Now with the republicans in charge wages will soar, at least for the Banksters and the oil barons. Hi ho!
Mr. Wolfers, it cost money to have a job. Costs for transportation, upkeep of a car, childcare costs, buying and keeping uniforms clean, and buying food to eat away from home, all put a drag on the wages earned. If the wages paid aren't great enough to offset those costs sufficiently, it can actually be more cost-efficient to stay home. So the fact that the economy is putting more people back to work is NOT the good news you think it is. The fact that most of those jobs are poorly-paid and nearly benefitless makes for a sour outlook for the average person, and has set us up to have a poorer citizenry with a lower standard of living, now and for years into the future. Those ramifications will be with us long after economists have made multiple error-ridden predictions from the comfort of their agenda-driven think tanks.
8
If all the bad news is Bush's fault and its all out of Obama's hands, isn't the all the good news to Bush's credit?
GW. Most successful 4 term president either.
Seriously, hope its really is as good as the numbers make it seem. Things seem slow to me. I never understood how it works that a record % of people want work but can't find it but unemployment is down.
Is that the distinction between non employment and unemployment?
GW. Most successful 4 term president either.
Seriously, hope its really is as good as the numbers make it seem. Things seem slow to me. I never understood how it works that a record % of people want work but can't find it but unemployment is down.
Is that the distinction between non employment and unemployment?
1
Wow. One can only hope you're mocking conservatives, but I fear not. Please try to distinguish the difference between the downturn, which happened under Bush, and the recovery, which happened under Obama. Monthly job losses peaked in March 2009. GDP contraction peaked in the 4th quarter of 2008 (the worst quarter in 50 years) and the Great Recession ended in June 2009.
Unless you think an arsonist deserves some credit when the firefighters finally put out the fire the arsonist set, you really don't have much of an argument. Just so you know, the percentage of the Civilian Noninstitutional Population counted by the Bureau of Labor Statistics as "not in the labor force, want a job now" is LOWER today (2.6%) than it was at a comparable point (58 months into the jobs recovery) following the much milder recession of 1990-91, when it was 2.8%. This percentage is also lower today than it was at a comparable point following the 1981-82 recession. So, the labor force participation rate is mostly low because most people who have dropped out of the labor force simply don't want jobs (e.g., because they retired).
Unless you think an arsonist deserves some credit when the firefighters finally put out the fire the arsonist set, you really don't have much of an argument. Just so you know, the percentage of the Civilian Noninstitutional Population counted by the Bureau of Labor Statistics as "not in the labor force, want a job now" is LOWER today (2.6%) than it was at a comparable point (58 months into the jobs recovery) following the much milder recession of 1990-91, when it was 2.8%. This percentage is also lower today than it was at a comparable point following the 1981-82 recession. So, the labor force participation rate is mostly low because most people who have dropped out of the labor force simply don't want jobs (e.g., because they retired).
There are many ways to adjust pay.
Traditionally, employers have not lowered the pay of existing employees, even when that would make sense. However, they have no hesitation about increasing the amount of work each employee is expected to do. With the laws in the US, nearly anyone can be asked to work nights and weekends without a pay increase.
Traditionally, employers have not lowered the pay of existing employees, even when that would make sense. However, they have no hesitation about increasing the amount of work each employee is expected to do. With the laws in the US, nearly anyone can be asked to work nights and weekends without a pay increase.
4
Policy makers need to look at the U-6 unemployment rate and not the U-3 rate usually discussed when measuring slack in the labor market. The U-6 rate includes people working part-time that want full-time employment, as well as people who have left the labor force in the last 12 months.
The BLS started tracking the U-6 rate in 1994. The rate was 11.8% in Jan 1994. It reached a low of 6.8% in October 2000. After the 2001 recession it peaked at 10.4% in Sept 2003. It declined to 7.9% in Dec 2006. It was 8.4% in the fall of 2007 prior to the Great Recession of Dec 2007 to June 2009. It peaked at 17.1% for several months from Oct 2009 to Apr 2010. It has now declined to 11.2% as of Dec 2014. http://data.bls.gov/timeseries/LNS13327709?years_option=all_years
The rate has declined 3.2% over the last two years. At that rate of decline it would be at 8% by the end of 2016, about its low since the 2001 recession. If the U-6 rate continues to decline, i.e. no new recession, we should see more upward pressure on wages over the next two years.
Based on historical data, the Fed shouldn't worry about raising interest rates at least until the U-6 rate goes below 9% and could probably wait even longer without fanning excessive inflation.
