a motif, a recurrent theme used by many who criticize government spending. What exactly do you think a trope is? Suggesting one keep an open mind has nothing at all todo with recognizing a discursive trope.
> Once you create the means for someone to obtain wealth, you cannot fault the individual for maximizing their gains under a capitalist system.
Nothing in my comment faults individuals for maximizing their potential gains under a capitalist system. In fact, i don’t fault individuals because, under a capitalist system, one is required to operate in that way or starve to death. Recognizing and calling this out is not the same thing as blaming people for doing it.
> Look, if you don't believe that the government does a very poor job of allocating resources, then our disconnect is large enough that realistically no consensus can be reached.
You are rejecting the possibility of understanding and/or consensus based on your own ideological tenet, not any sort of evidence or discussion of facts. For you, “that the government does a very poor job of allocating resources” is an axiom, a political/ideological article of faith. This is in no way proven, yet you’re establishing an impasse by refusing to engage with the possibility that could be false.
> The motivations of the people lobbying for their piece of the government pie only exist in a context where (1) people are greedy and (2) the government has tons of money to spend. We can't do anything about #1, but maybe something about #2.
You do realize the people—who are allegedly not to be faulted for being “greedy” as a foundational concept of living in a capitalist system—are submitting bids/invoices for their piece of the pie voluntarily, right? If you do, on what sensible grounds can you criticize the government for paying up? The government is obeying the rules of this capitalist system. Even if it always was required to choose the cheapest bid, one could still allege that is waste. At which point, your ideology is blaming the government for “wasting” resources when there are no other options, and—with no evidence provided—concludes the answer is to starve the government of resources to use for the public good. You appear to believe you can eliminate waste not by targeting where the waste is procured (and where the rates are set) but by targeting who pays for it. That’s some pretty interesting mental gymnastics there.
> Nothing of the sort has been conclusively demonstrated, primarily because macro economics deals with aggregate human behavior - and humans are not automations. To every example of a low-tax low-growth economy is a counter example of high-tax still low-growth economy.
Yes, it most certainly has. Here’s 65 years of data to get you started: https://www.theatlantic.com/business/archive/2012/09/tax-cut...
A sibling commenter has provided other links in their posts.
Is there proof that raising taxes causes economic growth? No. That claim is not made. Is there proof that cutting taxes harms economic growth? No. What is shown is that cutting taxes does not spur economic growth, as those who advocate for that idea claim.
Where are the examples and serious data that show cutting taxes and starving the government of resources leads to high economic growth? You’re claiming it’s out there, so where is it? Where’s the low-tax, high-growth country? How long does that last? How much demonstrable growth is triggered as a result of each cut in taxes? How much of that growth is actually a product of the lower taxes?
>Specifically that the only manner in which lowering taxes is proven as a cause of economic growth is when economic growth is defined as growing individual bank accounts of an increasingly smaller proportion of the population?
Economic growth is nominally defined as increase in GDP. Hopefully we don't have to keep doing this dance.
>Nothing in my comment faults individuals for maximizing their potential gains under a capitalist system.
This is your comment - "If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices?"
> If you do, on what sensible grounds can you criticize the government for paying up?
The sensible ground is the fact that allocation of government resources is influenced by lobbying and other special interests. Not to mention governments' own waste (e.g. government employees abusing government credit cards or the $2 million intern and about a million other things).
> At which point, your ideology is blaming the government for “wasting” resources when there are no other options, and—with no evidence provided—concludes the answer is to starve the government of resources to use for the public good.
That is hilarious. No other options but to buy more F35s?
>You appear to believe you can eliminate waste not by targeting where the waste is procured (and where the rates are set) but by targeting who pays for it. That’s some pretty interesting mental gymnastics there.
You are too naive if you think the system will magically reform itself or that people can be trained to be frugal with someone elses money when they have zero incentive to do so.
>You’re claiming it’s out there, so where is it?
Where did I claim that? You seem to be imagining an argument here.
Economic growth is nominally defined as increase in GDP. Hopefully we don't have to keep doing this dance.
>Nothing in my comment faults individuals for maximizing their potential gains under a capitalist system.
This is your comment - "If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices?"
> If you do, on what sensible grounds can you criticize the government for paying up?
The sensible ground is the fact that allocation of government resources is influenced by lobbying and other special interests. Not to mention governments' own waste (e.g. government employees abusing government credit cards or the $2 million intern and about a million other things).
> At which point, your ideology is blaming the government for “wasting” resources when there are no other options, and—with no evidence provided—concludes the answer is to starve the government of resources to use for the public good.
That is hilarious. No other options but to buy more F35s?
