
Technology Change Not the Culprit in Wages Falling Behind US Productivity Gains - cribbles
https://www.nakedcapitalism.com/2018/02/technology-change-not-culprit-wages-falling-behind-us-productivity-gains.html
======
moorhosj
This paper finds that the change in wage distribution in the US over the past
40 years has been more similar to China than France. This implies policy may
be playing a large factor. How many times has the highest tax rate been cut in
the past 40 years? How many states have enacted right-to-work laws? How have
special tax rates for carried interest, long term capitals gains and dividends
impacted business decisions?

[https://www.economist.com/news/finance-and-
economics/2171710...](https://www.economist.com/news/finance-and-
economics/21717102-why-chinese-citizens-seem-more-tolerant-rising-inequality-
westerners-new)

France and Germany have works council that gives labor a voice in business
decisions (a seat on the board). Maybe the solution is as easy as giving
workers a voice.

~~~
skookumchuck
> Maybe the solution is as easy as giving workers a voice.

Maybe you should give the guy you paid to paint your garage a voice in your
management of your home.

~~~
skosch
On the face of it, your reductio ad absurdum is perfectly reasonable.
Employees do their job, get their money, end of story. Right?

In continental Europe, nobody _expects_ it to work like that. It's a different
mindset. If you work in a large firm, the works council has a say (to some
degree) in management decisions. It's not always perfect – politics are
everywhere – but it is completely normal and expected by bosses and workers
alike that employment is a _relationship_ , not a transaction. And for the
most part, it seems to be working.

To someone who grew up in that culture, your wild-west thinking seems a bit,
well, primitive? Or uncivilized?

~~~
adventured
> In continental Europe, nobody expects it to work like that. ... To someone
> who grew up in that culture, your wild-west thinking seems a bit, well,
> primitive? Or uncivilized?

One should challenge that setup by asking the question: has contintental
Europe's policies resulted in high wages?

France has far lower wages than the US, with 1/4 to 1/5 the wage growth rate
of the US over the last two decades. Germany, Britain, Spain, Portugal,
Greece, Italy, Austria, Belgium, all have considerably lower wages than the
US.

Continental Europe also includes dozens of nations that are dramatically
poorer than the US, both in terms of median income and median household net
worth.

Wouldn't it be more primitive or uncivilized to be using the French approach,
since it has resulted in _dramatically_ lower wage growth for decades now?
Wage growth in France averaged 0.5% annually the prior two decades. In the US,
2.5% wage growth is considered very slow, with 3.5% to 4% being average in the
1999-2009 time frame. If their system works so well, where's the wage growth
(and we're talking about the last 20 years, not a blip of time)?

~~~
tensor
But digging deeper, Europe has a bigger middle class than the US, and the US
has the largest lower class and upper class, the latter which pulls up the
overall average.

So is the average citizen is probably better off in Europe than in the US.

Data: [https://www.citylab.com/life/2017/04/euro-vs-american-
middle...](https://www.citylab.com/life/2017/04/euro-vs-american-middle-
class/524193/)

Also, Europe is catching up on the US average income too, which is really more
relevant than what the past or current average is. It means that recent US
policy is not working in favour of the average citizen.

~~~
adventured
> Europe is catching up on the US average income too ... It means that recent
> US policy is not working in favour of the average citizen.

Western Europe isn't seeing faster wage growth than the US. Economically the
US is pulling away from Germany, Britain, Italy and France. US income and GDP
growth rates have been far higher the last 10 and 20 years than most of its
peers.

Economically speaking, Germany's GDP hasn't net expanded since 2007, when it
was $3.44 trillion (it was $3.46 trillion for 2016). France and Britain are
similar. French GDP was $2.66 trillion in 2007, it was $2.46 trillion in 2016.

In that time, 2007 to 2016, the US added GDP larger than the entire German
economy (about $4.5 trillion).

It's practically impossible to generate broad wage gains if you don't grow the
whole economic pie. That's why French wages have been so stagnant for so long,
despite all the supposedly labor friendly approaches there.

The US middle class has contracted because more people have moved up and out
of the middle class and into the upper classes, than have moved down and out
(that's true over 10, 20, 30 years of time):

[https://www.washingtonpost.com/opinions/is-the-middle-
class-...](https://www.washingtonpost.com/opinions/is-the-middle-class-moving-
up/2016/06/24/214dc04a-3a28-11e6-8f7c-d4c723a2becb_story.html)

[https://www.forbes.com/sites/timworstall/2016/06/21/sure-
the...](https://www.forbes.com/sites/timworstall/2016/06/21/sure-the-middle-
class-is-shrinking-30-of-americans-are-too-rich-to-be-middle-class-now/)

The formerly extremely poor 1/2 of Europe in the East has seen dramatic
improvement since the end of the USSR. You can see that dramatic improvement
in several countries like Czech, Slovakia, Romania (more recently), etc. Many
are still doing very poorly at growing their economies, including Bulgaria,
Moldova, Hungary, Belarus, Macedonia, Albania, Ukraine, Croatia, Bosnia.

The median incomes of Latvia and Lithuania are still around 1/4 that of the
US, Estonia is closer to 1/3 that of the US.