The BLS started tracking the U-6 rate in 1994. The rate was 11.8% in Jan 1994. It reached a low of 6.8% in October 2000. After the 2001 recession it peaked at 10.4% in Sept 2003. It declined to 7.9% in Dec 2006. It was 8.4% in the fall of 2007 prior to the Great Recession of Dec 2007 to June 2009. It peaked at 17.1% for several months from Oct 2009 to Apr 2010. It has now declined to 11.2% as of Dec 2014. http://data.bls.gov/timeseries/LNS13327709?years_option=all_years
The rate has declined 3.2% over the last two years. At that rate of decline it would be at 8% by the end of 2016, about its low since the 2001 recession. If the U-6 rate continues to decline, i.e. no new recession, we should see more upward pressure on wages over the next two years.
Based on historical data, the Fed shouldn't worry about raising interest rates at least until the U-6 rate goes below 9% and could probably wait even longer without fanning excessive inflation.
3
I would look back even further. The only time wages rose broadly was back in the 1990s when unemployment (U-3) was below 4.5%.
I have no idea why the Fed economists (aka bankers) think that the natural unemployment rate is so high. It seems to me that some Jedi mind trick from the "investors" is driving their opinions (and they ARE opinions because there are NO FACTS that drive them).
I have no idea why the Fed economists (aka bankers) think that the natural unemployment rate is so high. It seems to me that some Jedi mind trick from the "investors" is driving their opinions (and they ARE opinions because there are NO FACTS that drive them).
3
Why should we expect wages to increase with productivity?
If higher productivity was based on people working harder, it would make sense, but as far as I can tell, the productivity gains have to do with technology and automation. We need less labor to do the same job, thus labor becomes less valuable, yet we expect higher pay?
The assumption that labor and productivity are tightly coupled is a flawed premise that leads us to the wrong discussion. The discussion should be: how does the economy function when labor isn't a limited resource?
Now off to watch the movie Wall-e, with my BnL popcorn.
If higher productivity was based on people working harder, it would make sense, but as far as I can tell, the productivity gains have to do with technology and automation. We need less labor to do the same job, thus labor becomes less valuable, yet we expect higher pay?
The assumption that labor and productivity are tightly coupled is a flawed premise that leads us to the wrong discussion. The discussion should be: how does the economy function when labor isn't a limited resource?
Now off to watch the movie Wall-e, with my BnL popcorn.
7
Because it makes the world go around. If the world is completely automated, you would have the movie A.I. Having ownership and income so concentrated results in long-term consequences: poor business decisions, misunderstanding of what "human welfare" means, the fact that many people cannot save enough for their retirements (we are all mortal despite what the Great Investors think of themselves), inability to deal with long-term global problems, etc.
And, as for your reference: Wall-E was NOT a positive commentary on human nature, our economic model or the health of the American lifestyle. In that animation, the Earth was a huge garbage can and everyone was grossly obese and ugly. Is that something we should be aiming for?
And, as for your reference: Wall-E was NOT a positive commentary on human nature, our economic model or the health of the American lifestyle. In that animation, the Earth was a huge garbage can and everyone was grossly obese and ugly. Is that something we should be aiming for?
Larry,
Yes, my reference to Wall-e was intended to reference a dystopian view of consumptionism and automation. My point is that the genie is out of the bottle - machines are replacing jobs.
How do we prepare the workforce and economy for a future where traditional labor isn't needed? This is the pressing issue to me, not how we return corporate profits to the worker when the worker wasn't part of the value creation.
If a CEO had a choice to hire 100 workers or buy a machine for $20M to do the same work, most rational business owners would buy the machine. This trend isn't reversing.
Solutions to how to provide a meaningful living in an automated world is the problem to solve. I believe automation and the internet - value created in a virtual world - are the big driver of wage stagnation. I fear a $15/hour minimum wage will result in a lot more machines and a lot less people behind the counter of a McDonalds. Automated fryer? Automated burger assembly? Self-serve kiosk to order and pay? Totally possible. Raising the cost of labor with continued advances in technology only narrows the break-even point between labor and automation.
Not everyone can become a musician, novelist, or app developer. Where do we go from here? Raising the minimum wage or reducing the work week to 32 hours are just a stall. Re-defining the labor market addresses the root cause.
Yes, my reference to Wall-e was intended to reference a dystopian view of consumptionism and automation. My point is that the genie is out of the bottle - machines are replacing jobs.
How do we prepare the workforce and economy for a future where traditional labor isn't needed? This is the pressing issue to me, not how we return corporate profits to the worker when the worker wasn't part of the value creation.
If a CEO had a choice to hire 100 workers or buy a machine for $20M to do the same work, most rational business owners would buy the machine. This trend isn't reversing.