>You appear to believe you can eliminate waste not by targeting where the waste is procured (and where the rates are set) but by targeting who pays for it. That’s some pretty interesting mental gymnastics there.
You are too naive if you think the system will magically reform itself or that people can be trained to be frugal with someone elses money when they have zero incentive to do so.
>You’re claiming it’s out there, so where is it?
Where did I claim that? You seem to be imagining an argument here.
I have so far been assuming you are being genuine in this little exchange of ideas. However, it's becoming difficult to have a productive conversation, as you keep commenting in circles without actually sticking to any particular point you've made, making cheap, insulting shots at those who are engaging with you, and don't appear to understand the points being raised directly to your claims.
> Economic growth is nominally defined as increase in GDP. Hopefully we don't have to keep doing this dance.
Right. This has been assumed as the definition we're targeting. Oddly, you've now twice selected two side comments I've made regarding what economic growth is not (for the purposes of this conversation), and rebutted/disputed them as if I was asserting that defined what economic growth is. Which is leading us, as I said, in circles. If you're not disagreeing, why are you selecting & rebutting as if you disagree?
> This is your comment - "If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices?"
Right. Do I need to explain that individuals are not the same as private companies? Again, you've selected something as if there is disagreement here, but have either failed to explain that disagreement, or have failed to recognize you're speaking right past each point I make, assuming we disagree.
> The sensible ground is the fact that allocation of government resources is influenced by lobbying and other special interests. Not to mention governments' own waste (e.g. government employees abusing government credit cards or the $2 million intern and about a million other things).
Ah, yes. We definitely agree that lobbying and special interests influence government spending. So, because lobbying and special interest groups influence allocation of public resources, the government should just not pay when they receive an invoice? Moreover, to stick with your other examples of waste--which I'd would seriously love to be linked to some information on, again--your conclusion is the government should, again, just not pay? Should private companies who suffer employees abusing corporate credit cards just not pay their invoices? Should a $2M intern at a private corporation be a valid excuse for not paying a corporate bill?
Let me remind you that my question was specifically about sensible grounds for criticizing the government for paying invoices that were the result of winning bids that were voluntarily submitted by a private company. You have already asserted that those who submit the bids cannot be criticized for their inflated bids--even though it is those bids that result in what you consider to be wasteful spending. So, if no responsibility for waste lies with those who bid exorbitant rates on government contracts--after all, you say, they cannot be faulted for maximizing their gains under a capitalist system (a system the government also exists under!)--are you suggesting the government should just default on its payments to those private companies after accepting the bids? Are you suggesting the government should be more responsible for reducing waste by means of violating and subverting contracts?
> That is hilarious. No other options but to buy more F35s?
Boy, it is especially tiresome to have to spell out every little nuance of a statement the way you are cherry-picking them out of their contexts. The "no other options" was provided within the specific context of a possible requirement to choose the cheapest available bid in a bidding process. Thus, if the executive branch of government is, say, executing a law that, in their view, requires them to contract a private company in order to fulfill execution of a law duly passed by the legislature, and they are also required by law to choose the cheapest bid, there are no other options but to choose the cheapest bid.
You may not believe it, but I'm in wholehearted agreement that we need exactly 0 more F35s.
> You are too naive if you think the system will magically reform itself or that people can be trained to be frugal with someone elses money when they have zero incentive to do so.
It seems to me that you're reading an awful lot into my comments that I am not saying. I've suggested no possibility of magical self-reform of a broken system. I'd certainly suggest it is entirely possible to craft incentives that lead to people being trained to be frugal with resources that are not (fully, but partially) theirs. This is not naivety; it happens daily in the private sector. The actors there were certainly trained to steward corporate finances as frugally as possible--it seems perhaps they're missing some training on being mindful of participating in the stewardship of public finances as a citizen who partially owns those public finances, and that it's possible to be mindful even while acting as an agent of a private company (but again, you say, we cannot fault them for maximizing their gains at the public's expense).
> Where did I claim that? You seem to be imagining an argument here.
You claimed it right here[0]. It is your original claim to which I responded (which regrettably has led us on a bit of a trudge through the ideological tenets of your "waste" trope). You claimed there was evidence that, although weak, correlates cutting taxes with leading to higher wages or economic growth.
[0]: https://news.ycombinator.com/item?id=17189018
> Economic growth is nominally defined as increase in GDP. Hopefully we don't have to keep doing this dance.
Right. This has been assumed as the definition we're targeting. Oddly, you've now twice selected two side comments I've made regarding what economic growth is not (for the purposes of this conversation), and rebutted/disputed them as if I was asserting that defined what economic growth is. Which is leading us, as I said, in circles. If you're not disagreeing, why are you selecting & rebutting as if you disagree?
