
How Big Firms Keep Wages Low - howard941
https://www.forbes.com/sites/teresaghilarducci/2019/01/21/uncovering-the-mystery-of-your-sluggish-paycheck/#70a9b2371d79
======
woolvalley
Nobody talks about how it's an explicit fed policy to prevent wage growth,
because of worries of "inflation". While other kinds of inflation are ok, such
as the asset price inflation we are seeing today. The asset price inflation
comes from the 2007 era quantative easing money given to banks instead.

That is a major reason why wages are kept low. The policy started around the
1970s, and surprise surprise, real wage growth has been flat since then.

The fed & US government is the biggest firm out there.

~~~
Cacti
Conversely, it is an explicit Fed policy to always have some non-trivial
amount of inflation. In fact, generally speaking, inflation is purposefully
created, and has to exist, in order for the Fed to control the money supply,
because the tools available to them become largely ineffective once real rates
drop below 0% for any significant stretch of time ("pushing on a string"). The
only significant obstacle to this was the domestic, then international pegging
of the dollar to gold reserves, the last vestiges of it being removed in the
early 1970s (this of course being the high point of real wage growth in the
US).

This is not per se a terrible thing (assuming some mythical scenario where
wage growth and inflation are nearly balanced), but it certainly shifts the
balance of power from inflation to the _rate_ of inflation, and therefore is
easy to nickle and dime until your average worker is almost assuredly
experiencing wage growth lower than inflation. Small changes here, small
changes there, ones nearly impossible for your average person to have any
control over or have any lever over, and largely imperceptable to most people,
end up being de-facto theft through the back door.

~~~
_red
The other interesting connection to wage growth and 1970's was 'women in the
workforce'.

The concept, apart from the genuine support that existed for it, was certainly
pushed by the feds, not out of political support but because they knew what
the implications were.

They could drive down purchasing power and families could make up for it by
having both parents work.

~~~
gumby
I agree that this factor has a big impact on the economy but I don't see how
it drives down purchasing power in any way. By having more people available to
do more things you have an opportunity for more economic activity.

It's true that when an economy is in deep, possibly structural recession, you
can increase wages by reducing the number of workers (this was used in Germany
in the 1930s -- when they cut the number of people allowed to work in half the
employment rate magically and mathematically doubled). But if you think that
there is inherently a finite amount of work to be done (the so-called "lump of
labor fallacy") you could also "fix" this problem by adding a day (or two!) to
the week end. France tried this by lowering the number of non-overtime hours
per week from 40, but it had no real effect.

Instead I think there is general consensus that having more people available
to do things promotes economic growth and human freedom.

It has had a pernicious effect: _household_ income has increased because the
number of people working per household now averages more than 1. Relying on
that measurement has masked the overall flattening of wage growth, which has
been quite a bad thing.

I don't know what you mean by this policy being "pushed by the feds"; could
you give any examples?

~~~
woolvalley
I think they mean supported maybe? I can definitely see a typical economist
giving arguments why women going into the workforce and away from the family
'workforce' is a good thing, this being encouraged by the fed which leads to
policy changes by congress people.

I think what people argue is multifold:

\- Households tend to pay for things in terms of budget percentages vs
something more rational. Ex: People tend to semiconciously target 30% of their
income towards housing, and will upgrade and downgrade their housing
accordingly as incomes go up and down. A dual income household will therefore
pay approx double the normal price if single family households are the norm.

\- The cost of things in some markets, especially NIMBY housing markets, are
demand sensitive at the margins since the supply isn't responding properly due
to rent seeking structures. So if a new more competitive creature called the
dual income household lands on the scene, the price norm will adjust to assume
a dual income household vs a single income household as the market price

\- Employers consider cost of living in pay to make a competitive offer to
employees. If the typical household is dual income, the pressure to pay more
to cover this norm is reduced. People quickly figure out that you need to be
dual income to pay your rent and have a 'family sized' lifestyle.

\- Iterate this kind of model several times over a lot of stuff and you need
to be a dual income household in many cases to tread water.

So what you are saying and what others say can both be true at the same time.
Dual income norms increase total economic output, but also make it very hard
to compete as a single income household on the market, which have other knock
on effects such as decreased fertility since all of the 'free' household labor
has now disappeared.

Go watch "F is for Family" for a 1970s time capsule of how family life was
back then. You have a suburban white single family household living in a house
on a single lower-middle class income, with 2 cars, the conflicts that arises
as the wife starts working and her previous 'free' household labor disappears
and more.

~~~
gumby
Thanks, good analysis.

------
mdorazio
Not mentioned in the article is another aspect of this: 1 in 10 American
workers is now an independent contractor or works for a contract labor firm
[1]. When monopsony starts to creep into buyers of contract labor, bargaining
power drops and wages stagnate or fall as well [2].

[1] [https://www.npr.org/2018/06/07/617863204/one-
in-10-workers-a...](https://www.npr.org/2018/06/07/617863204/one-
in-10-workers-are-independent-contractors-labor-department-says)

[2] [https://thehill.com/opinion/finance/409876-the-hidden-
culpri...](https://thehill.com/opinion/finance/409876-the-hidden-culprit-
behind-stagnant-wages)

~~~
hoaw
It interesting/despairing to see that the modern world just seem to end up
formalizing age old things like collusion and corruption. So many of these
situation are essentially lose-lose-lose. I really wonder if any country will
manage to keep on track, or we all wake up when we realize there is
competition. It isn't exactly unknown how to be successful as a country, or at
least it is pretty well known how to fail. It is weird that everything have
become easier, yet more complex. I guess that is why all the super vertically
integrated companies are outperforming the rest of society.