~~~
dragonwriter
> The US middle class has contracted because more people have moved up and out
> of the middle class and into the upper classes, than have moved down and out

The study cited directly in the Washington Post opinion piece (and indirectly,
by way of a WSJ opinion piece, in the Forbes piece -- good effort there
passing off the same underlying study as if it were two independent sources)
_excludes adult children living with parents_ from the analysis, which makes
it completely broken, since that's a living pattern that is known to be more
common among adults with lower income relative to the cost of living, and
which has been observed to increase over the time period the study addresses.
[0]

So, yeah, if you ignore a growing share of young adults that are unable to
afford to live independently, the share of the remaining population that is in
higher economic strata by income is greater.

Clever spin, but not really a good representation of the reality.

[0] See, e.g.,
[http://www.fanniemae.com/resources/file/research/housingsurv...](http://www.fanniemae.com/resources/file/research/housingsurvey/pdf/nhsjuly2014presentation.pdf)

~~~
adventured
Would you go ahead and break out the the impact you're claiming as it pertains
to adult children living with their parents? I disagree that it makes it
completely broken, the effects shown in the study are _dramatic_ , rather than
subtle. You'll need to show an equally dramatic impact from adult children
living with their parents having a counter effect.

That study also makes adjustments for household size. Further, average
household sizes are smaller today than they were in 1980, by about 10%. That
trend has been persistent, with household sizes shrinking considerably since
the 1950s/1960s.

The upper middle class expanding from 12.9% of households to 29.4% of
households, cannot be explained by your premise.

The change in adult children living with their parents between 1994 and 2016,
is a mere 4%. From 27.5% to about 31.5%. And most likely that figure is set to
decline a bit from here given the very low unemployment rate.

That 4% change, for example, could explain _some_ of the drop in the poor and
near poor, from 24.3% of households to 19.8%; and the lower middle class
falling from 23.9% to 17.1% of households. However it very obviously fails to
explain the change on those two combined. And it _entirely_ fails to explain
the epic increase in the upper middle class.

~~~
dragonwriter
> Would you go ahead and break out the the impact you're claiming as it
> pertains to adult children living with their parents?

No, barring a grant to do so, I'm not going to dig into the paper’s source
data and rerun the analysis without the methodological errors, of which the
treatment of the demographic noted is just the most glaring, should be obvious
to even a layman at the time who had been basically attentive to the news,
much less anyone seriously trying to do honest analysis. Among the other
methodological errors (and this is not intended to be an exhaustive list):

(1) The paper commendably recognized that current money income is a different
thing than class, which “knits together multiple factors such as income,
wealth, education, prestige, and cultural sophistication”, and then proceeded
to use money income alone to measure class mobility on the assertion that it
“current income is closely related to all the factors associated with social
class and because data on current income are readily available.” While
prestige and cultural sophistication are clearly hard to get annual statistics
for, education and wealth distribution are not; there is no excuse for not
including these of the intent to is assess a feature which includes them.

(2) Related to #1, Rose does not justify his thresholds as meaningful class
thresholds,

(3) Also related to the use of money income as a proxy for class, Rose
justifies using fixed real income thresholds (which mean that changes in the
median inflation-adjusted income with even with no distribution change within
the non-excluded population will result in upward “class” mobility, which,
even to the extent that money income correlates to class, doesn't seem to
correlate with _how_ it usually correlated with that concept) with the only
justification being that that's how the federal poverty line works (which is
true, but it's worth noting that this is both a controversial thing about the
federal poverty line, and dubious in relation to class generally even if it is
appropriate to the purpose of the FPL; there's probably a good reason to think
that what is right for the FPL corresponds in some ratio to the boundary for
the lower class, but that with successively higher classes income mapping to
the class is not simply a constant multiple of the poverty line.)

(4) No justification is given for the method of calculating “family of three
equivalents” (using the square root of the ratio of the actual household size
to 3 as an income divisor to get the “family of 3” equivalent income.) Note
that if one views the FPL as having a reasonably constant relationship to
class boundaries as Rose suggests in his justification of the use of constant
real-income thresholds, this method of size adjustment is tolerably close for
families _under_ 3 (though off in different directions for size 1 vs. size 2)
but artificially pushes families _over_ three upward in “class” because it
understates the additional income needed to stay at the same level with more
family members.