> This is your comment - "If waste is something you find especially onerous, shouldn’t we start by pointing the finger at the private companies who submit “wasteful” bids/invoices?"
Right. Do I need to explain that individuals are not the same as private companies? Again, you've selected something as if there is disagreement here, but have either failed to explain that disagreement, or have failed to recognize you're speaking right past each point I make, assuming we disagree.
> The sensible ground is the fact that allocation of government resources is influenced by lobbying and other special interests. Not to mention governments' own waste (e.g. government employees abusing government credit cards or the $2 million intern and about a million other things).
Ah, yes. We definitely agree that lobbying and special interests influence government spending. So, because lobbying and special interest groups influence allocation of public resources, the government should just not pay when they receive an invoice? Moreover, to stick with your other examples of waste--which I'd would seriously love to be linked to some information on, again--your conclusion is the government should, again, just not pay? Should private companies who suffer employees abusing corporate credit cards just not pay their invoices? Should a $2M intern at a private corporation be a valid excuse for not paying a corporate bill?
Let me remind you that my question was specifically about sensible grounds for criticizing the government for paying invoices that were the result of winning bids that were voluntarily submitted by a private company. You have already asserted that those who submit the bids cannot be criticized for their inflated bids--even though it is those bids that result in what you consider to be wasteful spending. So, if no responsibility for waste lies with those who bid exorbitant rates on government contracts--after all, you say, they cannot be faulted for maximizing their gains under a capitalist system (a system the government also exists under!)--are you suggesting the government should just default on its payments to those private companies after accepting the bids? Are you suggesting the government should be more responsible for reducing waste by means of violating and subverting contracts?
> That is hilarious. No other options but to buy more F35s?
Boy, it is especially tiresome to have to spell out every little nuance of a statement the way you are cherry-picking them out of their contexts. The "no other options" was provided within the specific context of a possible requirement to choose the cheapest available bid in a bidding process. Thus, if the executive branch of government is, say, executing a law that, in their view, requires them to contract a private company in order to fulfill execution of a law duly passed by the legislature, and they are also required by law to choose the cheapest bid, there are no other options but to choose the cheapest bid.
You may not believe it, but I'm in wholehearted agreement that we need exactly 0 more F35s.
> You are too naive if you think the system will magically reform itself or that people can be trained to be frugal with someone elses money when they have zero incentive to do so.
It seems to me that you're reading an awful lot into my comments that I am not saying. I've suggested no possibility of magical self-reform of a broken system. I'd certainly suggest it is entirely possible to craft incentives that lead to people being trained to be frugal with resources that are not (fully, but partially) theirs. This is not naivety; it happens daily in the private sector. The actors there were certainly trained to steward corporate finances as frugally as possible--it seems perhaps they're missing some training on being mindful of participating in the stewardship of public finances as a citizen who partially owns those public finances, and that it's possible to be mindful even while acting as an agent of a private company (but again, you say, we cannot fault them for maximizing their gains at the public's expense).
> Where did I claim that? You seem to be imagining an argument here.
You claimed it right here[0]. It is your original claim to which I responded (which regrettably has led us on a bit of a trudge through the ideological tenets of your "waste" trope). You claimed there was evidence that, although weak, correlates cutting taxes with leading to higher wages or economic growth.
[0]: https://news.ycombinator.com/item?id=17189018
> Specifically that the only manner in which lowering taxes is proven as a cause of economic growth is when economic growth is defined as growing individual bank accounts of an increasingly smaller proportion of the population?
You say it is proven, but actually the study linked to by the article you mentioned from The Atlantic does not claim that. In the summary, it says: "The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced." And indeed the study's data does not prove any of this, so it is correct in not making that claim.
> If you do, on what sensible grounds can you criticize the government for paying up? The government is obeying the rules of this capitalist system.
The government also decided that the system would be this particular not very capitalist system, where it pays contractors for anything at all. That is what it ought to be criticized for.
> Even if it always was required to choose the cheapest bid, one could still allege that is waste. At which point, your ideology is blaming the government for “wasting” resources when there are no other options, and—with no evidence provided—concludes the answer is to starve the government of resources to use for the public good.
There is at least one other option: not having the government choose any bid at all, cheapest or not. And there is an even better option: not having a government in the first place.
> Is there proof that raising taxes causes economic growth? No. That claim is not made.
It has been made by dnomad: "There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth."
> What is shown is that cutting taxes does not spur economic growth, as those who advocate for that idea claim.
The study does not claim that it shows this, and if it did it would be wrong as it presents no evidence that this is the case.
You say it is proven, but actually the study linked to by the article you mentioned from The Atlantic does not claim that. In the summary, it says: "The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced." And indeed the study's data does not prove any of this, so it is correct in not making that claim.