Solutions to how to provide a meaningful living in an automated world is the problem to solve. I believe automation and the internet - value created in a virtual world - are the big driver of wage stagnation. I fear a $15/hour minimum wage will result in a lot more machines and a lot less people behind the counter of a McDonalds. Automated fryer? Automated burger assembly? Self-serve kiosk to order and pay? Totally possible. Raising the cost of labor with continued advances in technology only narrows the break-even point between labor and automation.
Not everyone can become a musician, novelist, or app developer. Where do we go from here? Raising the minimum wage or reducing the work week to 32 hours are just a stall. Re-defining the labor market addresses the root cause.
3
Microeconomics vs. Macroeconomics. That is the reason.
MBAs are taught the former. Economists and policy specialists are taught the latter.
Both sides might want to take a course in game theory too. It helps to understand that short-term results do NOT always accumulate. One step forward and two steps back.
One of the things that the conservatives always focus on is values. They focus on values for PERSONAL behavior but they never apply it to ECONOMIC behavior. Work on that for awhile, you will find the reason eventually.
MBAs are taught the former. Economists and policy specialists are taught the latter.
Both sides might want to take a course in game theory too. It helps to understand that short-term results do NOT always accumulate. One step forward and two steps back.
One of the things that the conservatives always focus on is values. They focus on values for PERSONAL behavior but they never apply it to ECONOMIC behavior. Work on that for awhile, you will find the reason eventually.
1
Fifteen seconds of searching and I found out that real wages declined under Reagan, and was negative for all but six months of his eight years in office.
http://www.frbsf.org/economic-research/publications/economic-letter/2012...
If this wage number is a problem, then Reagan was an all-time failure. Which is it ?
http://www.frbsf.org/economic-research/publications/economic-letter/2012...
If this wage number is a problem, then Reagan was an all-time failure. Which is it ?
16
It ain't rocket science, the answer is organized labor.
Hey, if being a labor union member (and president of one one two seperate occasions) was good enough for Ronald Reagan, it's good enough for me.
Hey, if being a labor union member (and president of one one two seperate occasions) was good enough for Ronald Reagan, it's good enough for me.
7
"Even if nominal wages were rising quickly, we have no idea how much of that will translate into higher real wages, because we don’t know the extent to which businesses will pass through higher labor costs into higher inflation."
Actually, we have a pretty good idea. All you have to do is google "inflation calculator" and you will get a really great page from the Bureau of Labor Statistics that lets you compare how a dollar spends between two different years, CPI indexed. While projecting the future is indeed unknown, thirty years of similar behavior of wages in relation to buying power constitute a constant. So even if you project keeping CPI constant, it is easy to see that workers have effectively seen their spending power cut in half in the past 30 years. The $10-12 still earned per hour today for significantly improved productivity over 30 years ago spends not like $10-12 hours earned in the 80's. Today's salaries, not even adjusted for productivity, just inflation, pays the equivalent of minimum wage thirty years ago.
So, it's actually worse, much worse than you want to admit. It has nothing to do with optimism, it has to do with cold hard facts. Optimism will be warranted only when more people understand how badly they've been had and do something about it rather than deluding themselves with your kind of optimism that lets them sit back and wait for somebody else to fix it. So excuse me if I think not only are you wrong, your're dangerously wrong.
Actually, we have a pretty good idea. All you have to do is google "inflation calculator" and you will get a really great page from the Bureau of Labor Statistics that lets you compare how a dollar spends between two different years, CPI indexed. While projecting the future is indeed unknown, thirty years of similar behavior of wages in relation to buying power constitute a constant. So even if you project keeping CPI constant, it is easy to see that workers have effectively seen their spending power cut in half in the past 30 years. The $10-12 still earned per hour today for significantly improved productivity over 30 years ago spends not like $10-12 hours earned in the 80's. Today's salaries, not even adjusted for productivity, just inflation, pays the equivalent of minimum wage thirty years ago.
So, it's actually worse, much worse than you want to admit. It has nothing to do with optimism, it has to do with cold hard facts. Optimism will be warranted only when more people understand how badly they've been had and do something about it rather than deluding themselves with your kind of optimism that lets them sit back and wait for somebody else to fix it. So excuse me if I think not only are you wrong, your're dangerously wrong.
22
Here is something you should research too: look at debt vs personal income. One of the reasons we had the Financial Crisis was that the level of personal debt (including mortgages) had become unsustainable. It is clear that the amount of debt carry even today as compared to back in the pre-Reagan era (BEFORE the growth of the financial industry) is unhealthy.
