
The Mystery of the Vanishing Pay Raise - Futurebot
http://www.nytimes.com/2015/11/01/sunday-review/the-mystery-of-the-vanishing-pay-raise.html
======
ryanackley
I suspect this might have something to do with the rising cost of health
insurance. This is not a criticism of Obamacare. This problem has been
building for years.

Most people in the USA don't realize how much of their total compensation is
health insurance since you don't typically see this cost as a line item on
your paycheck. The last time I checked, an employer sponsored health plan for
a family of 3 from Aetna was close to $2000/month

~~~
ThomPete
This problem exist outside the US too even in Denmark were health care is
free.

The reason why it's not so obvious is that countries like Denmark
redistributes wealth much more and have fairly high wages. Denmark doesn't
have a minimum wage but instead it's based on negotiations between unions and
employers (and sometimes the government if they cant agree). The model is know
as Flexicurity[1].

The problem is that that model keeps a lot of people outside the working
market because their skills simply aren't worth the salaries they would have
to get because of this model. And so in Denmark the problem instead is that
companies just move the production out or take in cheap east european labour.

The problem isn't about any specific political prioritization but about
something more underlying (my claim is technology).

[1][https://en.wikipedia.org/wiki/Flexicurity](https://en.wikipedia.org/wiki/Flexicurity)

~~~
goodJobWalrus
> The problem is that that model keeps a lot of people outside the working
> market because their skills simply aren't worth the salaries they would have
> to get because of this model.

I'm not sure what you mean by "a lot of people", but Denmark has one of the
highest employment rates among OECD countries, so it's actually doing great at
keeping people in employment (comparably).

[http://www.stats.govt.nz/browse_for_stats/income-and-
work/em...](http://www.stats.govt.nz/browse_for_stats/income-and-
work/employment_and_unemployment/employment-rate-article.aspx)

~~~
ThomPete
Yeah please see how many people work in the public sector and you start to
realize the problem. Also as with most other countries the way employment is
measured it's usually based on who is deemed available for the job market. In
Denmark a lot of people simply stop being part of the statistics after a while
even if they are in theory available for the job market.

Fever and fever people in the private sector providing for an increasing
public sector and an increasing senior population.

Denmark pays for it's gigantic wellfare system via income taxation and through
a number of taxes on goods (180% on cars for instance)

The current situation right now is that public sector while still growing the
public sector year over year is now beginning to cut from areas it used to
held almost holy. (Education for instance)

------
edoloughlin
> Federal Reserve officials hoped wages would begin rising at today’s 5.1
> percent, but economists are increasingly saying the rate might need to fall
> to 4.9 percent or lower to push wages higher

Whenever I read something like this I have to wonder: do these economists have
a server farm running models to backup statements like this or do they just
pull it out of their asses?

~~~
polskibus
They pull it out of a simple linear model in Excel _.

_ just an educated guess based on my occasional economics study.

~~~
mtw
I wonder if deep learning could be more accurate for this kind of problem

~~~
davmre
Deep learning works well when you have a ton of data and don't care about
interpreting the parameters of your model. My understanding is this is pretty
much the opposite of the typical situation in econ research.

------
vinceguidry
OK, so capitalism is fundamentally about choices. Market players compete to
bring products / services to the market that both a) people want to choose,
and b) is cheap to provide. Because it is not the case that the most desirable
service is the most expensive to provide, that allows for competition. Markets
"learn" over time, advantages gained by one firm are copied by others
requiring constant innovation.

The job market is no different, but the second quality, being cheap to
provide, means there is going to be a constant degrading in the monetary
compensation offered to workers, while the _desired benefits_ those workers
are getting is paradoxically going to increase. You can most clearly see this
in companies like Uber where compensation gets slashed every year, but there's
no truly mass uprising of drivers taking place.

You can treat this as a failure of union outreach, that Uber drivers should
unionize and demand relief. But it's not like they _can 't_ organize. They
were perfectly capable of organizing a march at Uber headquarters. No, most
Uber drivers _choose_ to keep driving, the arguments that they're being
exploited seem a little thin when you realize that Uber drivers could be doing
just about anything else to make more money if they were really truly being
exploited. Workers in America have unparalleled ability, compared to other
countries, to try out other industries and occupations.

What I think is happening, is that the information age has brought unmatched
and unmeasurable utility to common people, in the form of free services
provided by tech companies, to _everyone_ (take a second to let it sink in
just how unprecedented this is, historically, for a hugely valuable service,
like Google search, to be provided to anybody with a Internet connection) and
the job market is simply adjusting to meet the new status quo.