> If you do, on what sensible grounds can you criticize the government for paying up? The government is obeying the rules of this capitalist system.
The government also decided that the system would be this particular not very capitalist system, where it pays contractors for anything at all. That is what it ought to be criticized for.
> Even if it always was required to choose the cheapest bid, one could still allege that is waste. At which point, your ideology is blaming the government for “wasting” resources when there are no other options, and—with no evidence provided—concludes the answer is to starve the government of resources to use for the public good.
There is at least one other option: not having the government choose any bid at all, cheapest or not. And there is an even better option: not having a government in the first place.
> Is there proof that raising taxes causes economic growth? No. That claim is not made.
It has been made by dnomad: "There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth."
> What is shown is that cutting taxes does not spur economic growth, as those who advocate for that idea claim.
The study does not claim that it shows this, and if it did it would be wrong as it presents no evidence that this is the case.
> You say it is proven, but actually the study linked to by the article you mentioned from The Atlantic does not claim that.
My apologies. You're right, and I overstated. The article does, in fact, claim there may be a relationship between distribution and top tax rates, not that this relationship is proven.
> The government also decided that the system would be this particular not very capitalist system, where it pays contractors for anything at all. That is what it ought to be criticized for.
You're saying the government ought to be criticized for paying contractors anything at all? If so, why? What alternative (more? less?) capitalist system would it be free of criticism for, under which (presumably?) contractors are not paid anything at all?
> There is at least one other option: not having the government choose any bid at all, cheapest or not. And there is an even better option: not having a government in the first place.
Within the context of my comment there, the "no other option" was specifically anchored in a requirement to choose the lowest bid in a bidding process. Not choosing a bid was intentionally left out as it is not relevant for determining, in the context of paying a private company for work performed, particularly if the bid/invoice for that work is at what an average person might consider to be exorbitant rates, which party bears responsibility for "waste".
I'll leave it to you to explain how not having a government in the first place is an even better option, as that'd be interesting to hear a thorough argument for.
> It has been made by dnomad: "There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth."
Sure. dnomad and I don't appear to be in any strong disagreement here about what available evidence shows. I was being careful here to say there is no causal proof, though there is a preponderance of evidence that seems to suggest a possible relationship--be that a result of greater government spending spurring growth, or be that a strong suggestion that higher taxes does not hurt growth (as many who clamor for cutting taxes love to claim to score political points).
> The study does not claim that it shows this, and if it did it would be wrong as it presents no evidence that this is the case.
The article most certainly does. They state plainly: "But it does suggest that there is a lot more to an economy than taxes, and that slashing taxes is not a guaranteed way to accelerate economic growth."
My apologies. You're right, and I overstated. The article does, in fact, claim there may be a relationship between distribution and top tax rates, not that this relationship is proven.
> The government also decided that the system would be this particular not very capitalist system, where it pays contractors for anything at all. That is what it ought to be criticized for.
You're saying the government ought to be criticized for paying contractors anything at all? If so, why? What alternative (more? less?) capitalist system would it be free of criticism for, under which (presumably?) contractors are not paid anything at all?
> There is at least one other option: not having the government choose any bid at all, cheapest or not. And there is an even better option: not having a government in the first place.
Within the context of my comment there, the "no other option" was specifically anchored in a requirement to choose the lowest bid in a bidding process. Not choosing a bid was intentionally left out as it is not relevant for determining, in the context of paying a private company for work performed, particularly if the bid/invoice for that work is at what an average person might consider to be exorbitant rates, which party bears responsibility for "waste".
I'll leave it to you to explain how not having a government in the first place is an even better option, as that'd be interesting to hear a thorough argument for.
> It has been made by dnomad: "There is very convincing evidence that higher taxes and greater government spending do lead to long term economic growth."
Sure. dnomad and I don't appear to be in any strong disagreement here about what available evidence shows. I was being careful here to say there is no causal proof, though there is a preponderance of evidence that seems to suggest a possible relationship--be that a result of greater government spending spurring growth, or be that a strong suggestion that higher taxes does not hurt growth (as many who clamor for cutting taxes love to claim to score political points).
> The study does not claim that it shows this, and if it did it would be wrong as it presents no evidence that this is the case.
The article most certainly does. They state plainly: "But it does suggest that there is a lot more to an economy than taxes, and that slashing taxes is not a guaranteed way to accelerate economic growth."
Deadweight losses from taxes have most certainly not been debunked.
Yes, and distribution of the benefits from deadweight loss reduction has also been a matter of study, and that's the topic on the table.
