If the NYT editors let this opinion piece through to give us something to complain about and mock they need to go back to the drawing board. It's far too easy to poke holes in and not at all satisfying.
21
"... if they find something worthwhile to do ..."
Soon to be the challenge for many a disrupted worker if forecasts about robotics are close to accurate.
Soon to be the challenge for many a disrupted worker if forecasts about robotics are close to accurate.
10
One word: Piketty.
10
Two places to look for enlightenment are the gig economy and the high numbers of people who have deliberately stepped out of the job market.
18
This looks like yet another one of these analyses where productivity is measured by how fast we dump garbage into landfills. I'm not buying it.
26
Profits are not shared with workers. They go into the bloated bank accounts of corporation heads and administrators.
42
I have a question. If companies compete to improve the life of a toaster so that it does not need replacement as often, or if light bulbs last for 20 years instead of two, or if cars last substantially longer, what does this do an economy? I am wondering whether substantial technical improvements continue to occur without being "productivity" in the old sense of churning more stuff through the economy. These gains displace workers unless they can find equally productive alternative work. Where are those equally productive jobs? It seems these kinds of productivity create great gains for society, but not if measured by overall wages, which might be affected negatively. Where does product quality fit into the models?
16
When I first married I found the toaster that my parents had used, and after cleaning it up used it for several more years before the ex ended up with it.
Corporations send jobs overseas and have products made elsewhere, products which in many cases that exhibit a shorter life than previous generations. Microwave ovens with bad capacitors that don’t last for more than two or three years, washing machines that last five to ten years instead of ten to twenty, electric drills that shred teeth on their drive gears upon their first use, clothing that is worn out after two washings due to cheap fabrics, buttons that crack, zippers that won’t zip, etc., etc. In addition more maintenance is required as plastic parts made of unsuitable resins and fillers break in short order. Companies love it because more products end up being sold, products that return more profits due to lower labor costs. Overseas manufacturers further cheapen the products with their own cost cutting measures, increasing their profits.
The corporations and their suppliers make more money, and consumers subsidize the stashing of trillions of dollars in offshore tax havens while they watch their job prospects lessen. Unemployment figures don’t tell the whole story as one also needs to look at the growing inequality and the shrinking middle class since those jobs don’t pay or provide the job security that they use to. Welcome to the future, compliments of both parties.
Corporations send jobs overseas and have products made elsewhere, products which in many cases that exhibit a shorter life than previous generations. Microwave ovens with bad capacitors that don’t last for more than two or three years, washing machines that last five to ten years instead of ten to twenty, electric drills that shred teeth on their drive gears upon their first use, clothing that is worn out after two washings due to cheap fabrics, buttons that crack, zippers that won’t zip, etc., etc. In addition more maintenance is required as plastic parts made of unsuitable resins and fillers break in short order. Companies love it because more products end up being sold, products that return more profits due to lower labor costs. Overseas manufacturers further cheapen the products with their own cost cutting measures, increasing their profits.
The corporations and their suppliers make more money, and consumers subsidize the stashing of trillions of dollars in offshore tax havens while they watch their job prospects lessen. Unemployment figures don’t tell the whole story as one also needs to look at the growing inequality and the shrinking middle class since those jobs don’t pay or provide the job security that they use to. Welcome to the future, compliments of both parties.
44
One of the things that is absolutely crushing read wage growth is the use of unrealistically low inflation numbers. The author non-problematically uses the bizarre government figure of 1.4% for recent inflation.
Who among you experiences price rises to be 1.4? These national inflation figures are shamelessly cooked, in order to lower government borrowing costs, wages and cost of living increases.
If the government derived its figures from the formula it used in 1990 recent inflation would be calculated as a bit less than 6% If they used the 1980 formula, it would be about 10%.
Who among you experiences price rises to be 1.4? These national inflation figures are shamelessly cooked, in order to lower government borrowing costs, wages and cost of living increases.
If the government derived its figures from the formula it used in 1990 recent inflation would be calculated as a bit less than 6% If they used the 1980 formula, it would be about 10%.
19
A major reason the US inflation rate is so low, is due to the low wages paid to developing and undeveloped countries, in a competitive world wide economy, and the globalization of trade.
8
If you remove housing costs, healthcare costs, and higher ed costs, from the equations, we really do have very low inflation for some two decades now. That includes food, gas, and other consumerables like clothing and white-goods. In no small part, we have China to thank for, in holding our inflation down. (Imagine if US were still producing all those clothing and appliances and gadgets in this country, we'll have WAY WAY HIGHER inflation than we'd had for the past two decades.)
In macroeconomic terms, that's a good thing. On individual levels, it's devastating for those who lost their jobs as a result of such operational shift from US to other lower-cost countries, and couldn't find a way to adapt. Corporations (and investors) love it, for the the higher profit and flexibility in operational control. But as society, we are the ones holding the bag dealing with the human toll of it. (And that "human toll" includes having to install an idiot in WH for his capability to writing unsubstantiated essays on twitter.)
In macroeconomic terms, that's a good thing. On individual levels, it's devastating for those who lost their jobs as a result of such operational shift from US to other lower-cost countries, and couldn't find a way to adapt. Corporations (and investors) love it, for the the higher profit and flexibility in operational control. But as society, we are the ones holding the bag dealing with the human toll of it. (And that "human toll" includes having to install an idiot in WH for his capability to writing unsubstantiated essays on twitter.)
25
When corporations fail to invest in their assets, including people, wage growth will stagnate, and so, eventually, should "growth." Oligarchs are only interested in "growing" their personal wealth offshore.
19
I often wonder whether authors like this have ever held real jobs. Freelance work is risky and not well-compensated for most, but it is a very different lifestyle from someone expecting to have the same job a year from now but with 3% more in their paycheck.
I witnessed some members of my family in support roles of industries looking for modest raises where the others of my family started small practices in those same industries. It became quickly apparent that unless you owned the company, you were never going to profit from it. No one banked on a 3% increase at an annual review. They hoped for a renegotiation of their union contract or some other force that radically altered the compensation structure.
I instead changed jobs, and constantly made double digit gains annually. And now that I have made many hiring, firing, and compensation decisions, I can say this and articles like it are silly.
Macro and micro have run their course. They are useful starting points, but we have so much data and sophistication now that these writings are basically passé. Geography, demographics, and human behavior determine your wage gains (and losses)- not strict adherence to a model. Not all people at the top are greedy and evil, just as not all people at the bottom will show up and work hard regardless of how much they get paid. There should be a mid-cro that introduces patterns of behavior in aggregate into these numbers instead of glossing over the interesting parts with averages.
I witnessed some members of my family in support roles of industries looking for modest raises where the others of my family started small practices in those same industries. It became quickly apparent that unless you owned the company, you were never going to profit from it. No one banked on a 3% increase at an annual review. They hoped for a renegotiation of their union contract or some other force that radically altered the compensation structure.
I instead changed jobs, and constantly made double digit gains annually. And now that I have made many hiring, firing, and compensation decisions, I can say this and articles like it are silly.
Macro and micro have run their course. They are useful starting points, but we have so much data and sophistication now that these writings are basically passé. Geography, demographics, and human behavior determine your wage gains (and losses)- not strict adherence to a model. Not all people at the top are greedy and evil, just as not all people at the bottom will show up and work hard regardless of how much they get paid. There should be a mid-cro that introduces patterns of behavior in aggregate into these numbers instead of glossing over the interesting parts with averages.
18
When you look at macroeconomics, you are effectively looking at data in very clinical terms. It is thus not inconceivable to see economists working in ivory towers since they don't ever have to go out to the field and see the human tolls and individual anecdotes as a result of macroeconomic shifts. Is that their shortcoming, or is it just "part of their job"? It's both.
I generally look at macroeconomic numbers and trends with a large dose of salt since it only provides one aspect of the picture. The danger comes when economists can get so hung up on their theories and past practices that they refuse/fail to see that their theories alone no longer holds up to reflect even that one aspect of the true picture. Such is the case when articles like this look at only the fundamental relationship between inflation and unemployment (wage growth). The world has moved on, and the real-world equation has become far more complicated than just two main variables. The question is, when will these economists learn to adjust their model?
I generally look at macroeconomic numbers and trends with a large dose of salt since it only provides one aspect of the picture. The danger comes when economists can get so hung up on their theories and past practices that they refuse/fail to see that their theories alone no longer holds up to reflect even that one aspect of the true picture. Such is the case when articles like this look at only the fundamental relationship between inflation and unemployment (wage growth). The world has moved on, and the real-world equation has become far more complicated than just two main variables. The question is, when will these economists learn to adjust their model?
14
Supply and demand
Plenty of unskilled workers
No need to raise wages
Not enough doctors in certain specialties particularly in rural areas
Sky is the limit
Plenty of unskilled workers
No need to raise wages
Not enough doctors in certain specialties particularly in rural areas
Sky is the limit
9
Don't be too sure of that. Technology is advancing. I would not be surprised when the times come and doctors (even from overseas) can provide diagnosis remotely. There are a lot of mediocre doctors out there, I won't be surprised to see AI diagnosis, coupled with better scanning technology for better data points, to surpass basic diagnosis of most regular PCP.
It might still take some time, but that day will come.
It might still take some time, but that day will come.
11
Productivity growth is lagging because laborers and management today are spending an inordinate amount of time texting and emailing with no increase in productivity.
You see it on construction sites, you see it in the grocery aisles. People aren't working while they are "staying connected" - a phenomenon that parallels the wage growth stagnation of the past 5-10 years.
You see it on construction sites, you see it in the grocery aisles. People aren't working while they are "staying connected" - a phenomenon that parallels the wage growth stagnation of the past 5-10 years.
5
The the article suggests that worker pay is controlled by productivity and inflation. Whatever happened to supply and demand? When employers need workers but can't find enough of them, they raise wages.
The productivity and inflation model assumes that there is only so much money available for worker pay, and that it can't be increased by moving some money out of profits, or (gasp, dare I say it?) executive compensation. This false assumption distorts the narrative in favor of employers, and (surprise, surprise) holds down worker pay.
The supply and demand model works best when employees change employers. Employees on a job are discouraged, even forbidden to exchange salary information with each other. Otherwise in a tight labor market, it would work across the entire workforce, causing the existing employees to become restive when they find out what the new hires are making. Again, the narrative is distorted in favor of the employers, in this case by tradition or by company policy.
Maybe the corporate control of the narratives is the real force holding down worker's pay.
The productivity and inflation model assumes that there is only so much money available for worker pay, and that it can't be increased by moving some money out of profits, or (gasp, dare I say it?) executive compensation. This false assumption distorts the narrative in favor of employers, and (surprise, surprise) holds down worker pay.
The supply and demand model works best when employees change employers. Employees on a job are discouraged, even forbidden to exchange salary information with each other. Otherwise in a tight labor market, it would work across the entire workforce, causing the existing employees to become restive when they find out what the new hires are making. Again, the narrative is distorted in favor of the employers, in this case by tradition or by company policy.
Maybe the corporate control of the narratives is the real force holding down worker's pay.
17
And almost all of the job shortfall can be blamed on demographics, not economic weakness. Wages are going up and many - a close to record number - of skilled jobs are going unfilled currently.
And the only way ANY type of corporate tax CUT works is if it is paired with decreasing burdensome regulations and increasing productivity. Otherwise you are simply adding billions to the deficit. And that means incorporating one aspect of Trump's initial plan that was NOT mentioned in the one-page tax reform outline released by the WH in March: allowing companies to immediately deduct from income the full value of investments in research or infrastructure or new technology. This MUST be included to have any shot at gainful economic growth. Otherwise, simply cutting corporate taxes would not do much in the long run to bolster GDP growth with the labor market at near peak employment.
And the only way ANY type of corporate tax CUT works is if it is paired with decreasing burdensome regulations and increasing productivity. Otherwise you are simply adding billions to the deficit. And that means incorporating one aspect of Trump's initial plan that was NOT mentioned in the one-page tax reform outline released by the WH in March: allowing companies to immediately deduct from income the full value of investments in research or infrastructure or new technology. This MUST be included to have any shot at gainful economic growth. Otherwise, simply cutting corporate taxes would not do much in the long run to bolster GDP growth with the labor market at near peak employment.
3
"And the only way ANY type of corporate tax CUT works is if it is paired with decreasing burdensome regulations and increasing productivity."
Decreasing "burdensome" regulations that would not have been written in the first place if some business hadn't done something bad, like pollute or defraud. Industry "self-policing" has failed over and over again. Regulations aren't written in a vacuum.
US workers are already the most productive on earth. What do you want from a labor pool that hasn't seen wages keep up with productivity gains for the last 40 years?
Decreasing "burdensome" regulations that would not have been written in the first place if some business hadn't done something bad, like pollute or defraud. Industry "self-policing" has failed over and over again. Regulations aren't written in a vacuum.
US workers are already the most productive on earth. What do you want from a labor pool that hasn't seen wages keep up with productivity gains for the last 40 years?
19
So...CEO pay levels rose only 2% last year too...right?
25
I found this article interesting. It contains a good summary of some of the important factors contributing to the problems we are facing. Still, the article suffers from some very standard and serious problems.
First, models are by definition simplified descriptions of a situation. A model makes predictions that can be tested for accuracy in real situations. If a model proves to be especially accurate, it can also be used to make predictions. Both the left and the right have a distressing tendency to take highly simplified models of special circumstances and treat them as if they were highly predictive in all circumstances. One of the most common is supply-side economics, which assumes that there is always an insatiable demand for every unit of economic output. This model does have some validity in situations like Venezuela, where customers are lining up, money in hand, to buy food at empty grocery stores. Still, in most situations you have to look at both supply and demand.
Second, it is easy to confuse the rules by which a machine or even an economy is built with the goals which made people want to have that machine or economy to begin with. For most people, economic systems are a means to an end rather than a dogma. To quote Irwin: "If anything, the numbers show that workers are capturing more than their share of the spoils". The workers' "fair" share of the spoils is not an economic decision, it is a moral one.