------
padobson
_At the opposite end of the spectrum – which we call ‘strong linkage’ – it’s
possible that productivity growth translates fully into increases in typical
workers’ pay, but even as productivity growth has been acting to raise pay,
other factors (orthogonal to productivity) have been acting to reduce it._

 _At the same time, non-purely technological hypotheses for rising mean-median
inequality include the race between education and technology (Goldin and Katz
2007), declining unionisation (Freeman et al. 2016), globalisation (Autor et
al. 2013), immigration (Borjas 2003), and the ‘superstar effect’ (Rosen 1981,
Gabaix et al. 2016). Non-technological hypotheses for the falling labour share
include labour market institutions (Levy and Temin 2007, Mishel and Bivens
2015), market structure and monopoly power (Autor et al. 2017, Barkai 2017),
capital accumulation (Piketty 2014, Piketty and Zucman 2014), and the
productivity slowdown itself (Grossman et al. 2017)._

All of the non-technological reasons, to me, boil down to globalization.

I'd love to see the productivity-wage divergence chart in China and other
developing countries. I wouldn't be surprised if the divergence is inverted in
those places that have seen unprecedented wage growth over the last forty
years.

I guess what I'm saying is that I don't think productivity and wages have
diverged as much as people think, it's just that a national analysis is
insufficient in a global labor market.

~~~
malvosenior
I would add women entering the workforce en bulk, essentially doubling it.
Between that and globalization it would seem the supply/demand ratio
significantly changed to have downward pressure on salaries.

~~~
EliRivers
All those women spend their earnings, increasing demand. Essentially doubling
it?

~~~
zaroth
A two-parent household isn't going to double its consumption of everything if
both parents start working. First, because wages will be depressed from the
new labor supply, the total income of the household doesn't double. Second
because their tax rate will increase. Third because many things we consume in
fixed units with little control over the total cost, like "health insurance".

But they will increase their consumption of some things, particularly when it
comes to the direct cost of working, so the family may spend more on things
like transportation, clothing, child care, home care & maintenance services,
food preparation, grocery delivery, etc.

~~~
jessaustin
It could be that housing costs are soaking up the bulk of the second earner's
pay?

~~~
zaroth
Home ownership rate is currently near averages maintained since the 70s. But
it increased substantially in the 40s-70s (from ~45% to 65%). So to the extent
that rise was enabled by dual income households you’re absolutely right more
demand for housing drives up housing prices and saps up the extra income.

------
arca_vorago
Because it was always about class warfare, and as W Buffett said, the rich are
winning. Just how they promised us the industrial revolution would, but
instead the rich gobbled up all the profits while starting the workers which
led to the Era of robber barons. Anyone who thinks the information or
automation revolution isn't going to result in the same thing unless we change
fundamental business practice is in for a rough surprise.

~~~
jeffreyrogers
Is this true? I think the average worker is much better off now than in the
past. It's not that long ago that many people in the US didn't have
electricity. I think what's happening is as we get richer our definition of
what's necessary to have a middle class life gets continually revised upwards.
Most people have a car, several electronic devices, eat out relatively often,
etc. What used to be a luxury or aspirational becomes commonplace.

That's not to say there aren't problems, but exaggerating how bad things are
makes any argument to fix them less credible.

~~~
wu-ikkyu
Bread and circuses[1] satifies only the most base of human needs[2]. Perhaps
that is why stress, anxiety, depression, and mental health issues have been on
the rise for quite some time now.

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

[2][https://en.m.wikipedia.org/wiki/Maslow%27s_hierarchy_of_need...](https://en.m.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs)

~~~
opportune
I think there's a lot to be said for how helpless the average worker is in the
modern economy. Part of it isn't just the absolute conditions of modern
people, but the knowledge and zeitgeist that people have now. The concept of
the "American Dream" isn't dead, but it's becoming increasingly reserved for
only a small subset of people with specific backgrounds and skills. People
that aren't, for lack of a better word, special simply aren't going to make it
big; more importantly, even if this has always been the case, people now
_know_ that about themselves.

People born in poverty look to lottery tickets, both literally and in the form
of risky activities like gang activities and becoming professional sports
players (which is risky relative to what else you could accomplish given the
same amount of effort). They typically don't have access to education, or
benefit from stable households, enough to break out. Middle class people don't
realistically have a chance of becoming wealthy unless they're unusually smart
or socially skilled. Neither group has the means to fix this situation
politically or culturally because very wealthy people control politics and
culture (or at the very least, all the important parts). Most modern success
stories are essentially an upper-middle class person rising to the lower-upper
class.

I think we need a new frontier. Maybe that's just a substitute for a lottery
ticket, but it's a lottery ticket with much better odds.