Being poor in America isn't nearly as horrible as it used to be. You don't
need to expend unreal amounts of effort to increase your station just to have
a more-or-less happy life anymore. Homeless people all can get online
_somehow_. And that access provides them with incalculable value. There's a
reason that everywhere you go, you see people buried in their smartphones.
They're choosing smartphone interaction over _everything else they could be
doing right now_.

So the labor market is adjusting to fit. People can choose to be poorer, and
are doing that rather than expending extraordinary efforts to climb ladders
that have, all of a sudden, become so much harder to climb. Because with these
services, being poor isn't nearly as onerous.

~~~
justinator
Regarding Uber: are the majority of its drivers part time, or full time? If
the majority of drivers are part time, I wouldn't suspect there's as much of a
chance of a march on Uber Headquarters, as it may not be their main source of
income. There's also the problem of geography: the majority of Uber drivers
are not close to it.

I'm a little shakier commenting on your poor people/homeless ideas. Have you
experienced being homeless/poor recently? I hate to think your perspective on
this is from, ahem: an ivory tower.

~~~
vinceguidry
I specifically tried to omit the homeless from my analysis. Americans have
largely excluded homeless people from being able to participate meaningfully
in the economy, for various reasons. I am in Colombia right now, and homeless
people here play critical roles in maintaining city infrastructure. I saw a
homeless guy once fixing water piping out in the street. It felt like the
street was his home, he had a pride obligation to making sure his home was in
good repair. I also see them doing things like trash sorting, things nobody
else wants to do at reasonable rates.

I think Americans, if they could moderate their sense of social justice, could
find win-win solutions with the really hard-up that makes everybody's lives
better. But they don't, so industries such as sanitation become hotbeds of
corruption instead.

But I grew up lower class, white privilege made my life much more palatable
than it otherwise would have been. But I am very familiar with the
psychological burdens of the working poor. Life is hard, but they are not
stupid people. There's a tendency in America to equate lower-class with
unintelligent. Just because you don't have an education doesn't make you
stupid.

Hard life makes you hard, eventually poor people become unable to climb the
social ladder. I've met people who willingly chose less affluent environs over
more affluent ones because the poorer ones were places they knew. They felt
richer because of their knowledge than because of their opportunity.

------
Chinjut
"I suspect this might have something to do with the rising cost of health
insurance"

"Whenever there's an article about the lack of jobs or pay for the middle
class, the first thing I do is hit Ctrl+F and start typing 'immigration'."

"I have one word. Technology."

"It's simpler than they make it out to be: there is no demand uptick."

An awful lot of theories and certainty here on Hacker News...

~~~
ThomPete
Yeah they are called perspectives which is one of the things I love about HN
:)

The discussions on here are mostly of very high quality even when people
disagree furiously.

~~~
RodericDay
He's pointing out that every other poster is cocksure with their pithy silver-
bullet explanations.

~~~
ThomPete
I know what he is doing but he doesn't know about how sure anyone is just
based on what they write and even how they write it.

Also people are talking about different aspects and so to even compare them as
they are all trying to answer the same question is well an interesting
perspective but hardly fair.

------
bsder
It's simpler than they make it out to be: there is no demand uptick.

People are already spending at 100%+ of their income so they have no way to
_increase_ what they are buying even as the economy improves for some people.
So, employers have no reason to hire more or extend hours.

This is why we see the minimum wage increases also stimulating the economy
where they occur. They result in demand increases.

~~~
yummyfajitas
The entire purpose of a demand uptick is to cause inflation and lower real
wages. Google Keynesian economics - its a fix for unemployment and output
gaps, not low wages.

Given that we are already at the natural rate of unemployment, further demand
creation is pointless anyway.

~~~
bsder
I would suggest you take your own advice and spend some time on Google.

The purpose of stimulating demand is to break a "coordination failure" where
falling demand->hiring cutbacks->cutting consumption->falling demand. That's
Keynesian (neo-Keynesian actually).

As for "natural rate of unemployment", there is no particular evidence that we
are at one, and, in fact, there is lots of evidence that there is probably not
a single "natural rate of unemployment" and mounting evidence against the
concept in general.

~~~
yummyfajitas
You aren't disagreeing with me - the coordination failure you refer to is
nominal rigidities. To disagree with me, demonstrate involuntary unemployment
and outout gaps together with flexible wages.

------
compostor42
The enormous amount of immigrants (both legal and illegal) to the US is
definitely a huge factor.