First, models are by definition simplified descriptions of a situation. A model makes predictions that can be tested for accuracy in real situations. If a model proves to be especially accurate, it can also be used to make predictions. Both the left and the right have a distressing tendency to take highly simplified models of special circumstances and treat them as if they were highly predictive in all circumstances. One of the most common is supply-side economics, which assumes that there is always an insatiable demand for every unit of economic output. This model does have some validity in situations like Venezuela, where customers are lining up, money in hand, to buy food at empty grocery stores. Still, in most situations you have to look at both supply and demand.
Second, it is easy to confuse the rules by which a machine or even an economy is built with the goals which made people want to have that machine or economy to begin with. For most people, economic systems are a means to an end rather than a dogma. To quote Irwin: "If anything, the numbers show that workers are capturing more than their share of the spoils". The workers' "fair" share of the spoils is not an economic decision, it is a moral one.
14
The share of labor in value added had been relatively constant since the end of WWII. This constancy seems to have ended in 2000. After that it began dropping sharply from 0.65 to 0.60 . The numbers we are seeing in the last few years are the lowest numbers we have seen in the post WWII era. Verify it for yourself at:
https://fred.stlouisfed.org/series/LABSHPUSA156NRUG .
The fact that historically labor's share has fluctuated around a constant mean has mean that while it changed a bit over the business cycle, falling during booms and rising during busts. These fluctuations averaged out. This no longer seems to be the case. Add in the increasing concentration of labor income at the high end of the income distribution, and you can quickly understand the concerns of many with the income distribution. This article strikes me as very poorly informed.
https://fred.stlouisfed.org/series/LABSHPUSA156NRUG .
The fact that historically labor's share has fluctuated around a constant mean has mean that while it changed a bit over the business cycle, falling during booms and rising during busts. These fluctuations averaged out. This no longer seems to be the case. Add in the increasing concentration of labor income at the high end of the income distribution, and you can quickly understand the concerns of many with the income distribution. This article strikes me as very poorly informed.
5
History also tells us that investors should be appalled by higher wages(costs) and sell stocks broadly. Yet, most major US equity indices are at or near all-time highs.
Could it be that labor has already done its part on the productivity side and management and shareholders are ready to, ahem, share?
Could it be that business schools will drop their unquestioning faith in "trickle down" and are reverting back to Henry Ford's "bubble up?"
Probably too much to ask.
Could it be that labor has already done its part on the productivity side and management and shareholders are ready to, ahem, share?
Could it be that business schools will drop their unquestioning faith in "trickle down" and are reverting back to Henry Ford's "bubble up?"
Probably too much to ask.
16
I did not read about the contribution of illegal labor to changing the labor supply and demand equation. Business has attracted illegal labor for the sole purpose depressing labor wages and I am not sure why this significant skewing of the labor supply and demand equation is not part of this economic discussion. In the past we have always heard that the existing labor pool would not take certain jobs but the wages for these jobs was never increased until labor was attracted. For the record i am not against illegal labors contributions to our economy and wish this was better accounted for.
13
"Unfortunately, the picture isn’t entirely clear. The process by which businesses and their workers become more productive is something of a black box, deeply important yet not really understood. But perhaps we can at least ask better questions: The real mystery isn’t why wage growth is so low, but why productivity is so low. And solving it could leave both workers and their bosses better off."
So thru out the article it kept saying its all a mystery. And it still is.
And no, never ask why wage growth is so low...never ask that...always focus on what the EMPLOYER wants and demands. More productivity with less and for less. Less staff, who earn less, forced to work harder.
Productivity might be low because despite the stellar .6 increase in wages (likely for new hires, not the already employed working their butts off) is the workers see no real needs to do more. Especially when the Executives keep rubbing their wealth in their employees faces. When a company spends millions to fly their managers off to Vegas every year for the annual Kool-Aid drinking festival, while those back in the offices and retail stores and warehouses, get an every now and again pizza party for reaching a goal.
"Whoopee pizza! You shouldn't have...I mean you really shouldn't have!"
What difference does it make if the workers produce more? They won't get a decent raise. Plus, in order to attract new applicants their employers are paying them close to what others took a few years to make.
So thru out the article it kept saying its all a mystery. And it still is.
And no, never ask why wage growth is so low...never ask that...always focus on what the EMPLOYER wants and demands. More productivity with less and for less. Less staff, who earn less, forced to work harder.
Productivity might be low because despite the stellar .6 increase in wages (likely for new hires, not the already employed working their butts off) is the workers see no real needs to do more. Especially when the Executives keep rubbing their wealth in their employees faces. When a company spends millions to fly their managers off to Vegas every year for the annual Kool-Aid drinking festival, while those back in the offices and retail stores and warehouses, get an every now and again pizza party for reaching a goal.
"Whoopee pizza! You shouldn't have...I mean you really shouldn't have!"
What difference does it make if the workers produce more? They won't get a decent raise. Plus, in order to attract new applicants their employers are paying them close to what others took a few years to make.
1
Thank you. It is a new economy altogether.. helped by a tax system which burdens the already burdened poorer citizens while enabling the wealthy to keep in most cases their undeserved gains. EG Warren Buffet whom I admire-- but what business did he start? Trump as we know sells his name and bullies others into selling cheap. Kushners get state funding as do many developers including Hollywood (tax credits, etc.).
The biggest nonsensical economic argument is that we need more immigrants and babies to grow the economy. OK to destroy the planet as long as people can have that 6 million unspent cushion and it keeps growing!! (Rich people ARE super cheap. Charitable deductions frankly should be called self-advertising.) No change in tax codes - luxury tax, lower estate tax, elimination of charitable deduction loophole, tax on trades -- on the horizon and the DEMS just as bad the REPUBS so far as this is concerned.
We need someone to sit down and write the 20th C version of Utopia,, on line .
It's not the economy; it's how we live. One watches "Shark Tank" to see what gadgets entrepreneurs have up their sleeves. Who is inventing the next Barbie? e.g. consumption goods.
We have the resources (and newly renovated yet filthy dirty subway stations-- 168th St. #1). Priorities do matter. E.G. Google cars can solve a lot of transportation problems if we let it.. and don't have regulation/unions standing in the way. And tax the rich (luxury tax) not gasoline.
The biggest nonsensical economic argument is that we need more immigrants and babies to grow the economy. OK to destroy the planet as long as people can have that 6 million unspent cushion and it keeps growing!! (Rich people ARE super cheap. Charitable deductions frankly should be called self-advertising.) No change in tax codes - luxury tax, lower estate tax, elimination of charitable deduction loophole, tax on trades -- on the horizon and the DEMS just as bad the REPUBS so far as this is concerned.
We need someone to sit down and write the 20th C version of Utopia,, on line .
It's not the economy; it's how we live. One watches "Shark Tank" to see what gadgets entrepreneurs have up their sleeves. Who is inventing the next Barbie? e.g. consumption goods.
We have the resources (and newly renovated yet filthy dirty subway stations-- 168th St. #1). Priorities do matter. E.G. Google cars can solve a lot of transportation problems if we let it.. and don't have regulation/unions standing in the way. And tax the rich (luxury tax) not gasoline.
1
Regarding google cars...so what about the drivers? What do they "upgrade" into? Regulations and unions are not standing in the way. Unions are near depleted, and where they exist, its a tenuous hold. You're beating a rhetorical dead horse...which is typical and what the GOP has so readily exploited. Blame those evil unions! Workers wanting rights, its apostasy...burn the witches!
You're all over the map...
Google cars might solve some problems, maybe, if they work...but they will create more, and unseen problems. Which will demand money to fix. Is that factored in?
You're all over the map...
Google cars might solve some problems, maybe, if they work...but they will create more, and unseen problems. Which will demand money to fix. Is that factored in?
6
It's more than ironic that the author chose a spokesperson from Domino's Pizza. Here in Australia there's been a widely publicized scandal involving Domino's for underpaying their workers...and given Socrates' comment, I think we are safe to assume that workers everywhere are not getting meaningful pay rises. (see link below)
http://www.smh.com.au/business/workplace-relations/dominos-pizza-workers...
http://www.smh.com.au/business/workplace-relations/dominos-pizza-workers...
6
I hereby nominate Neil Irwin as the NYT's "Gaslighter In Chief." While many on the NYT's staff obviously try very hard on a day by day basis to earn this distinction, Mr. Irwin through his demonstrated consistency in this regard is clearly in a class all his own. I see a job with the WSJ Editorial Board in Mr. Irwin's future, but in the meantime he's all ours.
14
Time for the author to back to school. This exercise in bloviation could be a first draft of a paper on the unintended consequences of a narrow view on life and economics.
5
According to the Department of Commerce, productivity and wages rose at almost identical rates from 1948 to 1973, when they began to diverge; productivity kept climbing, but wages didn't. If they had, the median family income in the U.S. would be over $100,000, and the middle class would be just fine. I don't know why this happened, but I'm sure the skyrocketing growth in senior executive compensation that started around the same time was just a coincidence.
31
"Consider a simple model for how much the average worker’s pay ought to be rising: You could simply add together the productivity growth rate — how rapidly the output generated by each hour of labor is increasing — and the inflation rate, which tells us how quickly prices are rising."
What is the logical justification for this mode? That's not how other economic costs are determined.
What is the logical justification for this mode? That's not how other economic costs are determined.
1
"If anything, the numbers show that workers are capturing more than their share of the spoils from a growing economy."
Well, that's Neil's numbers. And does the mushrooming of executive pay represent their increasing deservedness? I'm afraid Neil's analysis isn't quite a rebuttal of Das Kapital.
Well, that's Neil's numbers. And does the mushrooming of executive pay represent their increasing deservedness? I'm afraid Neil's analysis isn't quite a rebuttal of Das Kapital.
12
There is much anecdotal evidence that reported inflation is way below the true rise in the cost of living (CPI)--e.g. the Burrito index, the Big Mac index, apartment rents and medical costs. This seems particularly true for lower income people and the particular subsistence-level basket of goods the inflation indices should be measuring. There is every incentive to under-report true inflation, as a lower CPI drives lower COLAs in labor contracts, lower social security checks, etc., which lowers government and business costs. If the true inflation rate has been more like 3-4%/yr, the real GDP would have shown sustained contraction for the past 2 years, the longest economic contraction since the great depression. If GDP growth is negative, productivity growth will be negative too if gross employment has been going up (as it has). This could explain the anger of the electorate and their receptivity to Donald Trump.
So, we may have an economic dashboard that is fundamentally broken. The gauges may be screwy. When the indicators like inflation, GDP and productivity are so close to zero, the possibility for error is rather alarming if we think we are gaining in altitude when we're actually headed for a crash. Politically, with the election of Donald Trump, the crash may have occurred. The writer of this article thinks the economy has been rather swell for workers for the past two years. I think he trusts the dashboard too much. Maybe the anger in the street is a better gauge.
So, we may have an economic dashboard that is fundamentally broken. The gauges may be screwy. When the indicators like inflation, GDP and productivity are so close to zero, the possibility for error is rather alarming if we think we are gaining in altitude when we're actually headed for a crash. Politically, with the election of Donald Trump, the crash may have occurred. The writer of this article thinks the economy has been rather swell for workers for the past two years. I think he trusts the dashboard too much. Maybe the anger in the street is a better gauge.
18
For example, how in the name of all the saints, did the housing recovery get disconnected from the inflation? Isn't housing the biggest expense for everyone except the wealthy?
6
Could the reason we have lower productivity growth be because we have an older work force? And the younger generation has grown up with more affluence so we have taught them how to live on $1mm but not how to make $1mm.
2
My interpretation is that the many minimum wage laws passed during the last few years affect the overall wage growth, but not "spending" since the wage money simply replaces food stamps, Medicaid, and other services for the working poor.
To me that explains the lack of productivity.
Pay people a living wage so they can buy their own food, healthcare and pay some Fed Income Tax.
To me that explains the lack of productivity.
Pay people a living wage so they can buy their own food, healthcare and pay some Fed Income Tax.
4
There is always a ready explanation for reason to suppress the pay of workers, but of course none of the trends mentioned dampens CEO pay which has outpaced any other reasonable measure, including performance. Does anyone still wonder why the establishment candidates took such a beating in the last election?
http://fortune.com/2016/07/15/ceo-pay-2/
"CEO compensation at the largest firms dipped temporarily in 2015, but remains 940.9 percent above its 1978 level," the report says. "This growth in CEO compensation far exceeded the growth of the stock market . . . . This shows that executives have done far better than the firms they have led and executive pay cannot be simply attributed to better firm performance."
http://fortune.com/2016/07/15/ceo-pay-2/
"CEO compensation at the largest firms dipped temporarily in 2015, but remains 940.9 percent above its 1978 level," the report says. "This growth in CEO compensation far exceeded the growth of the stock market . . . . This shows that executives have done far better than the firms they have led and executive pay cannot be simply attributed to better firm performance."
25
"Some employers, including the mega-retailer Walmart, have examined this problem and found that by paying somewhat more in wages, they get a more productive work force."
Wait, what? Walmart had to actually "examine" this? It takes about two seconds to recognize the likely validity of the hypothesis and case study after case study has shown this to be true almost all the time. My own experience in hiring people in positions from entry level to senior management has also shown this to be true. When you hire, promote, and reward on the basis of "what's the most I can offer this person" rather than "what's the least I can get away with" good things tend to happen.
Wait, what? Walmart had to actually "examine" this? It takes about two seconds to recognize the likely validity of the hypothesis and case study after case study has shown this to be true almost all the time. My own experience in hiring people in positions from entry level to senior management has also shown this to be true. When you hire, promote, and reward on the basis of "what's the most I can offer this person" rather than "what's the least I can get away with" good things tend to happen.
17
The author proposes a paradox based upon an oversimplified model, and then explains the faulty paradox with a faulty analysis. The objective appears to be less to explain the paradox and more to provide assurance that everything is normal and to calm down.