------
jakecrouch
Wealth inequality is the result of a debt bubble that's been growing for
several decades, not technology. High household debt to GDP and wealth
inequality probably coincide today for the same reason they coincided during
the Great Depression. The ways these debts have to be restructured or dealt
with distort the economy, in a way that tends to massively benefit some while
hurting everyone else. If you own stock in or work for a health insurance
company, the last decade has been fantastic. On the other hand, the government
will soon find that it's having trouble keeping up with the debt from its
healthcare programs. If you started a company in Silicon Valley, you
benefitted from enormous pools of VC money that might have been in treasury
bonds if the Federal Reserve hadn't already been buying trillions of them. If
we look back historically, wealth inequality began to normalize by the 1950s
only after the US's debt was erased. The story that runaway technology is
creating massive inequality is unlikely be true in a country where GDP growth
is only 2%.

------
losvedir
This touches on something I've been thinking about but don't have a word to
look into further; maybe someone can help me out.

I would think that the productivity of a worker (as defined here) would put an
_upper bound_ on wages, but not that wages would necessarily rise to that.
That would depend on supply and demand of labor.

The concept I've been toying with is this: suppose there are 100 software jobs
and 90 software developers. In that regime, the wages will rise to the value
created by the software developers, since there will be a bidding war among
the companies that need them, and they'll be willing to pay up to what the
developer is worth to them. On the other hand, suppose there are 100 software
jobs and 110 software developers. Now the wages will _fall_ to the minimum
amount the developers will take, based on cost of living or switching careers
or whatever, since companies will now offer as little as they can get away
with.

IOW, I think that there are two discontinuous "wage regimes" depending on if
there are more workers than jobs, or more jobs than workers. Is there a term
or concept for this that I can read about more?

~~~
dredmorbius
You've pretty much precisely nailed this.

If you go to the classical economists (Smith, Ricardo, Mill, Marx), you'll
find that they tend to discuss both specific classes of goods, and specific
factors to the wages of labour.

Of the first, from Smith, generally: commodities, wages, rents, interest,
assets (gold and silver), capital (stock), and public goods ("expenses of the
sovereign"). These are somewhat scattered about the book, the first six
largely in Books 1 & 2, and Book 5 devoted solely to the latter.

I'll turn it over to Smith for the factors in compensation of labour, as he's
uncharacteristically direct and brief:

"The five following are the principal circumstances which, so far as I have
been able to observe, make up for a small pecuniary gain in some employments,
and counterbalance a great one in others: first, the agreeableness or
disagreeableness of the employments themselves; secondly, the easiness and
cheapness, or the difficulty and expense of learning them; thirdly, the
constancy or inconstancy of employment in them; fourthly, the small or great
trust which must be reposed in those who exercise them; and, fifthly, the
probability or improbability of success in them."

[https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...](https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_10)

(An expansion of each of the five elements follows.)

From Ricardo we get the Law of Rent and Iron Law of Wages (Lasalle, Marx, and
Engles also discuss this). The first notes that for any productive input
_whose quantity is fixed_ , the price will rise to capture _all_ of the
generated value. The second notes that wages fall to _or below_ the level of
bare subsistence.

The second factor is _most_ distinct for _nondifferentiated_ labour, that is,
unskilled, and in particular, in a stagnant or declining economy. Smith
describes the circumstances of the latter in terrifying detail in Book 1
Chapter 8, which I strongly recommend reading in full, though the relevant
detail begins at: "But it would be otherwise in a country where the funds
destined for the maintenance of labour were sensibly decaying..."

[https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...](https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_8)

Smith, _et al_ , are _classical_ economists, and their observations were given
mathematical rigour and explanation by the _marginalists_. Effectively, goods
producing rents have _zero price elasticity_ , public goods have _zero
marginal cost_ , and in the case of wages, there are generally distinct short-
term and long-term cost components, a phenomenon which can produce a
_backwards-bending supply curve_. That is, if you reduce a wage rate _below_
subsistence, on a time-worked or piece-work basis, you will get _more_
productivity _as labourers work more hours to simply meet their minimum
survival requirements._ This comes, however, at the cost of long-term
capacity: raising of families, rest and recuperation, education, and the like.

Much of the conflict of modern economic life, from a worker-renter's point of
view, can be explained by the squeeze of falling wages against rising rents,
via numerous mechanisms.

Your observation on who has rightful claim to the _surplus value_ generated by
labour (and the role of increased productivity in setting an upper bound to
the possible wage component) is the matter explored by Thorstein Veblen,
though I need to revisit just exactly where.