What I always found interesting about the West is how they seem to always apply different rules to themselves as compared to the rest of the world. The troika always demands that certain economic measures be applied to Asian, Latin and African nations but they never apply these limits to themselves. If the U.S. was another country back in 2007, the IMF would have declared its consumer and financial debt junk.
What I always found interesting about the West is how they seem to always apply different rules to themselves as compared to the rest of the world. The troika always demands that certain economic measures be applied to Asian, Latin and African nations but they never apply these limits to themselves. If the U.S. was another country back in 2007, the IMF would have declared its consumer and financial debt junk.
4
Real wages would have to increase (and probably real corporate profits decrease) quite a bit if workers are to capture even a small portion of the productivity increases since the 1980s. I wish I could be optimistic about reversing the trend toward income inequality during the last 30 years..
12
Now would also be a good time to practice a little inflation pumping. Like raising the minimum wage and instituting a carbon tax. These actions will tend to raise prices and slow down hiring but their effects are expected to be very minor.
It is unlikely that NAIRU is 5% in any case, it is probably closer to 3.5% with Internet hiring tools such as LinkedIn. It is also likely that the current 5.6% measure is in error. We are probably faced with a gross inaccuracy due to the despair among older workers, new graduates and the other long term unemployed. The true unemployment rate is probably 1.5 to 2.0% higher than measured.
The Fed should definitely wait for measured inflation to exceed 3% before acting.
It is unlikely that NAIRU is 5% in any case, it is probably closer to 3.5% with Internet hiring tools such as LinkedIn. It is also likely that the current 5.6% measure is in error. We are probably faced with a gross inaccuracy due to the despair among older workers, new graduates and the other long term unemployed. The true unemployment rate is probably 1.5 to 2.0% higher than measured.
The Fed should definitely wait for measured inflation to exceed 3% before acting.
7
This article suggests the difference between what is and what ought to be. What is is that when wages increase prices increase. What ought to be is that as wages increase at the bottom prices drop for those at the bottom while increasing for those at the top. Economics, because it is about what is, is much less interesting than political philosophy, which is about what ought to be.
You must have been reading some other article. Because this one was about a simple and widely understood *economic* functional relationship.
NAIRU: the Non-Accelerating Inflationary Rate of Unimployment.
As to your babbling. Inflation is a general increase in consumer prices. Inflation has three main components; the cost of raw materials (rent), the cost of labor (wages)and the cost of capital (profit). All of these are *per unit of production* so if costs go up by 5% but you produce 6% more units with the same inputs prices will actually tend to fall. That is why some things like cell phones or gallons of gas might actually cost Lee as time goes by.
Justin explained this very well but you seem to have missed the point.
NAIRU: the Non-Accelerating Inflationary Rate of Unimployment.
As to your babbling. Inflation is a general increase in consumer prices. Inflation has three main components; the cost of raw materials (rent), the cost of labor (wages)and the cost of capital (profit). All of these are *per unit of production* so if costs go up by 5% but you produce 6% more units with the same inputs prices will actually tend to fall. That is why some things like cell phones or gallons of gas might actually cost Lee as time goes by.
Justin explained this very well but you seem to have missed the point.
4
During my economics study in the late 60s, I was taught that full employment meant a 4% unemployment rate, and some economists believed 3% or lower was possible. A 5-5.8 percent unemployment rate given the recession facing most nations of the world today and deflation as well is ridiculously high.
Wage rates are not simply a reflection of unemployment rates and GDP growth, they reflect working people's institutional loss of power relative to monopoly corporations and capitalists and the profound shift in national income from working people to capitalists. The U.S. unemployment rate could drop to 3% and wages and salaries remain low unless the power position of labor rises relative to capitalists. International trade shackles U.S. labor rates to other countries labor markets as well. The worldwide recession will likely curtail rising U.S. wages and the power of capitalists overcome what should be rising wages giving our higher employment numbers.
Wage rates are not simply a reflection of unemployment rates and GDP growth, they reflect working people's institutional loss of power relative to monopoly corporations and capitalists and the profound shift in national income from working people to capitalists. The U.S. unemployment rate could drop to 3% and wages and salaries remain low unless the power position of labor rises relative to capitalists. International trade shackles U.S. labor rates to other countries labor markets as well. The worldwide recession will likely curtail rising U.S. wages and the power of capitalists overcome what should be rising wages giving our higher employment numbers.
19
an interesting but incomplete discussion. Focusing on the unemployment rate is missing the real issue. Yes the unemployment rate has fallen, but largely due to people be no classified as "not in the labor force." As not discussed is the issue of people working part time who want to work full time. So what if my hour wage goes up 1.7 percent but my hours are cut back 10 or 15 percent.