Maybe the author is reassured by this mumble jumbo, and is happy that automation and AI are not a problem because his measure of productivity assures him this job-dumping chaos isn't happening. But it is obvious all around us. Building a house requires fewer tradesmen because of equipment advances, pre-assembly, etc. Cars are built with fewer people, drivers are being eliminated, cashiers, tellers, and on and on.
Not only are wages stagnant for those able to keep their present jobs even though there are fewer of them, but wages at lower pay levels are pressed by workers displaced from higher paying jobs now competing for lower paying work.
There is no paradox about why wages are stagnant. It is an expression of the growing inability of the private profit-before-all-else sector to provide employment, dumping jobs right and left as automation takes over.
Maybe the author is reassured by this mumble jumbo, and is happy that automation and AI are not a problem because his measure of productivity assures him this job-dumping chaos isn't happening. But it is obvious all around us. Building a house requires fewer tradesmen because of equipment advances, pre-assembly, etc. Cars are built with fewer people, drivers are being eliminated, cashiers, tellers, and on and on.
Not only are wages stagnant for those able to keep their present jobs even though there are fewer of them, but wages at lower pay levels are pressed by workers displaced from higher paying jobs now competing for lower paying work.
There is no paradox about why wages are stagnant. It is an expression of the growing inability of the private profit-before-all-else sector to provide employment, dumping jobs right and left as automation takes over.
16
When the whole planet is awash in cheap junk to buy, what would be the point of improving productivity?
In fact, why in that environment is there inflation AT ALL?
In fact, why in that environment is there inflation AT ALL?
5
A 2% increase in a wage that is marginal isn't increasing prosperity
7
No so long ago, when productivity was soaring, wages remained flat then. The same thing took place in the 1920s and may be one of the factors of the Great Depression. We also haven't heard from conservatives in over a generation the nostrum, a rising tide lifts all boats. So who's kidding who here?
8
I imagine that productivity is low because people's wages are dependent on their job title, not how much they produce.
Saying that wages are tied to productivity or inflation is mistake. It is only tied to productivity in the compensation plans of some workers. Other workers have their compensation tied to stock performance. While even more have their wages tied to what the recommendation of miscellaneous, non-governed entities say the common wage for a job title should be given the location of the job and the experience and education of the employee.
Saying that wages are tied to productivity or inflation is mistake. It is only tied to productivity in the compensation plans of some workers. Other workers have their compensation tied to stock performance. While even more have their wages tied to what the recommendation of miscellaneous, non-governed entities say the common wage for a job title should be given the location of the job and the experience and education of the employee.
2
This sounds to me like an exercise that is created to show something that just isn't true. Wages may be going up, albeit not enough to allow too many people to keep their heads above water. If things are better, why are so many working people receiving government food subsidies (SNAP), why are there so many working people covered under Medicaid? Let's get serious.
11
"Say a genius inventor creates a robot that mows your lawn perfectly. Human landscapers might lose their jobs, but if they find something worthwhile to do, the productive capacity of the economy will grow."
The qualifier "if they find something worthwhile to do" may explain why the wages of workers haven't been growing. People who don't find something worthwhile to do are not productive. They aren't happy. Their communities deteriorate. They get sick, use drugs, commit crimes.
The answer that's being considered by our government is to make them even more miserable so they are forced to go to work. The assumption is that there is actually something out there that's worthwhile to do, but that safety net is so comfortable that people just don't bother looking. We need to think differently about this problem.
The qualifier "if they find something worthwhile to do" may explain why the wages of workers haven't been growing. People who don't find something worthwhile to do are not productive. They aren't happy. Their communities deteriorate. They get sick, use drugs, commit crimes.
The answer that's being considered by our government is to make them even more miserable so they are forced to go to work. The assumption is that there is actually something out there that's worthwhile to do, but that safety net is so comfortable that people just don't bother looking. We need to think differently about this problem.
11
When minimum wage is raised to a level where it allows that "average" individual to actually make a living wage, be able to afford health care, pay car payments, and otherwise live that "average" life, then talk.
Until then, we have the extremely rich, a massively bloated "middle" class, and a working class that barely survives.
It's been that way for a very long time, and changing the language, looking at sub-sectors, and so forth does not hide the fact that an enormous number of American citizens to damned hard work for crap pay.
Until then, we have the extremely rich, a massively bloated "middle" class, and a working class that barely survives.
It's been that way for a very long time, and changing the language, looking at sub-sectors, and so forth does not hide the fact that an enormous number of American citizens to damned hard work for crap pay.
7
this is exactly what the gop, the hedgefunders, the trumps, etc wanted to happen. stupid voters rallied behind them- drunk on breast-beating enthusiasm for reagan's and bush's adventures and absurd policies.
4
How many of these models are based on antiquated notions back from the days when people's work involved making things using their hands? If all your new jobs occur at Starbucks and the espresso machine only can put out X amount of shots per hour, no matter how fast the barista works only X amount of lattes are coming out in that same hour. Forget about the big shots you feel they need double and triple shots in their individual latte in order for them to capably function on their iPad, where all their "real" work is done. Whatever that means? How does one really measure the size of a mirage?
6
Ah Neil...as usual, you are probably 100% correct but you kinda lost me halfway thru so let me dumb this down for myself and who knows maybe a few other readers.
1-The glory yrs. of America eco. total world dominance from app. 1945-1970 is over. During this period, Japan and Europe were destroyed and the communist world had very inefficient systems.
2-Don't ask for what you want. You may get it. We preached to the entire world that their economic model should be like us. It took a while but by 1990, it pretty much came true throughout the world.
3-Now everybody is our competitor.
4-The final crash game in 2008 and Obama slowly, very boringly led us out of it to the point we have our head above water.
5-We will never be like 1945-1970 again but we still can be the best economy in the world albeit toned down.
1-The glory yrs. of America eco. total world dominance from app. 1945-1970 is over. During this period, Japan and Europe were destroyed and the communist world had very inefficient systems.
2-Don't ask for what you want. You may get it. We preached to the entire world that their economic model should be like us. It took a while but by 1990, it pretty much came true throughout the world.
3-Now everybody is our competitor.
4-The final crash game in 2008 and Obama slowly, very boringly led us out of it to the point we have our head above water.
5-We will never be like 1945-1970 again but we still can be the best economy in the world albeit toned down.
5
Is this a joke? We're not making widgets anymore, for pete's sake! How do you measure "productivity" when sitting in front of a computer screen for eight hours? What does a highly paid CEO do who earns millions plus stock options every year for doing - what, exactly - while the REAL workers producing the value for the company are being paid peanuts because, well - "productivity." In today's jobs, productivity is a myth, it's an 18th century construct that was adapted to the age of industrialization in the 19th century, and has ceased to have any meaning in the 21st century. Unless we seriously reconfigure our compensation structures, there won't be ANYONE with disposable income other than the top one-percenters. They're incomes are growing, but not yours; however, your costs of living keep going up, up and up. How and why - when that money sure isn't being trickled down to the workers who actually produce the unmeasurable value? How does a surgeon measure "productivity" - by how many spleens he removes a day? Baloney! What about a registered nurse? By how many pills she dishes out every day, by how many patients she has to tend at a hospital? How do you measure productivity when you're sending emails instead of dictating a letter? How do you measure your secretary's productivity, for that matter? By how many telephone calls she sends to your voice mail per day? We need a new paradigm here, folks.
15
On Innovation:
Suppose you are one of the people full of ideas (who) risk their savings to start companies that provide work and paychecks. You produce a better widget & have a great ad campaign & people want to buy your widget.
We have just have 2 studies that showed if the typical American family had a real emergency & had to come up with some money, they couldn't do it. One said the half the people couldn't come up with $400 & the other that 2/3rds couldn't find $1,000.
So a lot of the people who want to buy your widget will not be able to and many of the ones that do will have to give up something else. Remember the studies looked at real emergencies, not something discretionary like buying a better widget.
Why aren't small community banks lending more?
First of all, after seeing what happened in 2008, both you and the guy who wants a widget might rightfully be afraid to go into debt. Secondly after 2008, the little banks might be rightfully afraid to lend you the money.
What about regulations? It is true that the largest banks can only lend out 10 times what they have in reserves, but small banks can lend out up to $115 million without any reserves at all.
What is holding the economy back is not regulations, but lack of money in the pockets of those who need it and would spend it.
Where can this money come from? Only the federal gov can get money to these people. The way it does so is by deficit spending.
And the deficit has been cut 75% since 2009.
Suppose you are one of the people full of ideas (who) risk their savings to start companies that provide work and paychecks. You produce a better widget & have a great ad campaign & people want to buy your widget.
We have just have 2 studies that showed if the typical American family had a real emergency & had to come up with some money, they couldn't do it. One said the half the people couldn't come up with $400 & the other that 2/3rds couldn't find $1,000.
So a lot of the people who want to buy your widget will not be able to and many of the ones that do will have to give up something else. Remember the studies looked at real emergencies, not something discretionary like buying a better widget.
Why aren't small community banks lending more?
First of all, after seeing what happened in 2008, both you and the guy who wants a widget might rightfully be afraid to go into debt. Secondly after 2008, the little banks might be rightfully afraid to lend you the money.
What about regulations? It is true that the largest banks can only lend out 10 times what they have in reserves, but small banks can lend out up to $115 million without any reserves at all.
What is holding the economy back is not regulations, but lack of money in the pockets of those who need it and would spend it.
Where can this money come from? Only the federal gov can get money to these people. The way it does so is by deficit spending.
And the deficit has been cut 75% since 2009.
6
Yeah but IF you get a celebrity to endorse that widget...people will spend for it, and sacrifice elsewhere. Americans buy what they dont need at the expense of what they do, or would best serve them.
Wages might not be going up by much, but Americans will figure a way to buy what they don't really need and truly doesn't make them happier, or more efficient. Just so long as they get that purchase induced endorphin dump, and can display the latest widget...
Wages might not be going up by much, but Americans will figure a way to buy what they don't really need and truly doesn't make them happier, or more efficient. Just so long as they get that purchase induced endorphin dump, and can display the latest widget...
1
Employers have found more and more ways to make their employees slaves, like arbitration and contracts forbidding them to take another job in the field after quitting. Wages are not enough to live on. And you and they expect productivity growth? only from robots.
6
Let's see: if a robot produces all the cars, eliminating human labor, and those workers find work of a menial sort that won't put their kids through college, but puts them on the street, does that increase productivity?
More to the point, suppose large numbers of jobs are not valued or filled because they do not fit into a model of profit-before-all-else, but are valuable for reasons of service to the community. But the community doesn't have means to pay for them. Then is productivity increased by taxing the few profiting from the corporate model to pay for the many to do this people-centered work?
What is the concept of "priductivity" at work here?
More to the point, suppose large numbers of jobs are not valued or filled because they do not fit into a model of profit-before-all-else, but are valuable for reasons of service to the community. But the community doesn't have means to pay for them. Then is productivity increased by taxing the few profiting from the corporate model to pay for the many to do this people-centered work?
What is the concept of "priductivity" at work here?
4
It's easy to explain in my state - the standoff between the Dems in charge of the House and Senate with the Rep Gov. means we're moving to our third year without a budget. People are leaving the state in droves and worries that Chicago will become the new Detroit are real.
So there's one data point - 49 or so to go.
So there's one data point - 49 or so to go.
6
I'm just wondering why a correlation that is clear to Walmart so confounds other companies....
4
The firms cannot find competent workers. There is a limit to these, unless you train them yourself. Few US firms do this.
3
Non-economist here--
When we speak of wages, I assume we are not speaking about the benefits (especially healthcare) and the other costs to companies that are 'baked into' the costs of having an employee. Haven't these backroom costs gone up for companies and account for some of this inequity (which I believe exists and abhor).
When we speak of wages, I assume we are not speaking about the benefits (especially healthcare) and the other costs to companies that are 'baked into' the costs of having an employee. Haven't these backroom costs gone up for companies and account for some of this inequity (which I believe exists and abhor).
2
Wage increases that are less than 1% higher than the total of inflation plus productivity gains are NOT so high as to be questionable.
Two major problems in this analysis are:
1 Information Technology is employed to make sure that employees do not have sufficient hours of employment per week to receive full time benefits. Many people under 40 in the USA have 2 part time jobs in which they work less than 30 hours.
2 Millions of people are being compensated as independent contractors and receive no benefits whatsoever.
Two major problems in this analysis are:
1 Information Technology is employed to make sure that employees do not have sufficient hours of employment per week to receive full time benefits. Many people under 40 in the USA have 2 part time jobs in which they work less than 30 hours.
2 Millions of people are being compensated as independent contractors and receive no benefits whatsoever.
7
Today the top 3% of households pay about 50% of Federal income taxes and the rest of the 97% pay the other 50%. In 1969 the top 3% of households paid 75% of Federal income taxes and the rest of the 97% paid only the other 25%. In computing those figure the government correctly attributes the corporate income tax payments to the households who own shares in the corporation. By eliminating the estate tax, the Obamacare taxes on high-income households and reducing business taxes, the share of taxes paid by the top 3% of households could be reduced to only 25%. Thus, leaving the other 97% of households to pay 75%.
If the economy was far from full employment as was the case in 2009 when the unemployment rate was above 10%, lowering taxes on anyone would increase expenditures and thus significantly boost real economic growth. However, we are much closer to full employment with the unemployment rate at 4.4% Now, lowering corporate tax rates would not result in any significant additional hiring or growth in wages or output. The entire incidence of a corporate income tax falls on the owners of the corporation, to the extent they are pension funds the incidence falls on them. If a corporate income tax is a percentage of pre-tax income, none of the corporate income tax can ever be passed on to employees or customers. That is because any hiring, wage or price decision that maximizes pre-tax profits would also maximize after-tax profits..."
https://seekingalpha.com/article/4075223
If the economy was far from full employment as was the case in 2009 when the unemployment rate was above 10%, lowering taxes on anyone would increase expenditures and thus significantly boost real economic growth. However, we are much closer to full employment with the unemployment rate at 4.4% Now, lowering corporate tax rates would not result in any significant additional hiring or growth in wages or output. The entire incidence of a corporate income tax falls on the owners of the corporation, to the extent they are pension funds the incidence falls on them. If a corporate income tax is a percentage of pre-tax income, none of the corporate income tax can ever be passed on to employees or customers. That is because any hiring, wage or price decision that maximizes pre-tax profits would also maximize after-tax profits..."
https://seekingalpha.com/article/4075223
3
Aggregate or average or even median wage growth measures are irrelevant.