------
Bucephalus355
Here’s my salary to help ppl negotiate:

I worked for KPMG previously (within 12 months) and made 140k as an AWS
Architect (designing the environment and then building it out in the GUI).

This was in Dallas, Texas so good amount of money.

If you’re going into any consulting company as a cloud person or devops person
with more than 2 years experience, anything less than 120k isn’t acceptable if
you’re a US citizen.

~~~
Aloha
Citizenship shouldnt matter, location of work should. If someone is working in
the United States, they should be paid the same as anyone else in the United
States doing that same work, no matter that persons country of origin, Country
of Citizenship, or visa status.

(Apparently this is an unpopular opinion)

~~~
ptd
I don’t think it’s unpopular, it’s just an unfortunate reality.

An individual’s compensation is dependent on how much people with similar
skills, backgrounds, and experiences will accept.

Is this fair?

Nope, and that’s why we have minimum wage. No matter how low the wage is,
people will accept the job for the money.

It would be hard(if not impossible) to implement an effective universal
minimum wage for international workers, but I don’t see any other solutions.

~~~
toweringgoat
You don't need anything near as complex. You just need to give visa-holders
(A) job mobility, (B) the right to stay in the country for some amount of time
when not employed (this doesn't have to be unlimited...), and ideally (C) not
lock the Visa to the employer beyond a year or two.

Some countries implement the above, some don't.

------
rhodo
>The suspicious use of noncompetes as a pure power play came to light when the
fast food joint Jimmy Johns was discovered to have forced their sandwich
makers to promise not to go to another fast food restaurant. It is not
credible that they were taking JJ secrets to McDonalds. But the action froze
JJ workers in searching for a better job. Surprisingly, the courts said it was
legal, but JJ settled and stopped using them.

This is so fucked

~~~
Cacti
Outside of rare cases, the entire concept needs to be made illegal, along with
forced arbitration.

------
rm_-rf_slash
There wasn’t much mentioned in the way of mitigation, which is somewhat
disappointing. If we are to accept that globalization and technology favor
massive champions (FAANG/Alibaba/Wall St) then by lacking any circumvention of
monopsony power we are collectively signing away our current and future pay
and bargaining power to executives and shareholders.

~~~
moate
Last time we encountered this sort of problem, the answer was
unionization/collective bargaining. Monopsony exists almost exclusively
because of regional/area dependency. By its nature, this problem can't be
dealt with by offshoring jobs on the company's part, and requires a local
labor force. Unions allow the labor class to raise the floor on the lowest
things they're willing to accept.

One of the largest problems towards this is the 40 year smear campaign that
neoliberals have been on against unions. Somehow they got the working class to
believe that each special individual is better on his own when bargaining
against a massive corporation.

~~~
skookumchuck
Ironically, unions always seek legal monopoly status.

[https://www.nrtw.org/right-to-work-states](https://www.nrtw.org/right-to-
work-states)

~~~
MrTonyD
Sorry you got downvoted. A lot of people never studied the history of Unions
(and I'm very pro Union, with several Union organizing relatives) to see how
incredibly corrupt they become. They have a long history of selling out to the
agenda of the rich - and many famous strikes were initiated by the rank and
file against the wishes of the Union - forcing the Union to pretend to be
supporting the strikers while doing everything possible to undermine them.

Just one example - Caesar Chavez's United Farm Workers was destroyed by the
Teamsters, since the Teamsters were aligned with farmers (who are mostly big
multinationals - hope you don't believe that "small farmer" myth.) So the
Teamsters agreed to undermine the UFW actions (by taking away members and
offering a short-term sweeter deal, criticizing UFW, then later giving them
much worse deals after the Farmers gave them benefits to keep the truckers
happy. Keeping Teamster management fat and happy.)