7
Wages are not going up until business can't get the quality and quantity of workers that they desire. Since we have massive under employment and many who could work but are not looking this is not happening any time soon, at least in mass.
4
But you have to look at how many of the unemployed would be useful to employers. Many corporations need specific skills. When there is a shortage of people with these skills, then wages will go up for people with these skills, but not for everyone else.
2
Why don't YOU train them?
After all, if they are unemployed, how do they afford the cost of training/education? Should they go into debt instead? See my prior post elsewhere on this blog: personal debt is already excessively high compared to history.
After all, if they are unemployed, how do they afford the cost of training/education? Should they go into debt instead? See my prior post elsewhere on this blog: personal debt is already excessively high compared to history.
2
Official joblessness dropped again, but the American Job Shortage Number (AJSN) says we’re still 18.3 million jobs short! Why? See http://worksnewage.blogspot.com/2015/01/unemployments-down-but-december-....
1
As I understand it, the monthly wage figure is an average of the hourly earnings of all employed people. Unemployed people, who are earning an average hourly wage of zero, aren't included in the average. If that's correct, then a decrease in the wage figure does not necessarily mean that anybody's wages have gone down.
Re-employment of low-income workers has lagged behind re-employment of unemployed high-income workers since the recovery began in 2009. But in December, unemployment dropped substantially and average hourly wages dropped slightly. This suggests to me that a whole lot of lower income workers were re-employed during December - bringing down both the unemployment rate and the overall average hourly wage of all employed workers. This is not bad news, or even mixed news - it is totally good news.
politicsbyeccehomo.wordpress.com
Re-employment of low-income workers has lagged behind re-employment of unemployed high-income workers since the recovery began in 2009. But in December, unemployment dropped substantially and average hourly wages dropped slightly. This suggests to me that a whole lot of lower income workers were re-employed during December - bringing down both the unemployment rate and the overall average hourly wage of all employed workers. This is not bad news, or even mixed news - it is totally good news.
politicsbyeccehomo.wordpress.com
5
This is an interesting point (also unproven since we do not have the raw data) but is having your workforce be increasingly low wage a cause for celebration?
1
Is this perhaps due to more part-time employment, rather than living wage, full-time employment?
3
Just remember we did economic arbitrage that sent work out of the US into the world via globalization. I suspect that did not really increase the wages of most citizens in the US. One could guess the standard of living for most in the US will be static or regress until we complete the globalization paradigm. We have China, India, South America and Africa. So don't hold your breath waiting for wages to increase. This is the new normal except in private equity
12
Good point, Carl. Alan Greenspan made exactly the same claim: cheap imports (from cheap labor) would prevent inflation from happening. He used that claim to justify his keeping interest rates low, which, in turn, was instrumental in creating the real estate bubble that burst in 2008.
1
This entire article implies that there is no mechanism by which workers will ever share in the fruits of decades of economic growth. If it appears that they might, companies will respond by raising prices, thus generating inflation to protect their relative advantage.
I'd say the Fed should not base any decisions on nominal wage growth, but wait to see if there is any actual inflation. Maybe global competition could start affecting the companies' shares rather than the workers'.
I'd say the Fed should not base any decisions on nominal wage growth, but wait to see if there is any actual inflation. Maybe global competition could start affecting the companies' shares rather than the workers'.
6
I’m concerned that over a period of several decades real wages have barely risen, even as productivity has continued to race ahead. The result is that workers have enjoyed few of the fruits of economic growth.
Isn't this the whole point? several decades is a long time to go without a raise while corporates benefit from worker productivity and management takes most of the benefits.
Isn't this the whole point? several decades is a long time to go without a raise while corporates benefit from worker productivity and management takes most of the benefits.
24
This productivity improvement is primarily driven by capital spending. Automation paid for and installed by the company has increased productivity, while the workers are working no harder than before.
1
Really?
Seems to me that many people are working more than the standard hours (often without an increase in pay). What sort of bubble do you live in? Are you an academic? Are you a wealthy investor trading his portfolio from home? Seems to me that maybe your personal experience may be SKEWED.
Seems to me that many people are working more than the standard hours (often without an increase in pay). What sort of bubble do you live in? Are you an academic? Are you a wealthy investor trading his portfolio from home? Seems to me that maybe your personal experience may be SKEWED.
2
Jonathan, I am retired, but when I talk to working people of any age they describe job demands that are significantly higher than what I saw 10 to 30 years ago. These demands are both during and after regular work hours when they are expected to read and respond to work emails or texts and to also work on paperwork after hours.
2