It is clear that our economy has split in the past few decades, with many workers experiencing fast wage gains, while other experience wages stagnation or decreases.
Lets say we have an economy that goes from 25%/50%/25% high/middle/low income to one that is 30%/30%/40%. Wages could have been growing at a good clip for individual occupations, but the shift in employment patterns from middle income occupations to low income ones, would completely mask that.
So more engineers working at Google, Microsoft and Facebook make a lot more money. But many newspaper reporters and secretaries lose their middle-income jobs and become waiters at a much lower income. They can all be incredibly productive, but the average or aggregate income could be stagnant.
It is clear that our economy has split in the past few decades, with many workers experiencing fast wage gains, while other experience wages stagnation or decreases.
Lets say we have an economy that goes from 25%/50%/25% high/middle/low income to one that is 30%/30%/40%. Wages could have been growing at a good clip for individual occupations, but the shift in employment patterns from middle income occupations to low income ones, would completely mask that.
So more engineers working at Google, Microsoft and Facebook make a lot more money. But many newspaper reporters and secretaries lose their middle-income jobs and become waiters at a much lower income. They can all be incredibly productive, but the average or aggregate income could be stagnant.
9
The underlying problem is what is meant by "productivity". The economics idea is focused upon one group as if it were all intent upon the same goals. But when some in the group profit while the rest are denied, productivity means different things to the two conflicting groups. The group in command set the wages, decide what constitutes "productive" work (that is, what work is worth paying for), and collect the profits. There is no necessary connection between wages and productivity.
We haven't reached the point where the connection between wages and productivity is entirely arbitrary, but it's getting closer every day. That is the problem of a corporate controlled Congress that recognizes only "lower taxes, less regulation, fewer benefits" and refuses to pay for community services, even those essential to corporate welfare like roads and education, but made avoidable expenses by political manipulation.
We haven't reached the point where the connection between wages and productivity is entirely arbitrary, but it's getting closer every day. That is the problem of a corporate controlled Congress that recognizes only "lower taxes, less regulation, fewer benefits" and refuses to pay for community services, even those essential to corporate welfare like roads and education, but made avoidable expenses by political manipulation.
3
The likely reason productivity isn't increasing in the United States is that the capital that would normally be invested to increase productivity is being invested in China and other countries. Most "American" companies are expanding overseas where there is low hanging fruit for investment increasing production.
Combine that with relatively low wage growth in the United States and there is little incentive to invest in making American workers more productive. We have an economy that has been hijacked for the benefit of a small group of people in the finance and business community who control most of our capital.
Combine that with relatively low wage growth in the United States and there is little incentive to invest in making American workers more productive. We have an economy that has been hijacked for the benefit of a small group of people in the finance and business community who control most of our capital.
7
Reportedly, even fast food restaurants are requiring employees to sign noncompete agreements and nondisclosure agreements. These hard working employees are disadvantaged by being locked in at low wages, unable to shop around for higher wage jobs or unionize to protect their interests, and with no way to discuss it, much less fight it. It's amazing how much more predatory American businesses become daily and do so with impunity and up-to-the-minute deregulation.
9
Productivity is low because (1) administrative state is slowing down productivity; (2) work ethic is a big problem and most workers are not engaged; (3) over-regulations feed the growth of administrative state; (4) senseless lawsuits and superficial political correctness increase the cost of doing business.
In fact, the real reason of outsourcing has less and less to do with labor cost. Unless productions can be made automatic, the real cost of doing business is a lot higher.
Again, just look at the industries which cannot be outsourced such as healthcare, you should be able to find the answer for the puzzle (why productivity is so low even with all the spending on machines and computers).
In fact, the real reason of outsourcing has less and less to do with labor cost. Unless productions can be made automatic, the real cost of doing business is a lot higher.
Again, just look at the industries which cannot be outsourced such as healthcare, you should be able to find the answer for the puzzle (why productivity is so low even with all the spending on machines and computers).
1
So we should merge points 1&3 so you don't keep repeating the same thing over and over. Many regulations actually spur job growth for compliance so that's not the reason. Why should anyone work harder when they get pittance in return?
The only way to get a raise is to switch jobs. It's not rocket science.
The only way to get a raise is to switch jobs. It's not rocket science.
2
As the law of supply and demand predicts, it certainly doesn't hurt American wage growth today that the political climate has turned less welcoming of immigrants.
I would like Neil Irwin to question if the inflation rate is really that low. I don't think it is. I don't question the stated inflation rate. But the calculation of the CPI has been adjusted over the decades. Every single time it was biased toward understating it. A couple examples is Reagan calculating the cost of a house as "equivalent rent" instead of the price of buying a house. In the Clinton era "quality" adjustments to inflation were introduced.
I suspect that if we calculated inflation as it was calculated in the 1970s, inflation would be a good 4 percent right now if not higher. If you look at the economy through that lens, a lot of things suddenly make sense.
I suspect that if we calculated inflation as it was calculated in the 1970s, inflation would be a good 4 percent right now if not higher. If you look at the economy through that lens, a lot of things suddenly make sense.
9
You could very well be right and there are likely large error bars on all the numbers being used, inflation rate, productivity, wages, GDP.
2
I totally agree--I think inflation is higher than the government says it is. My wife and I are not pinched financially, but do not buy a lot of luxury goods for day-to-day use or consumption as we are probably at the age where such things seem less important than when we were younger. In the last four to five years I began going to the grocery store with my wife more often and started mentally keeping track of purchases of the same items under the same brand name. For the first few years, it didn't seem prices moved much, if at all, but in the last two years, prices are definitely going up in little pops, always at least 4% to 8%.
Of course, health insurance for my wife and I is our largest single expense and has tripled in just a few years. Not a problem for us (business expense), but it has got to be financially killing a lot of people--and the increases just keep coming.
I run into recent graduates with hard-science degrees who are working as waiters.
It seems pretty obvious from just looking around that we have the top 10%, the next 20% that lives like the Kardashians but is just servicing their debt, the shrinking middle third which is slipping, and then the bottom third which is being fed by the shrinking higher tiers and will eventually be the bottom half.
Of course, health insurance for my wife and I is our largest single expense and has tripled in just a few years. Not a problem for us (business expense), but it has got to be financially killing a lot of people--and the increases just keep coming.
I run into recent graduates with hard-science degrees who are working as waiters.
It seems pretty obvious from just looking around that we have the top 10%, the next 20% that lives like the Kardashians but is just servicing their debt, the shrinking middle third which is slipping, and then the bottom third which is being fed by the shrinking higher tiers and will eventually be the bottom half.
4
Productivity is low because interest rates have been so low for so long. Businesses use the low rates to borrow cheaply, do share buy-backs, grow by acquisition, etc. Everything except investing in innovation.
15
We have had two careful examinations of the causes of inequality. In "Wealth and Democracy." Kevin Phillips points out that there is a feedback in economic distribution because as the rich get richer, they use their wealth to get more power. They then use their power to get more wealth and so on. There seems to be a tipping point where this process becomes impossible to reverse. When inequality becomes bad enough, the country soon goes down the tubes. He gives several examples, e.g. the 18th century decline of the Dutch Republic.
In "Capital in the Twenty-First Century" Thomas Piketty defines a quantity, β, which is the length of time it would take the entire income of a country to purchase the capital of that country. It is a measure of the relative importance of capital and labor, and roughly correlates with inequality. He shows with vast amounts of historical data that before WWI, β was about 8 years in capitalistic countries.
WWI & II destroyed huge amounts of capital and β declined, to about 4 years. After WWII an increase in government ownership & regulation, especially in the US, kept β from rising to its historic levels. At the time, this lower value of β was thought to represent a maturation of capitalism that would persist.
Piketty shows, again with enormous quantities of data, that this has NOT been the case. β is trending inexorably back to 8 years probably because of the forces described by Phillips.
It is clear we must return to the policies of post WWII.
In "Capital in the Twenty-First Century" Thomas Piketty defines a quantity, β, which is the length of time it would take the entire income of a country to purchase the capital of that country. It is a measure of the relative importance of capital and labor, and roughly correlates with inequality. He shows with vast amounts of historical data that before WWI, β was about 8 years in capitalistic countries.
WWI & II destroyed huge amounts of capital and β declined, to about 4 years. After WWII an increase in government ownership & regulation, especially in the US, kept β from rising to its historic levels. At the time, this lower value of β was thought to represent a maturation of capitalism that would persist.
Piketty shows, again with enormous quantities of data, that this has NOT been the case. β is trending inexorably back to 8 years probably because of the forces described by Phillips.
It is clear we must return to the policies of post WWII.
30
I may be stupid here, but Irwin correctly points out that when unemployment is low, the law of supply and demand shows that wages should rise, BUT when he computes what the rise in wages should be, he ignores the unemployment figures and only looks at inflation and productivity.
Furthermore, his article is very stingy with the actual figures. If you look at the figures you will see a simple explanation of why wages have risen a bit very recently.
Between 1947 and 1972, the nation’s productivity increased by 97% and median pay rose quite democratically by 95%.
But between 1979 and 2011, when the right-wing successfully hijacked the country's common sense, productivity rose by 75% and median pay rose by just 5%, with executive wage theft of worker wages making up the bulk of the difference.
From 1978 to 2013, CEO pay rose by an immoral 937%, mostly due to theft of worker wages.
So what has happened recently is that there has been a small correction to make up for the huge imbalance that has built up since 1972. There is no reason to believe it will continue and every reason to believe it will not. See my other comment.
Furthermore, his article is very stingy with the actual figures. If you look at the figures you will see a simple explanation of why wages have risen a bit very recently.
Between 1947 and 1972, the nation’s productivity increased by 97% and median pay rose quite democratically by 95%.
But between 1979 and 2011, when the right-wing successfully hijacked the country's common sense, productivity rose by 75% and median pay rose by just 5%, with executive wage theft of worker wages making up the bulk of the difference.
From 1978 to 2013, CEO pay rose by an immoral 937%, mostly due to theft of worker wages.
So what has happened recently is that there has been a small correction to make up for the huge imbalance that has built up since 1972. There is no reason to believe it will continue and every reason to believe it will not. See my other comment.
74
"the law of supply and demand shows that wages should rise"
The "law" of supply and demand is really a theory which reality repeatedly contradicts. An awful or of economics amounts to attempts to reconcile that reality and the theory. The real purpose of the "law of supply and demand" theory is to convince us that the rich getting richer is a natural process that can't be corrected.
The reality is prices are set based on the relative power of the buyer and seller. Certainly supply and demand have an effect on that power balance, but so do a lot of other things. Moreover there are plenty of powerful actors out with enough clout to influence both supply and demand in ways that benefit them, but not the rest of us.
The "law" of supply and demand is really a theory which reality repeatedly contradicts. An awful or of economics amounts to attempts to reconcile that reality and the theory. The real purpose of the "law of supply and demand" theory is to convince us that the rich getting richer is a natural process that can't be corrected.
The reality is prices are set based on the relative power of the buyer and seller. Certainly supply and demand have an effect on that power balance, but so do a lot of other things. Moreover there are plenty of powerful actors out with enough clout to influence both supply and demand in ways that benefit them, but not the rest of us.
2
The incentive to increase productivity declined because productivity stopped increasing wages. Not the other way around. Why bother being a productive worker if the effort doesn't get you anywhere? Clawing back some wage growth under the auspices of inflation is the wage worker's revenge. It also helps that non-exempt status now also includes individuals making up to $52 thousand a year. Employers were overworking exempt employees without compensation adjusted for inflation. Now they're sending people home at 5:00 in order to avoid overtime. There's the "productivity" decline implied here. This is a false analysis with a bogus conclusion. Crunch the numbers a little harder next time please.
5
Back in the late 70s I read a book that advanced the theory that we would run into problems in the future as productivity increased in fields where machines, etc., could make a difference to create that increase while various others in the services, arts, and government would not be able to produce the same kind of gains because of the nature of what was being done. For example, there was no way to increase the "productivity" of an opera singer. Unfortunately, I read the book so many years ago that I don't remember the title, the author, or the details of what he wrote. I've looked for this book in recent years because I believe it has some important points relating to the discussions we are having today over wage increases, productivity, and inflation as we've moved from a manufacturing economy to a highly service based one. Unfortunately, I've never been able to find it. If anyone thinks the recognize the book I'm talking about, I would love to get a pointer to it. In the meantime, I notice that this changed mixture among the kinds of jobs that make up our economy seems to get short shrift. When we do talk about it, it's usually from the stand point of the loss of good-paying jobs in manufacturing because of outsourcing, automation, etc., but there never seems to be any discussion of how we can create good pay for the kinds of jobs that exist in our economy today and that we need to have to create the future. How do we provide good pay for CNAs, for example?
3
Don't know the book, but I think the effect is called 'baumol's cost disease'.
It's not inherently a problem, but is *part* of the explanation for things like healthcare, education, childcare seeming more expensive as time goes on.
I'm the US the changing distribution of income is much more important recently, but that is still an underlying trend.
It's not inherently a problem, but is *part* of the explanation for things like healthcare, education, childcare seeming more expensive as time goes on.
I'm the US the changing distribution of income is much more important recently, but that is still an underlying trend.
1
Written by economist William baumol who died recently. Phenomenon called baumol's curse or service cursr.
You actually do increase the productivity of the opera singer by mass producing high quality reproductions of the top few performers, eliminating the market for less skilled performers. The productivity comes from the growing ability to distribute the skills of the people of the very top of each profession. We have started seeing it with lawyers and will soon see it with doctors and other health professionals.