~~~
random_user456
Amazing summary of the text, would you recommend any modern books on the above
subjects?

~~~
dredmorbius
Apologies for the late response, though I've been thinking this over.

I'll stand by my earlier comment: _read the classic economists themselves,
directly, if at all possible._ Smith, Malthus, Ricardo, Marx, Mill (both John
Stuart and David), Carlisle, Toynbee, Marshall.

You don't need to read _all_ of them or the works in full, but each of these
addresses at least in some depth and detail the question of goods and their
pricing behaviours, in ways that are not generally addressed today.

There are overviews and histories of economic thought and its development
which should be useful. I've read Heilbroner ( _The Worldly Philosophers_ )
and Backhouse ( _The Ordinary Business of Life_ ), both of which provide a
broad overview. Ha-Joon Chang has _Economics: The User 's Guide_, which is a
pretty good overview of various schools of thought.

I'm particularly impressed currently by Steve Keen, whose most recent book is
_Debunking Economics_. He's been developing his ideas at a rapid pace and to
an extent has overrun what's in the book. He's good to watch though.

John Kenneth Galbraith tends generally to discuss economics more-or-less in
the terms I've been mentioning here, with _The Affluent Society_ and _Age of
Uncertainty_ probably being good starting points.

I'm not much impressed by and generally strongly discount most Libertarian
thinking, though if you'd like a sense of what I consider to be bad/poor
economic theory, Howard Hazlitt's _Economics in One Lesson_ and Murray
Rothbard's _Libertarian Manifesto_ might be considerations.

Hope that helps.

------
Animats
That's an awful article. The author is trying to infer too much from data that
summarizes the entire economy. There's far more detailed data available from
the Bureau of Labor Statistics. You can look at technology and productivity by
industry sector, which is more useful.

This guy was Secretary of the Treasury and a professor of economics at
Harvard. He has to know better. This looks like starting from a desired result
and working backwards to support that argument.

------
darepublic
I first read the comments page on nakedcapitalism.com before browsing these
comments. It is interesting that these articles are discussed on HN as a proxy
for using the comment section of the actual site, but I guess that is the norm
these days. I would kind of expect the discussion at the actual site to be
more informed as only more dedicated people to the topic would have membership
at the smaller site. But I feel like, more or less, the discussion here
mirrors the one on nakedcapitalism. It would be interesting to bucket all the
arguments that are more or less the same. I see the following: (in answer to
why have wages stagnated)

* 'its because the rich are greedy assholes who have corrupted government'

* its due to globalization or cannot be explained without factoring this in

* its because of some complex unorthodox economic theory (insert here)

I can tolerate the comments on HN more than on reddit where I can only
anticipate the ratio would tilt so heavily in favour of just emotional
outbursts against rich greedy assholes that get upvoted by online pitchforked
mobs ready for the revolution. These main lines of thought spawn mini threads
that swirl like like pools of attention suckage in a steady stream of water.
What I think would be interesting would be for some kind of automatic
moderation that parses out the main arguments, prevents de-railments, crushes
duplication, and forces the true competing arguments to face each other head
on in the rational arena.

------
wu-ikkyu
So the basic question is: why are wages stagnating in the face of increased
productivity?

What is wrong with a simple, non-technical answer like: _because the people at
the top don 't want to share_?

~~~
aggronn
Even if this is true, you're limiting your options by not trying to understand
the technicalities behind it. Why don't the people at the top want to share?
What are we even sharing? How does sharing happen? By what means does sharing
occur?

The only reason you believe the people at the top don't want to share is
because of centuries of thinking that has lead you to see the structure of the
world in a way that this is useful. Summing up centuries of thought into a
single phrase, and then throwing out the data and ideas that got you there
is...risk at best.

~~~
schiffern
> Why don't the people at the top want to share?

There are people like that in every wealth bracket. The difference is, the
people at the top are uniquely empowered to make it happen.

As Dana Meadows warned us over 40 years ago, the numerous "[more] success to
the successful" feedback loops in our society have overcome the wealth-
equalizing negative feedback loops, with the (predictable) result being
runaway exponential wealth concentration.[1] _Limits to Growth_ , despite its
convenient "debunking" in the popular zeitgeist, is tracking well with real-
world data.[2]

[1] 1h long, worth it:
[https://www.youtube.com/watch?v=HMmChiLZZHg](https://www.youtube.com/watch?v=HMmChiLZZHg)

[2]
[http://sustainable.unimelb.edu.au/sites/default/files/docs/M...](http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-
ResearchPaper-4_Turner_2014.pdf), via
[https://www.theguardian.com/commentisfree/2014/sep/02/limits...](https://www.theguardian.com/commentisfree/2014/sep/02/limits-
to-growth-was-right-new-research-shows-were-nearing-collapse)

~~~
schiffern
(too late to edit)