That the distribution of the benefits is done according to supply and demand has most certainly not been debunked either. Wages are decided by the labor market equilibrium, not individually by employers. And economic growth is not a matter of distribution and certainly related to deadweight losses.
Do you have any evidence for these simplistic Econ101 theories?
The funny thing is that if an any economist did prove a link between tax cuts and long term economic growth he wouldn't just win a Nobel, they'd knock down the Statue of Liberty and replace it with a statue of him. Alas, the evidence eludes all comers.
> And economic growth is not a matter of distribution and certainly related to deadweight losses.
Unfortunately this is exactly wrong. Economic growth is probably only a matter of distribution. No matter how hard the supply siders wish it, aggregate demand and a strong consumer base are all that really matters. As they say, show me a growing middle class and I'll show you economic growth.
The funny thing is that if an any economist did prove a link between tax cuts and long term economic growth he wouldn't just win a Nobel, they'd knock down the Statue of Liberty and replace it with a statue of him. Alas, the evidence eludes all comers.
> And economic growth is not a matter of distribution and certainly related to deadweight losses.
Unfortunately this is exactly wrong. Economic growth is probably only a matter of distribution. No matter how hard the supply siders wish it, aggregate demand and a strong consumer base are all that really matters. As they say, show me a growing middle class and I'll show you economic growth.
> Do you have any evidence for these simplistic Econ101 theories?
Yes, deductive logic. Way better than empirical studies, if that's what you were looking for. You only need the assumption that demand curves in the labor market slope downward to deduce that taxes in that market cause deadweight losses, and the evidence that demand curves nearly always slope downward, not just in the labor market, is every transaction you have ever made and every transaction you have ever heard anyone talk about. There are empirical studies that confirm this, but they are irrelevant because you have access to much better evidence, and you should just dismiss the empirical studies that say otherwise. If controlled experiments showed this wrong, you should assume that the researchers are lying about their results, because that would genuinely be a more likely explanation than demand curves not actually sloping downward.
By the way, simple theories are more likely to be true, not less.
> Economic growth is probably only a matter of distribution.
There are exactly two reasons there can be an increase in economic growth and they are intensive and extensive growth. Either you make more efficient use of inputs or you have more inputs. Deadweight losses mean you make less efficient use of inputs.
In principle, the inefficiency caused by the taxes could be offset by the way they are spent if they were used to correct a market failure, which could increase economic efficiency or even increase the inputs. But market failures do not exist so in practice this does not happen and taxes always harm economic growth.
Yes, deductive logic. Way better than empirical studies, if that's what you were looking for. You only need the assumption that demand curves in the labor market slope downward to deduce that taxes in that market cause deadweight losses, and the evidence that demand curves nearly always slope downward, not just in the labor market, is every transaction you have ever made and every transaction you have ever heard anyone talk about. There are empirical studies that confirm this, but they are irrelevant because you have access to much better evidence, and you should just dismiss the empirical studies that say otherwise. If controlled experiments showed this wrong, you should assume that the researchers are lying about their results, because that would genuinely be a more likely explanation than demand curves not actually sloping downward.
By the way, simple theories are more likely to be true, not less.
> Economic growth is probably only a matter of distribution.
There are exactly two reasons there can be an increase in economic growth and they are intensive and extensive growth. Either you make more efficient use of inputs or you have more inputs. Deadweight losses mean you make less efficient use of inputs.
In principle, the inefficiency caused by the taxes could be offset by the way they are spent if they were used to correct a market failure, which could increase economic efficiency or even increase the inputs. But market failures do not exist so in practice this does not happen and taxes always harm economic growth.
My favorite scam I've seen lately has been the "We're gonna give you a promotion with no salary increase, see how you do, and then discuss a pay raise after X months! You should be grateful for this opportunity!"
And then of course in six months, the pay raise is basically a small bump, versus what one might be paid if brought in as a manager/higher title.
And then of course in six months, the pay raise is basically a small bump, versus what one might be paid if brought in as a manager/higher title.
Not a great scam because you give the employee both the means and motive to leave for a better paying job down the street. Then you'll either have to repeat this draining process or pay a reasonable salary after all, only now you'll have a less experienced person in place for a while.
You are supposed to take the promotion, update your linkedin, and find a real position with that title elsewhere for more money.
I've had the privilege to have the proactive version of this discussion: A discussion was had about an employee and then the question was asked "If they left, how much would we pay to hire someone the replace them? Let's give them a raise to that amount now and avoid that mess."
That sounds like a Sorkin production where everyone is unrealistically smart and rational.
Perhaps left unsaid is that the companies accrue the benefit of a long-tenured employee, savings on hiring and searching for a replacement, and saved opportunity cost from the time frame where the individuals job was left unfilled. Win-win.