AI/Tech will never completely eliminate any job role. It will rapidly reduced the numbers of humans needed for many job roles. If your productivity metric only includes what a single person does, it looks flat. If your measure includes the number of humans in the role to meet global demand, the productivity is astounding.
AI/Tech will never completely eliminate any job role. It will rapidly reduced the numbers of humans needed for many job roles. If your productivity metric only includes what a single person does, it looks flat. If your measure includes the number of humans in the role to meet global demand, the productivity is astounding.
1
Do those economic rules of thumb apply in both Europe and the US? One has social safety nets, one does not. One has universal health insurance, the other ties health insurance to employment. And in both the workforce is older than ever before, and getting older. We need the dismal science to become less dismal very soon so that it can correctly inform policy.
6
Who's included in the calculus of "average workers wage"? Does this include CEOs and higher level executives? We know that CEO pay is rising, and whether that really reflects greater CEO productivity is open to question.
15
The answer to your second question is "yes", according to an earlier column Neil Irwin linked in this one. Which means, of course, that ALL of the documented gains are going to the upper 1% of the "labor" force.
As many of the comments reveal, on-the-ground experience show that many employees are taking over the responsibilities of others who were laid off in the last few years, or working overtime, but without overtime pay because they've been given a new title and business card, magically making them "exempt" employees.
How much can you squeeze out of workers before there's little left but the rind (apologies to Arthur Miller)? It's no wonder if productivity has risen less than prior years. It's the same with a diet -- the last few pounds are the hardest to lose. In this case, workers have lost for so many years and yet the writer is asking why pay is suddenly going up at long last?
How much can you squeeze out of workers before there's little left but the rind (apologies to Arthur Miller)? It's no wonder if productivity has risen less than prior years. It's the same with a diet -- the last few pounds are the hardest to lose. In this case, workers have lost for so many years and yet the writer is asking why pay is suddenly going up at long last?
20
Interesting, balanced analysis. Thank you, Neil.
Maybe the rent is driving wages? If so, pay is still not high enough.
4
Lower taxes on the wealthy are a major cause of labor's low share of GDP and of labor's smaller share of productivity improvements. When the top rate was 90%, even a small increase in income for management and shareholders required consuming a very large increment of corporate profits. That made it hard to justify increased income. But, lower taxes made increased income "cheaper." Thus, the increased share of income going to the wealthy was, or should have been, the expected result of lower high-end taxes. Thus has meant less income available to non-supervisory wage earners and a culture that assumes much higher relative income for management and shareholders.
It will take a long time to unwind the impact of low taxes on the wealthy. Raising them is the obvious first step, but we'll find that assumptions about appropriate shares change slowly - they are sticky.
It will take a long time to unwind the impact of low taxes on the wealthy. Raising them is the obvious first step, but we'll find that assumptions about appropriate shares change slowly - they are sticky.
9
"... If a corporate income tax is a percentage of pre-tax income, none of the corporate income tax can ever be passed on to employees or customers. That is because any hiring, wage or price decision that maximizes pre-tax profits would also maximize after-tax profits.
If a profit-maximizing rational corporation is charging $10 for an item, that is because it is more profitable to charge $10 than $9.99 or $10.01 taking into account market demand and competitive pressures. Thus, $10 is the price at which pre-tax profits are maximized. If a corporate income tax is levied or changed as a percent of pre-tax profits, $10 is still the price that maximizes both pre-tax and after-tax profits. Thus, the tax change can not cause any change in the price and is not passed on to consumers. The same applies to a corporation that is paying a wage that maximized its pretax profits, which is also the wage that maximizes its after-tax profits. Likewise, the level of output or number of employees that maximizes pretax profits is also the level of output or number of employees that maximize after-tax profits.
The shift of the tax burden in the United States from the rich to the middle class has been a major factor is creating the glut of savings which has supported higher prices for financial assets. This has been a world-wide phenomenon. As the tax burden is further shifted away from the rich the glut of savings will grow. .."
https://seekingalpha.com/article/4075223
If a profit-maximizing rational corporation is charging $10 for an item, that is because it is more profitable to charge $10 than $9.99 or $10.01 taking into account market demand and competitive pressures. Thus, $10 is the price at which pre-tax profits are maximized. If a corporate income tax is levied or changed as a percent of pre-tax profits, $10 is still the price that maximizes both pre-tax and after-tax profits. Thus, the tax change can not cause any change in the price and is not passed on to consumers. The same applies to a corporation that is paying a wage that maximized its pretax profits, which is also the wage that maximizes its after-tax profits. Likewise, the level of output or number of employees that maximizes pretax profits is also the level of output or number of employees that maximize after-tax profits.
The shift of the tax burden in the United States from the rich to the middle class has been a major factor is creating the glut of savings which has supported higher prices for financial assets. This has been a world-wide phenomenon. As the tax burden is further shifted away from the rich the glut of savings will grow. .."
https://seekingalpha.com/article/4075223
1
I'm I'm a retired factory worker from the automotive sector. As our work load got heavier, wages and benefits were negotiated away from us. In other words, our actual take home pay was reduced. Of course we were vilified for making too much in the first place. It didn't matter whether you were production or management, things got worse. As bad as this sounds, we got tired of it, and our incentive to work harder and innovate reflected that attitude.
I don't know if things are better now, but the idea that Mulvaney put forward the other day, " the dignity of work," kind of gets lost in the shuffle when corporations see workers not as assets but as numbers that need to be reduced. Give me incentives, more pay, better benefits, and a little praise and I'll be a lot more productive.
I don't know if things are better now, but the idea that Mulvaney put forward the other day, " the dignity of work," kind of gets lost in the shuffle when corporations see workers not as assets but as numbers that need to be reduced. Give me incentives, more pay, better benefits, and a little praise and I'll be a lot more productive.
72
Supply and demand works on employee wages just as it does on the cost of goods and services. When worker compensation at a given company. gets too low (as it has), prospective employees will look elsewhere. Now companies are forced to offer more than the minimum wage to attract good employees. This slight blip in wage growth reflects the fact that companies have finally squeezed out their last bit of profits by reducing wages.
I would like to see a more detailed analysis of this recent bit of economic news. For example, what is the breakdown of wage growth by industry type? I suspect the only folks who are getting raises are those in the computer and technology realms where is a definite shortage of trained people.
I would like to see a more detailed analysis of this recent bit of economic news. For example, what is the breakdown of wage growth by industry type? I suspect the only folks who are getting raises are those in the computer and technology realms where is a definite shortage of trained people.
5
The key conclusion (one that is independent of economic models) is that workers are capturing more of the economic pie, whether it is growing or not. This along with Obamacare are the two major legacies of the Obama administration. However, our American public is soft-hearted: we weep for the rich. We yearn for the good old days when labor's share of the economic pie (real growth plus inflation) was decreasing. We abhor this heresy of redistribution, especially since a Dollar in the pocket of a working person is less valuable than a Dollar in the pocket of our local Trump wannebes. This idea of increasing labor's share of the economic pie is too French, too much like what Piketty advocated.
5
The author hinted at the truth when he suggested that low wages lead to lower productivity rather than the other way 'round. For decades, employers have reduced their investment in their work force. They don't invest in training. They don't invest in wages. They don't invest in pensions. Quite the contrary, employers expect the taxpayers and workers themselves to pay for training, they have moved out of the pension business entirely, and they have reduced wages, in part by getting rid of the most experienced and most expensive employees. When you treat workers this way, they learn to devalue work, education, and themselves. Eventually you wind up with a workforce that displays all the productivity of a Russian peasant in the late Soviet Union.
85
It's really very simple. In the aftermath of the 2008 recession the employer held all the cards and treated employees like dirt.
I know at my company many of the younger employees swore on their children they were gone once jobs started opening up again.
They did, and employees in my division fled in droves. Some departments had 100% turnover and within a year those new employees quit and there was 100% turnover again. The cost of moving remaining employees around the country to cover all the work not getting done was huge.
Only when wages AND benefits were increased just 2 years ago did the massive number of resignations abate.
I was too close to retirement to leave, yet even being a survivor worked to my advantage because I got a raise without even asking so that I would not retire early.
I know at my company many of the younger employees swore on their children they were gone once jobs started opening up again.
They did, and employees in my division fled in droves. Some departments had 100% turnover and within a year those new employees quit and there was 100% turnover again. The cost of moving remaining employees around the country to cover all the work not getting done was huge.
Only when wages AND benefits were increased just 2 years ago did the massive number of resignations abate.
I was too close to retirement to leave, yet even being a survivor worked to my advantage because I got a raise without even asking so that I would not retire early.
23
You were one of the lucky ones.
8
The obvious answer is Employers are more generous today. Before they were Degenerate Robber Barons. today their just Miserly Robber Barons. Now that's a giant leap for employees. In another decade or two or more we just may see "Robber Baron" all by itself. Remember, "Progress is our Most Important Product".
There is another reason to consider. It may be that the CEO's are so filthy rich they now know they couldn't spend it all in two lifetimes, so decided in their teeny, tiny hearts to give a few pennies to the "others".
There is another reason to consider. It may be that the CEO's are so filthy rich they now know they couldn't spend it all in two lifetimes, so decided in their teeny, tiny hearts to give a few pennies to the "others".
4
There are so many factors that are not taken into account when economists do macro-analysis. In Northern California, there are areas 60 miles apart but three hours in traffic where the cost of living and wages are dramatically different. From an economist's perspective, everyone should live in the cheaper areas and work in the higher paying areas. But that's not how it works.
Humans have other reasons for doing what they do than just economics. Geography plays a huge role in economics; most people won't move just to improve their wage. The answers to the questions posed in this article seem completely obvious...just not to economists.
Humans have other reasons for doing what they do than just economics. Geography plays a huge role in economics; most people won't move just to improve their wage. The answers to the questions posed in this article seem completely obvious...just not to economists.
2
Improving your wage - like moving to Chicago from Milwaukee, or to New York or San Francisco? Good luck trying to find a place to live that you can afford, even if you can find roommates - all strangers to you, by the way. Who wants to live like THAT? Not me, in today's age with all the nut cases running around out there, are you joking? Tell the people in Flint, MI to move - but they're stuck in homes they can't sell. What do they do - maybe they WANT to try their luck in Alberta, Canada or Wyoming, but they can't because they don't have the money to move and live on until they can land a new job (IF they land a new job). Economic analysis is a joke in the 21st century, totally ignoring obvious realities of the so-called "marketplace" for labor.
11
If only I could live in urban Detroit, where a nice house costs $15,000 -- but work in San Francisco or Manhattan, where the jobs pay big bucks! It would be so great!
All I need is a Star Trek-type transporter to make that happen.
All I need is a Star Trek-type transporter to make that happen.
2
I have done the calculations. A house in SF is not a house in Dallas. IN economic terms, they are both units of residence but they are not remotely equivalent. Even if you adjust for the change in income, it does not buy you the same standard of living. Like I have said in the past, price without the value component is meaningless.
Might part of the problem be that it's harder to measure productivity in a knowledge economy than in an industrial one? In an industrial economy, you just measure widgets produced per hour. More widgets per hour = increased productivity. But measuring the productivity of a knowledge worker, say a banker or coder, is trickier. Yes, we can measure GDP per worker or similar measures, but that does not quite show how much more or less a given individual produces.
Certainly *over time* productivity has increased with little or no commensurate gain in wages. That needs to be addressed, regardless of the cause.
Certainly *over time* productivity has increased with little or no commensurate gain in wages. That needs to be addressed, regardless of the cause.
6
YES! I had similar thoughts, posted a few minutes ago. I should have read down first before posting. THANK YOU for stating what is so darn obvious! Nineteenth century theories of economics don't work in the 21st century economies we are now experiencing.
9
More massaging statistics and using them to tell us that, somehow, we're better off than we know we are? (at least the non-millionaires, non-1%, who ARE better off!) And based on mega-numbers increases like .4% (that's 4/10s of 1%!) more than we "might expect" over 2 YEARS!
Whooeee, with increases like that, maybe we can all afford to join Mer a Lago next year!
"yet wages are rising barely faster than inflation ... real mystery isn’t why wage growth is so low, but why productivity is so low ... Over the last 24 months through ... you may expect average worker wages to have risen only 2 percent. In fact, the average hourly earnings for nonmanagerial private sector workers rose 2.4 percent a year in that period... If anything, the numbers show that workers are capturing more than their share of the spoils from a growing economy"
Whooeee, with increases like that, maybe we can all afford to join Mer a Lago next year!
"yet wages are rising barely faster than inflation ... real mystery isn’t why wage growth is so low, but why productivity is so low ... Over the last 24 months through ... you may expect average worker wages to have risen only 2 percent. In fact, the average hourly earnings for nonmanagerial private sector workers rose 2.4 percent a year in that period... If anything, the numbers show that workers are capturing more than their share of the spoils from a growing economy"
4
Yet over the course of a generation in which the financial services became a larger piece of the American economy, with an ever growing array of financial derivatives, and during a time of mega-mergers in which corporations have grown in size and power, CEOs and finance professionals have seen breathtaking increases in their compensation. Based on their stewardship of the economy it would seem that those salary increases are unjustified
9
Cost of living is a fiction. A fictional basket of goods. However, it has tracked very closely to the increase in wages for at least three generations. Mostly because HR uses CPI to measure how much to pay. See the circle? The actual measure should be GDP - the total amounts of goods and services produced AND sold in an economy has outpaced CPI by 2% over that same period. As an example, 1960's $1/hr minimum wage would be $33/hr in order to demand the proportional amount of goods and services.
Mr. Irwin, Please pull up the Census Dept's report on income and poverty, p60-252.pdf. From 1959-1974, the nation tripled the GDP - $420B to $1.2T AND CUT THE POVERY RATE IN HALF...22%-> 11%! After that, tax policy was structured to give the "Already Have's" a increasingly larger share of the nation's growth. Thus, our economy has grown to $18 TRILLION (15X) yet there has been no sustained reduction in the poverty rate. I'd call that state-sponsored greed.