[1] timecode link
[https://www.youtube.com/watch?v=HMmChiLZZHg&t=3m55s](https://www.youtube.com/watch?v=HMmChiLZZHg&t=3m55s)

direct link to the part on "success to the successful" loops
[https://www.youtube.com/watch?v=HMmChiLZZHg&t=18m48s](https://www.youtube.com/watch?v=HMmChiLZZHg&t=18m48s)

------
beefman
Original source: [https://voxeu.org/article/link-between-us-pay-and-
productivi...](https://voxeu.org/article/link-between-us-pay-and-productivity)

------
novalis78
What about the disconnecting of currency from the gold standard (1971/1973).
Productivity gains that rippled through the economy based on a capped unit of
accounting were now more likely to end up in the banking vaults of the
institutions overseeing the money issuance and those close to the source -
while the rest of the workforce sat on inflating paper.

~~~
throwaway1748
Not sure why this comment wasn't upvoted higher. Inflation has effectively
been a slow-moving tax increase to the middle class, as tax brackets don't
change with the decreasing value of the US dollar. A $100,000 salary in 2018
was equivalent to a $65,000 salary in 2000, meaning much more of one's 2018
income is pushed into the higher 25% bracket rather than the lower 15%
bracket.

~~~
novalis78
Also coincides nicely with the demand on families to go from one partner
working and able to sustain a family of 4-5 (lots more kids in the 50s/60s) to
both parents having to work and smaller family size over the past 50 years.

------
crdoconnor
Technology makes a convenient scapegoat though.

~~~
mfoy_
Especially because technology drives automation, and automation pushes us ever
closer to a very difficult question: What, exactly, will happen when all jobs
which can be automated, are automated?

~~~
kruhft
The automators are automated.

~~~
ph0rque
But who will automate the automator automators?

~~~
murph-almighty
_Alan Moore scribbles furiously_

------
tomc1985
Duh. The real answer is greed.

------
taw-an
There is no competition for wages, only a cartel effect. It's pretty simple.

------
digitalmaster
Why are we still doing this in 2018! The jury isn't out on this one - the
voodoo tricke-down economic experiment is over and the results are in - it is
nothing more than a sensationalized way for the rich to piss on the poor. If
you don't believe me try this: Go on google.com - type "rich piss on the poor"
\- the click "I'm feeling lucky". I rest my case lol

A more constructive debate should focus on how to first mitigate, reverse and
then prevent.

------
CiPHPerCoder
This is the kind of content I like to see on HN: An approachable blog post
explaining research in a field I'm not intimately familiar with.

------
CWuestefeld
There was just a post on a related topic, technological unemployment, on
SlateStarCodex. Quoting the conclusion below:

Here are some tentative conclusions:

1\. Technological unemployment is not happening right now, at least not more
so than previous eras. The official statistics are confusing, but they show no
signs of increases in this phenomenon. (70% confidence)

2\. On the other hand, there are signs of technological underemployment –
robots taking middle-skill jobs and then pushing people into other jobs.
Although some people will be “pushed” into higher-skill jobs, many will be
pushed into lower-skill jobs. This seems to be what happened to the
manufacturing industry recently. (70% confidence)

3\. This sort of thing has been happening for centuries and in theory everyone
should eventually adjust, but there are some signs that they aren’t. This may
have as much to do with changes to the educational, political, and economic
system as with the nature of robots per se. (60% confidence)

4\. Economists are genuinely divided on how this is going to end up, and
whether this will just be a temporary blip while people develop new skills, or
the new normal. (~100% confidence)

5\. Technology seems poised to disrupt lots of new industries very soon, and
could replace humans entirely sometime within the next hundred years. (???)

This is a very depressing conclusion. If technology didn’t cause problems,
that would be great. If technology made lots of people unemployed, that would
be hard to miss, and the government might eventually be willing to subsidize
something like a universal basic income. But we won’t get that. We’ll just get
people being pushed into worse and worse jobs, in a way that does not inspire
widespread sympathy or collective action. The prospect of educational, social,
or political intervention remains murky.