They say the current population won't do the unpleasant jobs that immigrants
do because the pay is too low. It seems no one has stopped to consider that
those jobs pay so low because there is a seemingly endless supply of cheap
immigrant workers to do them. It drives wages down and provides little
incentive for automation.

The ancient Greeks invented the steam engine but never really used it because
they had no shortage of slave labor. There was no incentive to further develop
that technology.

------
ThomPete
I have one word. Technology.

Think about technology as outsourcing and you realize what the problem is
because you are realizing the trend; Technology will compete with higher and
higher levels of abstraction and so you either have to be really skilled in an
increasingly competitive space or you need to accept taking jobs at wages that
are as low as they are because of the increased competition from technology.

And until economist stop treating technology as an externality they wont
understand whats going on and we will keep debating this as if its a political
problem. In my opinion its not.

[http://www.technologyreview.com/sites/default/files/images/d...](http://www.technologyreview.com/sites/default/files/images/destroying.jobs_.chart1x910_0.jpg)

~~~
gaius
Yes but there's no evidence that links higher technology to greater
productivity. All the accountants who were automated out of existence by COBOL
programs, simply became COBOL programmers, and the net amount of accounting
done per person involved didn't change!

~~~
ThomPete
Thats the wrong way of looking at it.

The point isn't just whether it leads to higher productivity the point is that
it removes the need for certain industries almost completely.

Just think about the amount of areas that digitalization have completely
removed. Those are jobs lost that aren't created somewhere else in the same
phase as it's destroying them. And most of those jobs are being outsourced.

With regards to your cobol example I would like to see where you get that idea
from. There is a huge demand of cobol programmers today because of all the old
financial/banking systems which no one really dares touching. So that's an
unlikely claim.

~~~
gaius
Such as what?

Things are done because _they need doing_ , i.e. there is demand for them to
be done, whether they are digital or analogue won't change that. Outsourcing
is a better explanation of what's happening.

The demand for COBOL programmers proves my point. Computers didn't eliminate
those jobs. They just transformed them. So where a company might have employed
100 accountants to do their accounting, now they employ 50 accountants and 50
programmers or 10 accountants and 90 programmers... Anyone who could do one
job could probably pick up the other.

~~~
ThomPete
Outsourcing is just the step before automation. The US lost 4 million jobs to
China between 98-2004 in the same period the Chinese lost 18 million jobs to
the robots. This trend isn't stopping, instead it will only continue faster
and faster.

The tings that digitalization kills are things like the camera, the walkman,
the video-recorder, the video-camera, the post-processing machines,
instruments, the studio musician and I could go on.

These aren't jobs that then are created somewhere else. In most of the cases
where new industries or new areas are made they either require extremely
highly specialized education or they are very hard for most people to make any
money in. The app store being a good example.

Your Cobol example isn't proving anything at all and your claim was wrong to
begin with. You claimed accountants just became cobol developers which is
simply a false claim. And the reason why there is a need for cobol isn't
because of a new demand but because of a dwindling availability of an existing
demand which is also going down until a new technology makes that completely
redundant.

------
tqtthrowaway1
Whenever there's an article about the lack of jobs or pay for the middle
class, the first thing I do is hit Ctrl+F and start typing "immigration". This
being the New York Times, it doesn't show up, for a variety of partisan and
ownership-related reasons.

Supply and demand applies just as much to labor markets as it does to any
other. The "vanishing pay raise" makes a lot more sense when you consider the
deliberate increase in labor supply for the explicit purposes of lining the
pockets of crooked billionaires like Mark Zuckerberg and Carlos Slim.

~~~
gaius
It is nothing to do with immigration really, since the H1B is explicitly not
an immigration visa.

------
danmaz74
> although some fear that inflation will climb if the jobless rate is that low

AFAIK the reason why inflation climbs when the jobless rate is very low is
because with few jobless the cost of labor usually increases, and THEN prices
increase to reflect higher costs. But if there are no wage increases, there is
no reason for a low jobless rate to increase inflation...

------
hwstar
Over the long term, wages in first world countries will remain flat or decline
and meet the third world countries in the middle.

------
pm24601
Seems like the solution to this problem is to keep raising the minimum wage
until Google, Apple, etc. who have BILLIONS locked up away from the economy
start spending it.

But companies with vast savings are sucking the growth out of the economy.
Same a high tax rate sucks economic power out of the economy.

------
masterleep
Since the government has tried as vigorously as possible to make it expensive
and legally risky to employ people, there is really no mystery here.

~~~
EdwardDiego
You're kidding, I hope, if not, try visiting some non-US jurisdictions and see
how they do it. The US has very weak protection for employees - the "At-will"
employment practise being a striking example.