Lastly, median household incomes have not shown any real growth since the Clinton years. How many companies have seen no revenue growth for 20 years? Why shouldn't households finally begin to make up for the abuse?
Mr. Irwin, Please pull up the Census Dept's report on income and poverty, p60-252.pdf. From 1959-1974, the nation tripled the GDP - $420B to $1.2T AND CUT THE POVERY RATE IN HALF...22%-> 11%! After that, tax policy was structured to give the "Already Have's" a increasingly larger share of the nation's growth. Thus, our economy has grown to $18 TRILLION (15X) yet there has been no sustained reduction in the poverty rate. I'd call that state-sponsored greed.
Lastly, median household incomes have not shown any real growth since the Clinton years. How many companies have seen no revenue growth for 20 years? Why shouldn't households finally begin to make up for the abuse?
44
If workers, through increasing societal use of defined contribution pensions, are solely responsible for the performance of their retirement accounts and smartphones are increasingly capable of performing increasingly cheaper tracking and trades of and with these accounts during business hours , why would productivity ever increase again? I retired recently and as my time drew near my institutional loyalty had an inverse relationship to my increasingly compulsive attentiveness to my contribution defined portion of my future income. Did my four years, and you?
4
This analysis misses some big factors. Health care costs are stripping families of buying power. The unemployment rate doesn't count those who have given up looking, retired early etc. Employers continue to discount the importance of their workers and see them as a drag on profits. There has been a huge decrease in employment stability so workers are less motivated and committed to a job. I'm sure the writer of this piece cannot relate. A tight labor market does not matter to employers anymore. All workers are treated with the same lack of respect and dignity regardless of productivity. Worker confidence since 2008 has not responded like the bean counters would have you believe.
8
"The rise in the share of employee compensation that takes the form of health benefits instead of wages is a factor, but doesn’t explain the whole gap..."
then what part of the gap does it explain?
we also need to consider other benefits like retirement benefits and insurance.
also, "managers" are people too. the definition of occupations, as well as the kinds of work that we do, could affect the calculations and are interesting in their own right.
then what part of the gap does it explain?
we also need to consider other benefits like retirement benefits and insurance.
also, "managers" are people too. the definition of occupations, as well as the kinds of work that we do, could affect the calculations and are interesting in their own right.
1
"the numbers show that workers are capturing more than their share of the spoils from a growing economy"
I vomited a little bit. I don't know how you can publish this drivel with a straight face.
I don't care whether your numbers are right or not, they are completely inconsequential.
The economical gap in our society is now bigger than it has ever been. The middle class has almost completely evaporated.
I find it incredible that you dare publish these numbers and use them to proclaim that the "Workers’ slice of the pie has increased a bit"
Should we be proud that the 1% is now leaving a few more crumbs for us to share?
I vomited a little bit. I don't know how you can publish this drivel with a straight face.
I don't care whether your numbers are right or not, they are completely inconsequential.
The economical gap in our society is now bigger than it has ever been. The middle class has almost completely evaporated.
I find it incredible that you dare publish these numbers and use them to proclaim that the "Workers’ slice of the pie has increased a bit"
Should we be proud that the 1% is now leaving a few more crumbs for us to share?
126
This is ridiculous. Workers' share of productivity has gone down for decades, for political not "market" reasons. Similarly, for the last few months, that trend has briefly gone the other way. Hear hear. We need many more such political decisions, to bring things back in line with a just and truly productive society. None of this has anything to do with "pure" market forces. That is a fiction.
7
This article seems to discount or ignore the concepts of supply and demand that regulate the amounts that suppliers and purchasers pay for anything, as well as the legal constraints that assist or hinder them in the pursuit of payment. The article itself describes its "simple model". Workers will work for the amount that they can get paid, regardless of productivity, inflation, etc. Employers will pay the least they can to get the labor they need to make a profit that justifies running their business. Employers rarely pay more just because they can afford to, and the rarely refuse to hire an employee who will help return a reasonable profit merely because the profit may be less than an unreasonable profit to which the employer might have become (temporarily) accustomed. And there is the relative position of the law in enhancing the bargaining power of the employers and employees ebbs and flow, but generally seems to enhance the power of employers (see recent article on use of employee non-competes to prevent employees from leaving for higher-paying positions). Again, a "simple model" here.
4
Common sense analysis can make economists heads explode. You are spot on!
"You may not feel like cheering about that, but it’s more than we might have expected, with inflation and productivity so weak."
You're right - I don't feel like cheering about that. I would definitely cheer, however, an article on wages and unemployment that actually acknowledged the fact that the labor participation rate is atrociously low, therefore revealing that any cheer leading of the "low" unemployment rate is deceitful.
I was hoping that with a Republican in the White House, liberal pundits would start telling the truth about the lackluster economy.
You're right - I don't feel like cheering about that. I would definitely cheer, however, an article on wages and unemployment that actually acknowledged the fact that the labor participation rate is atrociously low, therefore revealing that any cheer leading of the "low" unemployment rate is deceitful.
I was hoping that with a Republican in the White House, liberal pundits would start telling the truth about the lackluster economy.
9
To which lackluster economy, exactly, are you referring?
With all three American stock indices at record levels - corporate profits at stratospheric levels - companies using profits to buy back stock instead of investing in additional capacity, the American economy seems to be doing all right.
Let's see these kinds of analyses include corporate earnings increases and CEO compensation growth, along the same timelines. See who actually benefits from the fruits of the wage earners' labors. Then wonder about the perceived lack of productivity gains.
With all three American stock indices at record levels - corporate profits at stratospheric levels - companies using profits to buy back stock instead of investing in additional capacity, the American economy seems to be doing all right.
Let's see these kinds of analyses include corporate earnings increases and CEO compensation growth, along the same timelines. See who actually benefits from the fruits of the wage earners' labors. Then wonder about the perceived lack of productivity gains.
2
Oh, the minimum wage workers who are saving a nickel every other paycheck to buy stock? Perhaps put into their restaurant's (non-existent) retirement plan?
Oh, not *those* workers or their economy.
Oh, not *those* workers or their economy.
There is tremendous pent-up wage loss after decades of trade abuse and labor/immigration fraud. A modest recovery of the titanic losses suffered by the middle class MAY be happening. Be cautious when you call rising real wages (=inflation adjusted wage gains) anything negative. This is a tremendous positive for voters. Actual progressive understand this, while fake corporate progressives intentionally comingle their low wage rhetoric with "global justice."
10
The salient point is that 'Capital' has been favored over 'labor' over the past generation or longer. Capital is mobile and chased economic growth -- Asia. It also put downward pressure on US and EU labor rates as the effective global supply of labor increased. Now however we may be seeing an inflection point as demographics reduce the supply of the labor force and wage increases in places like China raise the cost of labor. The answer should inform the current policy questions regarding the potential inflationary impact of additional fiscal stimulus and whether increasing returns to Capital via tax policy is appropriate.
2
I have a question about the wage data cited here (apparently from the NCS via BLS). Does this include contract workers in its wage calculation? If it does not, then you're missing a big part of the employment picture as corporations have strongly moved to offload benefit burdens such as health insurance by moving a large number of jobs into contract work. The most egregious example of this would, of course, be Uber.
28
"the productivity slump could be a result of businesses that have failed to pass on the gains from a growing economy to their workers for decades. " is a true statement. So is the fact that it is likely productivity has maxed out and reached a plateau (BLS data as well). This article has inflation and productivity added together. If you look at just productivity from 1973 - 2006 (BLS data) gains were consistent over each decade or so, which clearly is not shown in the figure. As to the wage rises, once again, the author mixes time frames to prove his point. Look at wages since 1970 not just the past few years. NYTIMES needs to stop cherry picking data, keep it all on the same time scale and further stop combining data for convenience and provide all the data.
5
How many decades of wages not keeping up with profits from increased productivity caused this need for wage growth. Workers need to earn more and have better benefits and to afford this, the profits must be reduced along with top CEO salaries that are hundreds of times the amount of the person who actually earned the money for them.
There is about to be a worker shortage and some of that may be addressed by a better immigration policy.
There is about to be a worker shortage and some of that may be addressed by a better immigration policy.
4
This essay is an obvious set up for the second shoe to drop, this as a rationalization for the continued exploitation of unskilled and skilled workers, look ma I'm making more!
2
I wonder how productivity growth is achieved. How much accounts for job satisfaction, where you feel you are making an innovative product, not a product protected by a gigantic corporation, likely with monopoly power. And you feel you can afford (labor relations wise) to take your vacation. And pension benefits are not some unsure fund, tittering on collapse. Is love of the job change productivity?
1
So, does this mean the worker has now received their "fair share" of the huge profits these companies have made fleecing the taxpayers? In order to recoup an equitable share of the wage growth, the average worker would need close to a 500% increase in pay. I mean that is what the CEOs and shareholders have received for fleecing them and America. Anybody remember "too big to fail lies" and the bailouts of big banks and businesses, who scammed hard working Americans, without reduction in bonuses for CEOs. This includes ridiculous subsidies, reduction of regulations such as cleaning up their destruction, using our public lands and water for free, and our government negotiating and enforcing trade agreements.
20
There is very little difference between what is going on in Brazil and what goes on in the U.S. these days.
The corruption of under the table payments are just made "legal" in the U.S. in the form of 501(c) "donations" and "jobs" for "retired" politicians and lobbyists. The U.S. is just as corrupt as any Latin American country. But because we give it a name or legal designation, it is magically now "legal" and not corrupt.
At least places like S Korea, Brazil and some EU countries are confronting their corruption. In the U.S., we have doubled down with the most corrupt administration we have had since the Teapot Dome days.
The corruption of under the table payments are just made "legal" in the U.S. in the form of 501(c) "donations" and "jobs" for "retired" politicians and lobbyists. The U.S. is just as corrupt as any Latin American country. But because we give it a name or legal designation, it is magically now "legal" and not corrupt.
At least places like S Korea, Brazil and some EU countries are confronting their corruption. In the U.S., we have doubled down with the most corrupt administration we have had since the Teapot Dome days.
1
It can hard to be productive when your employer sets things up so you can't be. It's hard to be productive when you can't find a job. And it's really hard to be productive when your employer overworks you and your co-workers in the hope that having a lean workplace will earn the company more money without hurting morale. There is no better way to destroy productivity than overworking, underpaying, and disparaging employees. American employers excel at that along with forcing us to hide our work experience because they don't want to pay for it.
Perhaps we should allow people to retire in their mid-50s. Employers don't seem to want to hire people much past the age of 50 anyway. And they definitely do not pass on any gains to employees: it goes to the shareholders first and employees last unless the employee in question is the CEO.
Perhaps we should allow people to retire in their mid-50s. Employers don't seem to want to hire people much past the age of 50 anyway. And they definitely do not pass on any gains to employees: it goes to the shareholders first and employees last unless the employee in question is the CEO.
80
Who wants to retire in their mid-50s? I'm in my 50s, and these have been the most productive years of my life, and my friends tell me similar stories. I have experience in my field, and much greater wisdom than I had 20 years ago. In addition, my wife and I are empty nesters now so I can spend more time and energy on my career. No, I think we'd do a great discervice to our employees to reduce the retirement age by 10 years. We shoulld be thinking of raising the retirement age, not reducing it.
3
I think you misunderstand. The suggestion was to allow retirement early, not to mandate it early. If you feel good and productive, plow on! I happen to know lots of people in their 70's who feel indispensable. Generally, I think they just clutter up opportunities for younger colleagues. But, it would be good to allow reduced SS at an earlier age.
1
Sounds like macro economics theories aren't much help if they may or may not apply, depending on who-knows-what. Best example is the national debt. Weren't we supposed to be Greece by now?
1
Here's a theory that at least explains the past:
1. We need money to conduct commerce.
2, As the economy grows we need more money.
3. Money can come to the private sector from 2 places--the federal government or from a favorable trade balance.
4. Money comes from the federal government in 2 ways--spending or from the FED to the banks.
5, The FED has sent a lot of money to the banks with little effect. The money has sat in the vaults of the banks or been lent to the Rich who use it to speculate. This money has low velocity--it doesn't change hands in domestic commerce frequently.
6. Net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money to people, businesses (not banks) and state & local govs.
7. Thus in order to get the new money the private sector needs, the federal deficit must be larger than the trade deficit. We have a large trade deficit. We need a large deficit.
8. If the above is correct, periods of negative deficits, surpluses, which pay down the federal debt should lead to a bad economy. They have. There have been 6 such periods of longer than 3 years in US history, They have ALL ended in a real gut wrenching depression. In fact this accounts for all of our depressions.
9. On the other hand, in 1946 we had the largest debt ratio in our history. The public debt ratio was 47% larger than today. We had deficits for 21 of the next 27 years. We increased the debt 75%.
And we had Great Prosperity.
1. We need money to conduct commerce.
2, As the economy grows we need more money.
3. Money can come to the private sector from 2 places--the federal government or from a favorable trade balance.
4. Money comes from the federal government in 2 ways--spending or from the FED to the banks.
5, The FED has sent a lot of money to the banks with little effect. The money has sat in the vaults of the banks or been lent to the Rich who use it to speculate. This money has low velocity--it doesn't change hands in domestic commerce frequently.
6. Net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money to people, businesses (not banks) and state & local govs.
7. Thus in order to get the new money the private sector needs, the federal deficit must be larger than the trade deficit. We have a large trade deficit. We need a large deficit.
8. If the above is correct, periods of negative deficits, surpluses, which pay down the federal debt should lead to a bad economy. They have. There have been 6 such periods of longer than 3 years in US history, They have ALL ended in a real gut wrenching depression. In fact this accounts for all of our depressions.
9. On the other hand, in 1946 we had the largest debt ratio in our history. The public debt ratio was 47% larger than today. We had deficits for 21 of the next 27 years. We increased the debt 75%.
And we had Great Prosperity.
America was great after WWII because the world was in ruin or still subsistence farming.