I have heard that before. Immediately after a promotion it's best to use the new title in a job search. Pretty sad.
This is basically what every McKinsey Engagement Magager does after 1 year on the job, and the firm is happy with it.
The difference is that McKinsey (and other consulting firms) rely on the network of alumni to secure new projects.
So those people aren't (usually) leaving to a competitor, but mostly to a current (or possibly future) client.
Same with law firms, auditing firms, etc.
So those people aren't (usually) leaving to a competitor, but mostly to a current (or possibly future) client.
Same with law firms, auditing firms, etc.
That's really good strategy. Is there another industry where you could apply this method? Hire young people for cheap and then let them move to future customers for high salaries. I guess it may work for somebody like Oracle: Hire young devs and after a few years let move to customers who pay them well as experts who then buy Oracle products.
Pretty much any professional services and consulting.
> Hire young people for cheap and then let them move to future customers for high salaries.
Well, consulting salaries are usually significantly higher than industry salaries. So it is actually the opposite.
People move out of consulting because of the stressful hours and the up-or-out culture. Additionally, as you progress, the work goes from IC to project management then to client management (as a principal) then to sales when you become a partner. They tend to make less money when moving to industry (not always) and work fewer hours, and travel less too.
> Hire young people for cheap and then let them move to future customers for high salaries.
Well, consulting salaries are usually significantly higher than industry salaries. So it is actually the opposite.
People move out of consulting because of the stressful hours and the up-or-out culture. Additionally, as you progress, the work goes from IC to project management then to client management (as a principal) then to sales when you become a partner. They tend to make less money when moving to industry (not always) and work fewer hours, and travel less too.
McKinsey probably have the most analyzed, overdeveloped and optimized system to run a business in the world.
Bring people in on the cheap (partly because they're being paid in prestige), fly them around the country on miles you've prebought, work them really hard for a few years, and nurture them as they move on as future customers seems to be working out pretty well for them.
Bring people in on the cheap (partly because they're being paid in prestige), fly them around the country on miles you've prebought, work them really hard for a few years, and nurture them as they move on as future customers seems to be working out pretty well for them.
I would be happy with an empty title for that reason. I'd gladly take a lower salary and work as a "senior dev" for a year, then apply to senior dev positions making 50% more.
You say that, but you'd be upset about not getting the pay bump that you know your fellow senior devs did, and you'd be gone in 3 months.
Only if I could get that higher paying job sooner. Either way it would be a win for me. I'm not sure if it would be one for the company, though.
But it'd be more of a win for you if the company would just give you the pay bump as well. And it'd be a win for the company because they wouldn't have you leaving.
This is the right answer, they are simply making you more marketable, and you are now gaining "New Position" XP
But wouldn't the promotion come with increased responsibility, thus keeping you too busy to interview?
[deleted]
One nice thing about working at a place that doesn't have levels is that this crap doesn't happen.
[deleted]
I have been on the opposite side.. they'll give me pay raises, expanded responsibility but never a promotion.
So if you do a LinkedIn search you'll think I'm a run of the mill programmer and they'll contact me for positions paying 1/3 or 1/4th of my current salary.
So if you do a LinkedIn search you'll think I'm a run of the mill programmer and they'll contact me for positions paying 1/3 or 1/4th of my current salary.
> In fact, one basic result in the theory of cheap talk is that if you assume the cheap-talker will do what’s best for him and worst for you, you can often get him to reveal more of the truth.
This is basically the definition of enemy.
These people are your enemies.
By that I mean, in the context of fair wages, employees ought to treat executives as enemies, not as slightly conflicted parties with slightly divergent interests. To win the pay he or she deserves, the employee must have both resolve ("I don't want this person to beat me") and clarity ("this person would gladly pay me half of what I make"). Mind and heart must be ready to fight, thus the word "enemy". A dangerous label but sometimes, a courageous one.
Pretending that these people care about your best interests, that they'd be willing to sacrifice a little because they're so forward-thinking, smacks of conflict-avoidance. I.e., "Oh my boss's boss is just trying to minimize and maximize like any rational actor. It's normal. Happens to everyone. I'm scared!"
This is basically the definition of enemy.
These people are your enemies.
By that I mean, in the context of fair wages, employees ought to treat executives as enemies, not as slightly conflicted parties with slightly divergent interests. To win the pay he or she deserves, the employee must have both resolve ("I don't want this person to beat me") and clarity ("this person would gladly pay me half of what I make"). Mind and heart must be ready to fight, thus the word "enemy". A dangerous label but sometimes, a courageous one.