[http://slatestarcodex.com/2018/02/19/technological-
unemploym...](http://slatestarcodex.com/2018/02/19/technological-unemployment-
much-more-than-you-wanted-to-know/)

~~~
passthefist
> 2\. On the other hand, there are signs of technological underemployment –
> robots taking middle-skill jobs and then pushing people into other jobs.
> Although some people will be “pushed” into higher-skill jobs, many will be
> pushed into lower-skill jobs. This seems to be what happened to the
> manufacturing industry recently. (70% confidence)

There's a couple research papers from the NBER that I think show this has been
happening since the early 90's.

[http://www.nber.org/papers/w18334.pdf](http://www.nber.org/papers/w18334.pdf)

The graphs of for the jobless recoveries are particularly telling. One thing
the authors suggest is that before the 90's after a recession we recovered the
jobs that were lost due to the slowdown, but after the 90's companies could
outsource or automate during the recession to deal with the economic
pressures, so when the economy recovered those jobs weren't around to come
back to.

[http://www.nber.org/papers/w18901.pdf](http://www.nber.org/papers/w18901.pdf)
From the conclusion

> In particular, we have argued that after two decades of growth in the demand
> for occupations high in cognitive tasks, the US economy reversed and
> experienced a decline in the demand for such skills. The demand for
> cognitive tasks was to a large extent the motor of the US labor market prior
> to 2000. Once this motor reversed, the employment rate in the US economy
> started to contract. As we have emphasized, while this demand for cognitive
> tasks directly effects mainly high skilled workers, we have provided
> evidence that it has indirectly affected lower skill workers by pushing them
> out of jobs that have been taken up by higher skilled worker displaced from
> cognitive occupations. This has resulted in high growth in employment in low
> skilled manual jobs with declining wages in those occupations, and has
> pushed many low skill individual's out of the labor market.

Moreover, the early 90's are about the same time we see a rise in disability
benefits, especially for children. There's a big increase that starts in the
early 90's. Some of this is probably from the welfare reform that happened
around that time, but [http://apps.npr.org/unfit-for-
work/](http://apps.npr.org/unfit-for-work/) has some pretty interesting
insights and that was written in 2011. They end the article with

> Somewhere around 30 years ago, the economy started changing in some
> fundamental ways. There are now millions of Americans who do not have the
> skills or education to make it in this country.

And as you mentioned, we don't have any programs to bridge that gap between
low and high skilled jobs. It used to be that you could work your way up,
training on the job and gaining new skills. Instead we turn to formal training
or education, but those have capital costs that create a barrier of entry into
the higher paid labor market. If you're already working one or more low income
jobs then it's not just the monetary but also the time capital required to
retrain. Either you spend most of your time working and training/studying or
you take the opportunity cost of quitting your job in the hopes of improving
your skills to find a new one. It seems many are taking a third route of going
to a doctor and getting on disability benefits, and while I can't find it I
read an article a while ago where one of the doctors straight up said that
they include education in the decision, seeing some people as unemployable
with their level of education. I think doctors making that judgement call is
it's own discussion, but just furthers the point.

Then you've got companies like Dollar General betting on America having a
"permanent underclass", their own words:
[https://www.google.com/search?q=dollar+general+permanent+und...](https://www.google.com/search?q=dollar+general+permanent+underclass)

I think we're only just realizing this now, but I pretty much agree with your
sentiment that we're not ready to handle this. Even if we could fix the issues
with cheap foreign and domestic labor that's not going to stop automation and
IMO we're already in the post-automation future, just with globalization
providing a similar effect.

> might eventually be willing to subsidize something like a universal basic
> income.

I'm kinda interested if there's any studies that use disability benefits as a
kind of natural experiment for basic income since in a way it's already a form
of UBI. There's some obvious differences, but one of the assumptions of SSDI
is that you're incapable of working and that's similar to one of the
criticisms of UBI that it would incentivize people not to work, which could
have negative social consequences. I'm sure there's something we could learn
from looking at people on disability benefits about that.

~~~
graedus
> Then you've got companies like Dollar General betting on America having a
> "permanent underclass", their own words

Interesting quote, thanks for that. However it's not "in their own words". The
quote comes from Garrick Brown, director for retail research at a commercial
real estate company. Here's the original source:

[https://www.bloomberg.com/news/features/2017-10-11/dollar-
ge...](https://www.bloomberg.com/news/features/2017-10-11/dollar-general-hits-
a-gold-mine-in-rural-america)

~~~
passthefist
Ah, my bad. I misread the article. Still interesting that someone would choose
to say that publicly.

------
allthenews
Where does this idea come from that if a worker is granted a novel piece of
technology which makes him/her more productive, he/she is entitled to a raise,
without necessarily demonstrating any personal improvement or additional
contribution to the company?

This attitude reeks of entitlement, to me.

Edit: to clarify, I believe that articles like these, which do not
differentiate between what I would call intrinsic and extrinsic productivity.
If a worker picks up a new language and automates away a portion of his job,
his intrinsic productivity has increased, making him more valuable on the
market.

If I retool a station on an automotive assembly line and extrinsically
increase the productivity of a worker, it doesn't make sense to presume that
he is deserving in a share of that increased profit, because his value has not
changed.

I think there is a certain hesitation in polite [non business] society
regarding this kind of measurement of human value, and so we find ourselves
with what is only a puzzle in appearance. The bottom line is that a worker's
compensation on average is determined by how useful he is with a certain set
of tools, not how useful his tools are.