Your correlation is not causation. Just happenstance.
Your correlation is not causation. Just happenstance.
George raises the "Europe was Rubble Myth,". Look at http://piketty.pse.ens.fr/files/capital21c/en/pdf/F1.1.pdf which shows that the out put of Europe was about the same as the US in the Great Prosperity 1946 - 1973.
And you KNOW there is no causation how? In point of fact, it is impossible to prove causality in the real world. Try and prove the sun will rise tomorrow. The scientific method works in precisely the opposite way. It attempts to disprove statements. So, while it is impossible for me to prove paying down debt causes depressions (which I never claimed), George is in the enviable position of being able to disprove that statement by simply showing one case in which the statement is not true. Of course, he does not do so, and cannot do so because one does not exist.
Let's take a more mathematical approach. When George says there is no causality, presumably he means that the chances are 50 - 50 that a depression will occur after a period of paying down the debt or the probability is 0.5. Hence the probability of a depression happening twice after a period of paying down the debt is 0.25. The probability of this happening six times is 0.015625. Thus, the probability of there being no causality is less than 2%.
The ideas developed above can be expressed in two well known sayings:
"The definition of insanity is doing the same thing over and over and expecting different results"
"Those who don't know history are destined to repeat it."
And you KNOW there is no causation how? In point of fact, it is impossible to prove causality in the real world. Try and prove the sun will rise tomorrow. The scientific method works in precisely the opposite way. It attempts to disprove statements. So, while it is impossible for me to prove paying down debt causes depressions (which I never claimed), George is in the enviable position of being able to disprove that statement by simply showing one case in which the statement is not true. Of course, he does not do so, and cannot do so because one does not exist.
Let's take a more mathematical approach. When George says there is no causality, presumably he means that the chances are 50 - 50 that a depression will occur after a period of paying down the debt or the probability is 0.5. Hence the probability of a depression happening twice after a period of paying down the debt is 0.25. The probability of this happening six times is 0.015625. Thus, the probability of there being no causality is less than 2%.
The ideas developed above can be expressed in two well known sayings:
"The definition of insanity is doing the same thing over and over and expecting different results"
"Those who don't know history are destined to repeat it."
The core problem is that so much of what we call economics is pseudoscience. Probably 75% of what is taught in Macro and Micro college courses has never actually been proven with real science. It's essentially 18th and 19th century philosophy dressed up with equations. It's as scientifically valid as Freudian psychology or nutrition science (another pseudo-scientific field that is in tatters right now).
In a perfect world, a lot of conventional economics would be consigned to the dustbin or at least the history books, and a lot of economists would find other careers. Then when the rich bought off Congress to have their taxes cut, at least we would have to put up with these fradulent claims about "job creation."
Yes, at a very pure theoretical level, wages are prices and prices respond to supply and demand. But in reality, wages are set in 100,000 different ways that have very little to do with market forces. CEO pay is probably the best example -- there's a total absence of evidence that paying a CEO $100 million instead of $5 million has any connection to company performance. Boards do it because they have a mutual-back-scratching relationship with CEOs. There are economic forces going on (board members hoping THEY will get the $100 million salary from THEIR company), but it certainly has nothing to do with the supply and demand for CEO talent.
In a perfect world, a lot of conventional economics would be consigned to the dustbin or at least the history books, and a lot of economists would find other careers. Then when the rich bought off Congress to have their taxes cut, at least we would have to put up with these fradulent claims about "job creation."
Yes, at a very pure theoretical level, wages are prices and prices respond to supply and demand. But in reality, wages are set in 100,000 different ways that have very little to do with market forces. CEO pay is probably the best example -- there's a total absence of evidence that paying a CEO $100 million instead of $5 million has any connection to company performance. Boards do it because they have a mutual-back-scratching relationship with CEOs. There are economic forces going on (board members hoping THEY will get the $100 million salary from THEIR company), but it certainly has nothing to do with the supply and demand for CEO talent.
9
"The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself." - John Kenneth Galbraith
7
This article wins the award for Most Clueless and Eggheaded Economics essay.
Wages may be rising slightly more than inflation+productivity-increase the last two years, but that's after wages were systematically suppressed for at least the last 35 years by a concerted war on wages and benefits that reduced workers to cheap raw materials.
The fact that wages are rising now after three decades of stagnation just means that the Robber Barons have finally run out of alibis to outswindle their labor force.
We know where all the profits went; to CEOs and shareholders.
Workers were bled and shifted to the ancient wage-slave model.
CEO-to-worker compensation ratio, 1965–2014
Year - CEO:worker compensation ratio
1965 = 20 :1
1966 = 21 :1
1967 = 22 :1
1968 = 24 :1
1969 = 23 :1
1970 = 23 :1
1971 = 23 :1
1972 = 23 :1
1973 = 22 :1
1974 = 24 :1
1975 = 25 :1
1976 = 27 :1
1977 = 28 :1
1978 = 30 :1
1979 = 32 :1
1980 = 34 :1
1981 = 36 :1
1982 = 38 :1
1983 = 41 :1
1984 = 43 :1
1985 = 46 :1
1986 = 49 :1
1987 = 52 :1
1988 = 55 :1
1989 = 59 :1
1990 = 71 :1
1991 = 86 :1
1992 = 104 :1
1993 = 112 :1
1994 = 87 :1
1995 = 123 :1
1996 = 154 :1
1997 = 233 :1
1998 = 322 :1
1999 = 287 :1
2000 = 376 :1
2001 = 214 :1
2002 = 189 :1
2003 = 228 :1
2004 = 257 :1
2005 = 308 :1
2006 = 341 :1
2007 = 345 :1
2008 = 239 :1
2009 = 196 :1
2010 = 230 :1
2011 = 236 :1
2012 = 285 :1
2013 = 303 :1
2014 = 303 :1
The picture is very clear.
CEO wage theft and associated behavior is enjoying a Very Golden Age.
Wages may be rising slightly more than inflation+productivity-increase the last two years, but that's after wages were systematically suppressed for at least the last 35 years by a concerted war on wages and benefits that reduced workers to cheap raw materials.
The fact that wages are rising now after three decades of stagnation just means that the Robber Barons have finally run out of alibis to outswindle their labor force.
We know where all the profits went; to CEOs and shareholders.
Workers were bled and shifted to the ancient wage-slave model.
CEO-to-worker compensation ratio, 1965–2014
Year - CEO:worker compensation ratio
1965 = 20 :1
1966 = 21 :1
1967 = 22 :1
1968 = 24 :1
1969 = 23 :1
1970 = 23 :1
1971 = 23 :1
1972 = 23 :1
1973 = 22 :1
1974 = 24 :1
1975 = 25 :1
1976 = 27 :1
1977 = 28 :1
1978 = 30 :1
1979 = 32 :1
1980 = 34 :1
1981 = 36 :1
1982 = 38 :1
1983 = 41 :1
1984 = 43 :1
1985 = 46 :1
1986 = 49 :1
1987 = 52 :1
1988 = 55 :1
1989 = 59 :1
1990 = 71 :1
1991 = 86 :1
1992 = 104 :1
1993 = 112 :1
1994 = 87 :1
1995 = 123 :1
1996 = 154 :1
1997 = 233 :1
1998 = 322 :1
1999 = 287 :1
2000 = 376 :1
2001 = 214 :1
2002 = 189 :1
2003 = 228 :1
2004 = 257 :1
2005 = 308 :1
2006 = 341 :1
2007 = 345 :1
2008 = 239 :1
2009 = 196 :1
2010 = 230 :1
2011 = 236 :1
2012 = 285 :1
2013 = 303 :1
2014 = 303 :1
The picture is very clear.
CEO wage theft and associated behavior is enjoying a Very Golden Age.
277
Do the same analysis for the compensation of executive directors of charities compared to the mean worker wages.
Do the same analysis of the compensation for government colleges. Didn't CCNY just hire a liberal commentator for a seven figure salary who is not teaching a single class?
Compare the wages of a full professor at a charity university who is being paid four times what someone with comparable credentials forty years ago was paid, and today that full professor teaches a single three hour class per semester when 40 years ago full professors taught three classes per semester.
It would be lovely to accuse capitalism of being responsible for wealth inequality, but the charitable sector has demonstrated far more wealth inequality as the elite have developed an entitlement mentality that they deserve the biggest slice of pie.
What is your justification for a charity hospital that offers little charity care, despite being exempt from property and income taxes and yet having spare funds available to pay a political operative like Michelle Obama $350,000 per year for a part time job.
The elite capture health care and education spending and then cry about the fact that medical and college costs are out of reach for the poor and middle class.
Let's put wage controls on people working for "non-profit" hospitals and universities. That will drive down medical and higher education costs down to manageable levels. Make it a livable wage, say $200,000-$250,000 per year.
Do the same analysis of the compensation for government colleges. Didn't CCNY just hire a liberal commentator for a seven figure salary who is not teaching a single class?
Compare the wages of a full professor at a charity university who is being paid four times what someone with comparable credentials forty years ago was paid, and today that full professor teaches a single three hour class per semester when 40 years ago full professors taught three classes per semester.
It would be lovely to accuse capitalism of being responsible for wealth inequality, but the charitable sector has demonstrated far more wealth inequality as the elite have developed an entitlement mentality that they deserve the biggest slice of pie.
What is your justification for a charity hospital that offers little charity care, despite being exempt from property and income taxes and yet having spare funds available to pay a political operative like Michelle Obama $350,000 per year for a part time job.
The elite capture health care and education spending and then cry about the fact that medical and college costs are out of reach for the poor and middle class.
Let's put wage controls on people working for "non-profit" hospitals and universities. That will drive down medical and higher education costs down to manageable levels. Make it a livable wage, say $200,000-$250,000 per year.
4
Excuse me, but CEO pay comes out of the shareholders' pockets, not the employees. Divide a major company's CEO pay by the number of employees and each employee might earn an extra five dollars a week. Or, the real situation is that if you paid the CEO nothing the employees would not earn a penny more. There is no correlation between CEO pay and employee pay, no matter what the ratio.
Not at all sure this is true. After all, it's all money! Profits would be lower if wages were higher. The profits pot for owners' equity would be smaller.
Really? You are making an entire article out of this blip? Look at your own graph -- over the past 47 years, since 1970, huge areas under the curve between the red line and the gold line. Decade after decade. If there were any real market, then, over the next 47 years the gold line will be over the red line to the same degree, for just as many years.
But for labor, there is no real market. The system is rigged. Those who "own" the means of production (i.e., the "capital" -- the machines, the factories, the distribution systems, etc.) hold all the cards, especially because they bribe lobbyists to give them lower tax rates and all kinds of corporate welfare. For labor, ironically, workers might be better off if there were no government at all, especially the one we have now. Yesterday, Tom Friedman said today's companies want their workers to have the following "soft" skills: suit up, show up, put up, shut up and don't give up. Wow. "Soft" like a wet noodle that is. Only someone who feels like they are holding all the cards would make demands like that on another human being. It is pretty close to master versus slave. Globalization has put the US worker (anyone who gets their income from a salary rather than investment dividends and "capital gains") on the auction block right next to sweatshop ghetto and homeless workers in Calcutta. No difference. Whatever the global "market" will sustain.
But for labor, there is no real market. The system is rigged. Those who "own" the means of production (i.e., the "capital" -- the machines, the factories, the distribution systems, etc.) hold all the cards, especially because they bribe lobbyists to give them lower tax rates and all kinds of corporate welfare. For labor, ironically, workers might be better off if there were no government at all, especially the one we have now. Yesterday, Tom Friedman said today's companies want their workers to have the following "soft" skills: suit up, show up, put up, shut up and don't give up. Wow. "Soft" like a wet noodle that is. Only someone who feels like they are holding all the cards would make demands like that on another human being. It is pretty close to master versus slave. Globalization has put the US worker (anyone who gets their income from a salary rather than investment dividends and "capital gains") on the auction block right next to sweatshop ghetto and homeless workers in Calcutta. No difference. Whatever the global "market" will sustain.
4
Wow, where do you work? Slavery? If I were you, I'd show your boss who's master and resign right away. Why would you work under those conditions?
This column reminds me of the joke about Economics 101. The instructor gives the same final exam to the students every year and always asks the same questions. He only changes the answers.
35
In the 1970's and 1980's the faculty at my college generally received "wage increases" of $500 per year. This meant for most of us wages went down since inflation ate more than $500 of our wage. There was grumbling, but most faculty - presumably more sophisticated than average - still talked about raises while grumbling that the "raises" were too low. I believe Keynes called this "money illusion". Most people will grumble less about a raise of 5% when inflation is 8% than about a 2% raise when inflation is 1.5%.
4
Take another look at the economics of your college. Full professors back in the 1970's and 1980's made the inflation equivalent of $60,000 in 2016 dollars and taught three classes per semester, or $10,000 per class. Assuming an average of 20 students per class, that represented $500 cost per student for a three credit class or $5000 in tuition for a full course load, in 2017 dollars.
Today, the bulk of the classes are taught by adjuncts and graduate students and other part time instructors who are paid, if they are lucky, $4,000 per class ($32,000 per year if they can put together four classes per semester.) Why is it that tuition today is not $3,000 for a full year, the universities having eked out cost reductions and labor productivity gains? Instead, the tuition at non-profit universities is $60,000.
The well connected full professors, like Elizabeth Warren and her husband are now being paid $350,000 per year to teach one class per semester, freeing their time up to make money consulting for the government and the private sector. The university presidents, who used to be paid a comfortable $200,000 equivalent, are now paid $1,000,000 plus.
The working class people in the universities are making wages [clerks, library assistants, maintenance, food service workers] that are flat over time.
The elite have captured all of the efficiency gains, despite not even having the excuse that they invested any capital.
Today, the bulk of the classes are taught by adjuncts and graduate students and other part time instructors who are paid, if they are lucky, $4,000 per class ($32,000 per year if they can put together four classes per semester.) Why is it that tuition today is not $3,000 for a full year, the universities having eked out cost reductions and labor productivity gains? Instead, the tuition at non-profit universities is $60,000.