Pretending that these people care about your best interests, that they'd be willing to sacrifice a little because they're so forward-thinking, smacks of conflict-avoidance. I.e., "Oh my boss's boss is just trying to minimize and maximize like any rational actor. It's normal. Happens to everyone. I'm scared!"
This is very reductive. You could use the same logic to argue that your coworkers are your enemies because the money being paid to them could be paid to you instead.
If a person had a coworker who thought "well I could get a 40% pay increase if I get <person> fired", then that person should consider that coworker an enemy.
Fortunately, the world does not revolve around game-theory and most other parties with whom we choose to associate, will at least consider and value our interests. Enemies do not do so, or value our interests at something close to zero; thus their calculus: "worst for you, best for them".
Fortunately, the world does not revolve around game-theory and most other parties with whom we choose to associate, will at least consider and value our interests. Enemies do not do so, or value our interests at something close to zero; thus their calculus: "worst for you, best for them".
If you would get a 40% raise if you switched companies, would you? Should execs see you as the enemy, then?
There are no "sides", everyone is just maximizing their own payouts.
People here don't seem to mind when profit-focused engineers switch companies for better salaries, but seem to mind when companies do the same.
There are no "sides", everyone is just maximizing their own payouts.
People here don't seem to mind when profit-focused engineers switch companies for better salaries, but seem to mind when companies do the same.
Which means it's essentially a free-for-all. If everybody is your enemy, then you still have enemies.
> Which means it's essentially a free-for-all. If everybody is your enemy, then you still have enemies.
Being a free-for-all doesn't make it enemies, just a game. The two prisoners in the prisoner's dilemma aren't enemies.
Employment is just another case of game theory. There are times when the best outcome for you is to collaborate with your employer, other times is to play against them. And so on.
A reductive vision of me vs. the world, or us against them is naive and counterproductive. Particularly because you'd do the same in their shoes.
Being a free-for-all doesn't make it enemies, just a game. The two prisoners in the prisoner's dilemma aren't enemies.
Employment is just another case of game theory. There are times when the best outcome for you is to collaborate with your employer, other times is to play against them. And so on.
A reductive vision of me vs. the world, or us against them is naive and counterproductive. Particularly because you'd do the same in their shoes.
> Being a free-for-all doesn't make it enemies, just a game. The two prisoners in the prisoner's dilemma aren't enemies.
You're disregarding the fact that while the prisoner's dilemma is a non-zero sum game, employment in general is - any value added over your marginal usefulness is your loss and your employer's gain.
Some people even "solve" this problem by being minimally valuable.
You're disregarding the fact that while the prisoner's dilemma is a non-zero sum game, employment in general is - any value added over your marginal usefulness is your loss and your employer's gain.
Some people even "solve" this problem by being minimally valuable.
> employment in general is
You're absolutely, utterly wrong. Voluntary employment only exists because it isn't a zero-sum game.
Any voluntary trade is not a zero-sum game, by definition.
And any value generated in excess of your cost is capture by you and the employer based on the price elasticity of the demand for labor.
You're absolutely, utterly wrong. Voluntary employment only exists because it isn't a zero-sum game.
Any voluntary trade is not a zero-sum game, by definition.
And any value generated in excess of your cost is capture by you and the employer based on the price elasticity of the demand for labor.
Can it really be called "voluntary" if you starve if you don't have a job?
Still is.
When you're trading your labor for money, you end up with more value than before. And excess value is split between you and the employer as I explained above.
When you're trading your labor for money, you end up with more value than before. And excess value is split between you and the employer as I explained above.
That's some pretty dubious logic, that is not completely backed up by reality.
And the idea that the split is governed by the value of labor at the time has also been debunked. Businesses everywhere are complaining of a labor shortage, yet they're not raising wages. I'm sorry, but the simplistic Econ 101 stuff isn't really applicable in the real world.
And the idea that the split is governed by the value of labor at the time has also been debunked. Businesses everywhere are complaining of a labor shortage, yet they're not raising wages. I'm sorry, but the simplistic Econ 101 stuff isn't really applicable in the real world.
Wrong again. This isn't "logic", this is well established science.
It's like gravity, you can dismiss it all you want, but if you jump out of the window, you'll still end up on the floor.
And you clearly didn't understand what price elasticity of demand means.
It's like gravity, you can dismiss it all you want, but if you jump out of the window, you'll still end up on the floor.
And you clearly didn't understand what price elasticity of demand means.
Because both of those sides are not on a level playing field. Even for some of the best of engineers, the power imbalance is very real.
In my experience, the calculus is more like "best for them, indifferent to you". If a business or personal goal can reasonably be solved by paying you more then they don't mind. In fact there are even scenarios where you'd win even more than the other party, but they still cooperate if they gain 'enough'. It is the absolute difference created by the action for their position that matters.