~~~
lucas_membrane
There is something suspect about the rise of corruption in the unions. Back in
the 1930's, labor was getting powerful and both starting and winning some big
strikes, and communists were a significant part of the labor movement. The
capitalist establishment's answer to this was the red squads (See
[https://en.wikipedia.org/wiki/Red_Squad](https://en.wikipedia.org/wiki/Red_Squad)).
These were branches of local law enforcement operating largely sub-rosa in
collaboration with the big employers and even sometimes partially financed by
contributions from anti-labor malefactors of great wealth. The strategy
adopted by the red squads was (1) that a union run by gangsters was ipso facto
far better than one run by someone who could change the status quo in favor of
workers, and (2) local law enforcement could benefit substantially from a win-
win relationship with organized crime. Corruption of unions became part of the
American economy hand-in-hand with corruption of police. When the gangsters
struggled with each other for control of a union, law enforcement might be
recruited as the tie-breaker, helping whichever thug best understood the needs
of the municipal power structure. The working class did not bring this on
themselves.

~~~
MrTonyD
You might be interested to hear that about 30 years ago I got myself invited
to a "union busting" class. It was held at changing locations each week, with
nobody giving their names (not even the instructor), and guest speakers from
law enforcement, legal, and senior management invited to discuss their
successful efforts to undermine unions. In essence, their recommended strategy
was to slowly move assets away from the company - whether overseas or via
contracts, then shut down sites while simultaneously bringing up other sites
without unions in secret. As long as things were done slowly, the courts
wouldn't recognize actions as anti-union. You could even move back into the
same region in a few years without unions. Once you know what to look for,
it's easy to see this technique being used over decades here in the United
States. And it doesn't apply just to unions, it applies to anywhere you want
to force lower wages. (In the early days of unionization big employers used to
coordinate moving out of a region, driving local populations to desperation so
they could move back in months later and pay wages where people were actually
starving while they worked.)

------
esel2k
What can you actually do against this? I have exactly this problem as I live
in a city with two major international companies and they get so many
applications that their salaries are quiet low and bad benefits (no remote
work, less holidays...).?

------
imh
Are there anti-monopsony laws like there are anti-monopoly laws?

~~~
crowdpleaser
Historically the anti-monopoly laws in America could be deployed to against
monopsony or the accumulation of power to act as a monopsony.

However, American Businesses successfully lobbied to change the ways the anti-
monopoly laws are used - now the anti-monopoly laws are focused primarily on
avoiding consumer price increases and are blind to things like accumulating
power to be an abusive monopoly (a la Amazon) or monopsony.

------
pmoriarty
Parenthetically, it looks like Forbes has quietly abandoned its anti-adblock
efforts.[1]

It used to be that I couldn't read a Forbes article without javascript and
without either disabling adblocking or trying to circumvent its anti-
adblocking attempts, and now reading a Forbes article without javascript is
not a problem.

[1] -
[https://news.ycombinator.com/item?id=11693485](https://news.ycombinator.com/item?id=11693485)

~~~
cyclonetiger
Reading Forbes now and getting a seizure are the same thing. Mini video with
autoplay that either doesn't have a close button or I can't figure out how to
close it combined with ads.

------
bediger4000
Wow, that's quite a take from Forbes, long considered a capitalist tool. Is
Forbes feeling OK?

~~~
TomMckenny
Perhaps they too understand a free market requires ruthlessly eliminating
monopolies and cartels. Perhaps they genuinely believe a functioning free
market helps everyone. Perhaps the article is coming from this direction.

Or perhaps it's been noticed that it is better to reign in some excesses of
rising inequality rather than potentially face the annihilation of wealth and
chaos of the 1930s and 40s.

~~~
skookumchuck
Do you assert that the Great Depression was caused by rising inequality?

~~~
TomMckenny
I only note that inequality peaked in 1929. And while the market obviously
collapsed from over exuberance etc, the lack of middle class spending power
prevented recovery. I also note inequality peaked again in 2007. But anyway
people use ideology to choose their explanation for the great depression from
the vast tangle of possibilities so it's a futile topic. And whether true or
not, it isn't my main point anyway.

Inequality causes dangerous levels of political instability which should be of
concern to Forbes' and everyone else.

~~~
skookumchuck
> Inequality causes dangerous levels of political instability

Does it? I think that's just a hypothesis. I haven't seen any careful research
justifying it.

It is clear that when people are literally starving, instability results. But
that isn't the same as inequality. Remember that Hillary lost the election
despite outspending Trump 2:1. We still live in a democracy, 1 man 1 vote.

~~~
TomMckenny
>I haven't seen any careful research justifying it.

You can literally google it and find an innumerable number of papers. Here's
one[1] with over 3,000 citations.

>We still live in a democracy, 1 man 1 vote.

You do know she won a majority of votes cast.

More votes than Bush beat Kerry. More than well loved Kennedy beat Nixon who
ended up resigning rather than be impeached.

Even more than Gore beat Bush.

So more of a flawed democracy[2] with 1 man, 1-ish vote

[1][https://www.nber.org/papers/w4486](https://www.nber.org/papers/w4486)
[2][https://en.wikipedia.org/wiki/Democracy_Index](https://en.wikipedia.org/wiki/Democracy_Index)

~~~
skookumchuck
From your cite: "As a consequence, income inequality and investment are
inversely related."

And yet, investment in America has never been higher. Prosperity is up,
unemployment is at very low levels, employment of minorities is at record
levels.

As for the Electoral College system, that's been around since the US was
founded. We've always had a republic. It's irrelevant, anyway, since rich
people don't have any more votes than poor people. There was little to no
evidence of voter fraud in the last election.

~~~
andrekandre
> It's irrelevant, anyway, since rich people don't have any more votes than
> poor people.

no, but they do have more money, which, thanks to citizens united equals more
speech (money equals free speech)

so, iow, they don’t need to vote, just use thier resources to
conveniently/trick/extol others to vote the way they want... nice little
workaround they found...