The well connected full professors, like Elizabeth Warren and her husband are now being paid $350,000 per year to teach one class per semester, freeing their time up to make money consulting for the government and the private sector. The university presidents, who used to be paid a comfortable $200,000 equivalent, are now paid $1,000,000 plus.
The working class people in the universities are making wages [clerks, library assistants, maintenance, food service workers] that are flat over time.
The elite have captured all of the efficiency gains, despite not even having the excuse that they invested any capital.
5
ebmem - The average salary for full profs in 4-year colleges & universities was during 2015 - 16 was $115,579, Assoc. Profs - $74,473 and Ass't profs. -$64,414. All tenure track. Practically all have Ph.D.'s.
https://www.higheredjobs.com/salary/salaryDisplay.cfm?SurveyID=24
https://www.higheredjobs.com/salary/salaryDisplay.cfm?SurveyID=24
3
It's not rocket science.
Paying Workers more and a minimum wage that matches or exceeds the cost of living is a very productive initiative to any society as it increases prosperity whilst lowering poverty and deprivation.
The benefits of doing so are the most productive thing America could do.
Paying Workers more and a minimum wage that matches or exceeds the cost of living is a very productive initiative to any society as it increases prosperity whilst lowering poverty and deprivation.
The benefits of doing so are the most productive thing America could do.
4
In a nutshell the author advocates for workers to work harder. Does that mean more hours of unpaid time on top of the highest total number of hours worked annually in the world? Does it mean fewer trips to the bathroom? Does it mean working through more holidays and vacations?
Aren't corporate profits higher than they have ever been? How does that factor in to the equation? Why not look at the problem of stagnant wages through the lens of historically high corporate profits?
Aren't corporate profits higher than they have ever been? How does that factor in to the equation? Why not look at the problem of stagnant wages through the lens of historically high corporate profits?
112
Mr. Irwin is your typical academic with NO COMMON SENSE.
It is obvious the world does not need productivity. American corporations hold $2.6 TRILLION hostage overseas because they don't want to pay corporate income taxes.
They have been doing fine with all of that cash just sitting there unused. What would increasing profits do exactly? They haven't even been reinvesting the profits they have been making the past two decades accounting for the giant cash trove.
Yet, we keep going through these consumer credit cycles where the typical citizen (aka most workers) accumulates consumer debt and then we go through a big crash that wipes out that debt which shows up as NATIONALIZED FEDERAL DEBT. We have already gone through two of these cycles in the past 40 years. Are we just going to keep doing the same things until we have another one (2018 anyone)?
It is apparent that these so-called "smart people" don't have a clue. They run this corrupt system that will end Western civilization (and maybe the entire global economy). But, they cannot help themselves because they are either ignorant or greedy.
The best thing that can happen in this world is that there will be less productivity and more happiness. Ironically, this would actually solve the debt/inflation imbalance. But this truth would be INCONVENIENT.
It is obvious the world does not need productivity. American corporations hold $2.6 TRILLION hostage overseas because they don't want to pay corporate income taxes.
They have been doing fine with all of that cash just sitting there unused. What would increasing profits do exactly? They haven't even been reinvesting the profits they have been making the past two decades accounting for the giant cash trove.
Yet, we keep going through these consumer credit cycles where the typical citizen (aka most workers) accumulates consumer debt and then we go through a big crash that wipes out that debt which shows up as NATIONALIZED FEDERAL DEBT. We have already gone through two of these cycles in the past 40 years. Are we just going to keep doing the same things until we have another one (2018 anyone)?
It is apparent that these so-called "smart people" don't have a clue. They run this corrupt system that will end Western civilization (and maybe the entire global economy). But, they cannot help themselves because they are either ignorant or greedy.
The best thing that can happen in this world is that there will be less productivity and more happiness. Ironically, this would actually solve the debt/inflation imbalance. But this truth would be INCONVENIENT.
And that, as it happens, is the reverse of a decades-long trend.
********
And one economic cycle is supposed to make up for it? How many working Americans have actually been able to catch up?
********
And one economic cycle is supposed to make up for it? How many working Americans have actually been able to catch up?
5
One of the biggest mysteries is why studies always focus on the unemployment rate, which does not include people who have dropped out of the workforce altogether. 37% of US citizens over the age of 16 do not have a job. That is the reality.
32
Rather disingenuous to fixate on a figure that includes high school/college students AND every single retired person in the country.
The unemployment rate if a limited figure, but the one you suggest is probably even worse.
The unemployment rate if a limited figure, but the one you suggest is probably even worse.
1
Mike. one can look at the LPR for people between 25 and 64 which eliminates most students and retirees. That figure is about 77%. Long term graphs are at https://www.advisorperspectives.com/dshort/updates/2017/05/09/long-term-...
1
If this turns out to be more than a blip, there may be a political explanation. Many states have raised their minimum wage over the past few years, including some red states such as Arkansas and South Dakota. It would be interesting to see what the wage data shows for those states since then. It also puts a focus on the failure/refusal of the Obama Administration to push through a hike in the federal minimum wage back in 2009-10, when it had Democratic majorities in both houses of Congress.
2
Interesting point about 2009-10, though it's important to consider two factors: Democrats aren't a party of unanimity across all policy goals and their majority existed during the height of the Recession. Any economic policy that could possibly put stress on businesses had to be weighed very carefully; anything further than the ACA might have been considered far too risky given the circumstances.
The problem with minimum wage hikes during a recession is that the benefits tend to take several years to fully materialize, while the increase in labor cost--even via gradual increases--can easily be perceived as burdensome in the short run.
Additionally, their majority included many moderate Democrats from purple states that tend to lean right on certain issues such as healthcare and minimum wage. Take the moderate Democrats out of the equation and suddenly a majority doesn't exist.
The problem with minimum wage hikes during a recession is that the benefits tend to take several years to fully materialize, while the increase in labor cost--even via gradual increases--can easily be perceived as burdensome in the short run.
Additionally, their majority included many moderate Democrats from purple states that tend to lean right on certain issues such as healthcare and minimum wage. Take the moderate Democrats out of the equation and suddenly a majority doesn't exist.
1
"The real mystery isn’t why wage growth is so low, but why productivity is so low." You mean "The real mystery isn’t why wage growth is so low, but why productivity GROWTH is so low."
Every time you make this kind of mistake you really confuse my calculus-learning students struggling to understand the difference between a function and its derivatives.
Every time you make this kind of mistake you really confuse my calculus-learning students struggling to understand the difference between a function and its derivatives.
117
Jose, you are correct. Historically, inflation has been driven by increases in worker compensation, not the other way around. Also, as others have noted, worker compensation has not tracked with productivity increases since the early 1970s, while compensation for top management has exploded. Yes, wage increases should follow low unemployment, except that in the current economy there are many who are underemployed and many others who have temporarily left the labor force so are not counted in the unemployment numbers As wages rise, many of these people may return to the job market. The unemployment numbers, by themselves, are not that great an indicator of the true condition of the job market.
In short, a very naive and clueless article, as has been pointed out.
In short, a very naive and clueless article, as has been pointed out.
1
For another perspective on this, take a look at Lack of Workers, Not Work, Weighs on the Nation’s Economy (https://www.nytimes.com/2017/05/21/us/politics/utah-economy-jobs.html).
Or perhaps one could simply say that wage growth "should" be exceeding productivity growth, finally, after such a sustained period of being less than productivity growth. Why do so many economists act as though only current conditions affect the economic processes? Humans have memories and after 30 years of low wage growth, those memories could easily dominate current conditions.
31
Since 1970 there were five sustained periods when productivity + inflation exceeded wage growth by more than 2%. Since 1970 there were perhaps three short periods when the reverse was true. No wonder wages should exceed formula expectations today.
The macro truth is, labor's share of GDP has declined these decades while the share of GDP claimed by capital (or those who own it) has increased.
Trump should do his voters a favor: pursue a policy where the labor's share of GDP increases. That will surely accelerate GDP growth (since nearly 70% of GDP is consumption) and indirectly enrich the owners of capital and probably more so than tax cuts for the super rich.
In short, instead of tax cuts to prime the pump, how about raising the minimum wage to primp the pump. Could be a better way of guiding the economy than the federal funds rate.
The macro truth is, labor's share of GDP has declined these decades while the share of GDP claimed by capital (or those who own it) has increased.
Trump should do his voters a favor: pursue a policy where the labor's share of GDP increases. That will surely accelerate GDP growth (since nearly 70% of GDP is consumption) and indirectly enrich the owners of capital and probably more so than tax cuts for the super rich.
In short, instead of tax cuts to prime the pump, how about raising the minimum wage to primp the pump. Could be a better way of guiding the economy than the federal funds rate.
63
Great idea but it means more poor people become less poor and might even have a chance to prosper.
Frankly that's preposterous! Why would you help or reward more those that least deserve it?
If anything, they should be penalised for being poor...and teach them a lesson they can't forget.
Frankly that's preposterous! Why would you help or reward more those that least deserve it?
If anything, they should be penalised for being poor...and teach them a lesson they can't forget.
1
Whatever Trump actually "believed" during the campaign (does he even know?), he has surrounded himself with supply-siders and trickle-downers.
Since 1979 average wage increases have been consistent with the inflation rate. So the so called average worker has retained his/her purchasing power over the last 38 years. And, if the benefit subsidy by employers is factored in, employee compensation has exceeded overall inflation during this time period. (The benefit subsidy by employers since 2000 has greatly exceeded the overall inflation rate.) So the question is, why should employee compensation increase faster than the inflation rate? If productivity is due to employee performance, as opposed to technological innovation driving productivity, one could argue wage increases should reflect this stronger employee performance. I am not sure, but I think the vast majority of productivity gains over the last couple of decades have come from technological innovation.
As an aside, averages can be misleading. Wage increases of the lowest paid employees have not kept up with inflation, while those of the highest paid employees (ie, college educated) have far outpaced inflation. Foreign competition from China and the importation of low wage workers into our agriculture, hospitality and residential construction industries have depressed wage growth in those relatively low skilled sectors. That is an argument for a much stronger minimum wage which failed miserably to keep up with inflation during this nearly 40 year period.
As an aside, averages can be misleading. Wage increases of the lowest paid employees have not kept up with inflation, while those of the highest paid employees (ie, college educated) have far outpaced inflation. Foreign competition from China and the importation of low wage workers into our agriculture, hospitality and residential construction industries have depressed wage growth in those relatively low skilled sectors. That is an argument for a much stronger minimum wage which failed miserably to keep up with inflation during this nearly 40 year period.
12
Isn't inflation calculated on a "market basket" of goods and services? How much adjustment has been made to that market basket to take into consideration things that are now considered necessities--such as gadgets that allow access to the internet--that carry a relatively high price tag but that were unavailable or not in wide-spread use earlier on?
I remember back in the early 80s reading a newspaper article that said wage increases would be low that year (whichever year it was), but interestingly enough there was a difference in the percent increase by job level. I don't remember the real figures, but say it was that workers would be getting a 3% increase, middle managers a 4% increase, and executives a 4% increase. That struck me at the time as a bad road to be going down, widening income inequality in an unhealthy way. The trend certainly continued on into the future as we saw people at the very top receiving income boosts in double digit percentages while the incomes for the college educated increased slightly and workers lost ground. What effect has this had on the relationship between productivity, inflation, and wages? I think I need to take some economics classes to better understand how some of these calculations work.
I remember back in the early 80s reading a newspaper article that said wage increases would be low that year (whichever year it was), but interestingly enough there was a difference in the percent increase by job level. I don't remember the real figures, but say it was that workers would be getting a 3% increase, middle managers a 4% increase, and executives a 4% increase. That struck me at the time as a bad road to be going down, widening income inequality in an unhealthy way. The trend certainly continued on into the future as we saw people at the very top receiving income boosts in double digit percentages while the incomes for the college educated increased slightly and workers lost ground. What effect has this had on the relationship between productivity, inflation, and wages? I think I need to take some economics classes to better understand how some of these calculations work.
or an easier answer might be that while wages rose 2.4% compared to the estimated expectation of 2% , the reason is because they were so behind to begin with. look at a longer time period, and your estimates will equal, and then eventually overestimate wage growth.
10
“While food costs are pretty benign, you are seeing, certainly in some markets, some pretty good inflation rate in wages,” said Patrick Doyle, the chief executive of Domino’s Pizza
When I go to the grocery store, and prices of food are 30% higher than last year, and have local bakers citing 25% increases in the cost of their products due to sharply increasing cost of ingredients, I would hardly classify food costs as "benign"
It is very Marie Antoinette-ish of Mr. Doyle to make a statement like this.
Furthermore, it is utterly ludicrous to suggest that lower productivity is not the direct result of unprecedented sustained executive greed.
In fact, this entire article smacks of falsehood. Phooey.
When I go to the grocery store, and prices of food are 30% higher than last year, and have local bakers citing 25% increases in the cost of their products due to sharply increasing cost of ingredients, I would hardly classify food costs as "benign"
It is very Marie Antoinette-ish of Mr. Doyle to make a statement like this.
Furthermore, it is utterly ludicrous to suggest that lower productivity is not the direct result of unprecedented sustained executive greed.
In fact, this entire article smacks of falsehood. Phooey.
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This article is disingenuous. Worker pay has been disconnected from productivity output for the last 40 years. http://www.epi.org/productivity-pay-gap/ Or in short, the people at the top have been making much more, without passing any of that to the workers at the bottom.
As to why that is, you don't need to look any further than the NYTimes own articles. There are business owners who are on the record saying that they'd rather not hire people (and turn down jobs) than to increase their own workers wages: https://www.nytimes.com/2017/02/28/business/economy/denmark-jobs-full-em...
As to why that is, you don't need to look any further than the NYTimes own articles. There are business owners who are on the record saying that they'd rather not hire people (and turn down jobs) than to increase their own workers wages: https://www.nytimes.com/2017/02/28/business/economy/denmark-jobs-full-em...
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