~~~
egypturnash
So let's say that you and I go into business together making artificial
flowers. Initially we are both sewing them entirely by hand and selling them.
We're barely making enough to scrape by, working twelve hours a day. It kind
of sucks.

One day, I win a thousand bucks in the lottery and buy a couple of sewing
machines for us to use. We can now make, oh, fifty flowers in the time it took
us to make one.

Let's assume that the demand for artificial flowers is _far_ higher than we
can fulfill. We could work as many hours as we used to and start selling fifty
times as many flowers. But instead we work a little less and sell thirty times
as many. We're still we're making a lot more money than we used to.

Now. Since I bought the sewing machines with my own money, _clearly_ I should
be the one reaping all of the benefits of this new order. I'll take all the
money and pay you exactly the same amount of money you were making when we
were both sewing flowers by hand. So I'm getting about _fifty-nine times as
much as you are_.

"Hey, Egypt," you say. "Thanks to those sewing machines, I'm creating a lot
more value than I used to. Maybe I should be getting, I dunno, twice what I
used to get? Or a hell of a lot more?"

And I sneer down at you from atop my golden toilet. "Your attitude _reeks_ of
entitlement," I say. "Get back to your sewing machine, Thenews."

Three weeks later, you're fired, and replaced by a guy living in a tent under
the Interstate who'll make flowers for _half_ of what you were paying. It's my
sewing machines, after all.

~~~
sigstoat
> It's my sewing machines, after all.

that you've also got to maintain, insure, save funds to replace at the end of
their life, etc. all while not earning 7% on the original $1000 by letting it
sit in the stock market long term.

~~~
egypturnash
Yes! Clearly these considerations are worth the _entirety_ of the profits
generated by Flowr, Inc's new equipment.

------
trophycase
I wonder how much of this stagnation can be attributed to fewer people
performing "real work"... that is producing something that actually adds
value. Just thinking of the sheer number of people and resources used in
advertising, movie CGI, useless chat apps, etc. that are basically a net
negative to real economic output, it makes me think that maybe these people
are the ones getting paid with the productivity gains of those who produce
real output.

Not trying to put anyone down here, it's just I can't see a lot of economic
benefit in a team of 10 engineers modeling the hair of the next Assassin's
Creed character... and where do you think this money comes from?

~~~
socalnate1
"Not trying to put anyone down here, it's just I can't see a lot of economic
benefit in a team of 10 engineers modeling the hair of the next Assassin's
Creed character... and where do you think this money comes from?"

Errr - doesn't it come from the people buying the Assassin's Creed games? That
particularly series earns hundreds of millions of dollars each game, and at
least some of that value is created by the engineers modeling the character's
hair.

~~~
tpallarino
The money earned from Assassin's Creed isn't by creating value, it's given by
others who are creating value. I'm genuinely surprised I'm getting so many
people disagreeing with this idea.

~~~
skookumchuck
The game purchases believe it has enough value to be worth exchanging their
dollars for it.

Do you also believe the Rolling Stones didn't create any real value?

~~~
trophycase
Does getting people addicted to heroin add value? Because people will exchange
their dollars for that too.

Just because people pay money for something doesn't mean it adds value or
creates wealth. Rolling Stones is a tough case, some entertainment is
necessary, but at what level and cost is up for debate, it's not like I have
all the answers.

~~~
PeterisP
Necessities is a fixed amount, wants are (nearly) boundless. As we are able to
afford things beyond bare necessities, pretty much all value create and
consumed isn't 'necessary' \- it's one or other kind of comfort, desire,
status, entertainment, etc. Those things do add value and do create wealth -
if getting enough nutrients and bare minimum of shelter takes just 10% of my
resources, then 90% of my wealth is something that's not necessary.

If people prefer hearing a song over getting an (extra) loaf of bread, then
hearing that song is by definition more valuable (more valued by that person)
as that loaf of bread. There's not much debate needed about Rolling Stones -
millions of people have expressed their values, and their choices illustrate
that the music of Rolling Stones is literally more valuable than a billion
loaves of bread; people have intentionally allocated a billion bread-loaves
worth resources towards Rolling Stones because they valued Rolling Stones more
than other alternatives.

People paying money for something doesn't _necessarily_ mean it adds value or
creates wealth, there are all kinds of edge cases like fraud, exploitation,
addiction, etc, but in general, in the vast majority of cases it _does_ mean
exactly that - if people genuinely freely _wanted_ to pay money for something
and did so, then that's very informative about what they actually value; this
is far more informative and truthful than, for example, what they _claim_ they
value.