Meanwhile in an actual adversarial relationship the other party can be expected to take actions that harm their own position if it harms you more. In such a position it is the relative difference that matters, an enemy seeks to either lose less or win more than you.
I'd argue that (except for the most pathological managers), jobs fall in the first category instead of in the second.
Meanwhile in an actual adversarial relationship the other party can be expected to take actions that harm their own position if it harms you more. In such a position it is the relative difference that matters, an enemy seeks to either lose less or win more than you.
I'd argue that (except for the most pathological managers), jobs fall in the first category instead of in the second.
Except in the case of co-workers, that logic is pretty dubious, and isn't true except in certain situations (stack ranking, for example). In the case of executives, it's been proven to be completely true over the past 50 years.
Enemy and counterparty are not the same. When I negotiate with my landlord, they aren’t my enemy. They’re someone I’m negotiating with.
Counterparty when the landlord says rent goes up by 5% or 10%. Enemy when the landlord says rent is going up by 90% and has sent you eviction papers to that effect.
It's not "best for them, a little bad for you", it's "best for them, worst for you".
It's not "best for them, a little bad for you", it's "best for them, worst for you".
I like the concept of "cheap talk". In my company they always celebrate sales growth and higher profits loudly. It really seems to motivate a lot of people while at the same time salaries are frozen so most of them get no benefit from the "good news".
My favorite is when this happens in the same meeting. "Best year evar!1!" Can we finally get a raise? "Oooooohhh, sorry."
For a typical working man job, this is the unfortunate reality of the job market
For tech jobs, this is why people jump ship every few years.
For tech jobs, this is why people jump ship every few years.
it's also why they try to instill&enforce the 'job hopper' stigma
Is it really a stigma when it is perfectly rational to prefer employees who will stick around for a while?
As an employee, I'd rather stick around. I greatly dislike the hazing rituals that tech hiring has become. Also, if I generally enjoy the problems I'm given to solve, I want to keep solving them. However, my view is that companies only care about money, so I should too. If I don't get good, consistent raises, I have to leave and take my experience with me.
I'd say it's a stigma since companies have no problem evaluating their employees every year or even more frequently, and deciding if they should keep them or not. Much like the tradition of giving two weeks notice, it's something that benefits companies but not employees and managers try to make everyome scared of doing something that hurts companies
Yes it is, when the reason they're doing it is so they can pay you less.
the point is that it's a stigma because they have made it into one because it benefits them.
to the employee, it's an artificial social barrier to getting their economic worth by hopping jobs.
to the employee, it's an artificial social barrier to getting their economic worth by hopping jobs.
Given that this was an event organized by the Dallas and Atlanta Federal Reserve Banks, we should consider the possibility that the CEOs were simply trying to encourage the Fed to keep interest rates low.
Here is most likely the event being referenced: https://www.dallasfed.org/research/events/2018/18ted
Here is most likely the event being referenced: https://www.dallasfed.org/research/events/2018/18ted
I'm curious as to whether that "median wage growth" chart takes inflation into account.
The data appears to come from here[1], which describes it as,
> Once we have constructed the individual hourly earnings data, we match the hourly earnings of individuals observed in both the current month and 12 months earlier. The matching algorithm results in an average of 2,400 individual wage growth observations per month. We then compute the median of the distribution of individual 12-month wage changes for each month.
That seems to indicate that it does not take inflation into account.
[1]: https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?pan...
> Once we have constructed the individual hourly earnings data, we match the hourly earnings of individuals observed in both the current month and 12 months earlier. The matching algorithm results in an average of 2,400 individual wage growth observations per month. We then compute the median of the distribution of individual 12-month wage changes for each month.
That seems to indicate that it does not take inflation into account.
[1]: https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?pan...
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In the end, it is back to the fundamental question : How should the business benefits created by the workforce be distributed?
I mean, why on earth would they give raises? It's not like we just passed a huge tax cut bill with enormous cuts to corporate taxes with the justification that the money would go back to workers...
Oh wait.
Oh wait.
The point of the tax law was to lower the cost of employment and investment in the US (specifically, the cost of repatriating foreign profits to pay US salaries and buy US-based infrastructure). The hope being that lower costs cause companies to value US labor more, which tightens the labor market.
A tight labor market causes the raises: companies will continue to offer what they want to offer, and they will be unable to replace attrition because the would-be new hire can do better. The employer is either forced to offer more wages directly, lower their standards to poach employees from lower-paying employers, or do without and leave profit on the table.
But none of that involves buttering up CEOs and getting them to pinky-swear that they're going to give out raises just because they can. The wage level is always "as low as they can get away with"