
Why Wages Aren’t Growing - rayuela
https://www.bloomberg.com/news/articles/2017-09-21/why-wages-aren-t-growing
======
Animats
Wages aren't growing because people aren't worth more. Most job growth is in
low-skill jobs.

For wages to grow, _people have to be paid more than they 're worth_ as an
economic unit. That's what unions are about. "More", as Samuel Gompers would
answer when asked what he wanted.

This was a well understood concept in the 1950s, and was accepted by both
management and labor in the major US manufacturing industries. The UAW - auto
company contracts of that era explicitly tied wages to increased manufacturing
productivity. It still is somewhat accepted in Germany, but is dead in the US.

Part of what killed wage growth was the demise of Communism. Communism was
once a serious ideological threat to capitalism. From the 1920s to the early
1980s, there was real fear in the business community that communism might
work. It might deliver a better life to workers. There was competition in
ideology, and capitalism had to provide an increasing standard of living or
risk countries going communist. Communism never did deliver a better standard
of living, but the presence of a competing system which more or less worked
kept capitalism honest.

With the demise of the USSR, and China moving away from its strict communist
roots, the competition disappeared. Capitalism became a monopoly. Then it
started acting like one. There was no longer any need to deliver a better life
to workers.

That's how we got here.

~~~
ardit33
That doesn't explain it at all. If you look closely, corporate profits have
been increasing (example compared to 90), but wages haven't. That means that
workers have been more productive, but are getting paid less (they increased
output/efficiency, but their wages have been stagnant).

That means that corporates have leverage over labour (ie, either importing
from cheaper countries, or automation, or guest workers, etc).... My hunch is
the increase of globalism (since the 90s) caused this. Communism fell, more
skilled people available in the market, more open borders, etc... which gives
global companies more leverage. It is very easy to spot:

[https://cdn.static-
economist.com/sites/default/files/imageca...](https://cdn.static-
economist.com/sites/default/files/imagecache/640-width/images/print-
edition/20160326_FBC779_1.png)

~~~
chongli
The productivity gains are due to capital, not to any improvement on the part
of the worker. When a more advanced machine lets you replace 10 unskilled
workers with 1, you don't pay that operator 10 times the wage, you pay him the
same wage or even less. Why less? Because there are 9 people waiting to take
his job if he quits.

~~~
cabalamat
> Why less? Because there are 9 people waiting to take his job if he quits

This is the answer

~~~
CaptainDecisive
I wonder where those 9 people are though. Locally, for a given job opening,
that could perhaps be true. Nationally however, unemployment is at
historically low levels in many Western economies; 4.3% in the UK, 4.4% in the
US, 3.9% in Germany, 6.2% in Canada, 4.8% in New Zealand.

Which should then drive an increase in wages. But it hasn't, and economists
don't know why - or at least as far as this armchair economist has read ;-)

~~~
partisan
The US unemployment rate is based on the labor participation rate, a measure
of the percentage of people who are unemployed and currently looking for work.
It does not account for people who are unemployed and not looking for work.
There is a real surplus of labor and employers know it. The vanity statistic
that the US publishes has no basis in reality.

~~~
mercutio2
I don’t think that’s a very good description of U3, which is the headline rate
the US typically uses. Specifically, labor force participation is usually a
shorthand for overall workforce participation, looking at everyone of prime
working age; that’s not U3. All unemployment measures are linguistically
indistinguishable from “labor force participation rate”, so there’s nothing
special about the US there.

I agree that U6 and prime age labor force participation rates are both weak,
and relevant to worker bargaining power, but to argue that U3 has no basis in
reality is absurd.

If I’m looking for labor this month, my pool of applicants will be coming from
the U3 pool, people who are actively looking for work.

High U6 unemployment suggests I might do better to raise wages slightly,
rather than aggressively, if I urgently need workers.

------
jstewartmobile
\- Two-income households: doubled the labor supply without making an equally
large increase in demand ( _NOT A DIG AGAINST FEMINISM, JUST TALKING NUMBERS_
)

\- Automation. Not talking AI. Just old-fashioned mechanical engineering and
micro-controllers. Not going to name any names, but almost every practical
thing you buy is made in only a handful of factories, and those factories
don't need very many people to run at full-tilt.[0]

\- BS Jobs. Most of the US defense spending is make-work for
engineers/welders/managers/subcontractors/etc working on projects of dubious
strategic value. It sure as hell doesn't go to the soldiers. 30% of hospital
payroll is admin staff. Higher ed is the same story.

[0] [https://www.bloomberg.com/news/articles/2017-06-21/how-
just-...](https://www.bloomberg.com/news/articles/2017-06-21/how-
just-14-people-make-500-000-tons-of-steel-a-year-in-austria)

~~~
e12e
> Two-income households: doubled the labor supply without making an equally
> large increase in demand

Interesting perspective. In Norway the consensus is that equal employment and
the resulting doubling of productivity was a major force in increasing
standard of living - way before the oil boom (corally: Sweden and Denmark are
also rich/high standard of living - with no/hardly any oil industry).

~~~
adventured
It's worth noting that doubling the output of a tiny economy of 5 million
people, and doubling the output of a large nation that in 1968 had half of all
global manufacturing - are two very, very different things.

If you double America's output today, and take the GDP up toward $40 trillion
- who is going to buy all of those products and services in the near term?
Nobody, it couldn't happen over a short period of historical time (10-20
years); that supply could not be absorbed, it would be a disaster for the
producing nation.

If you're Norway in 1990, and you have a $100 billion GDP, doubling that into
a global economy of $28 trillion, is very feasible. If you're the US in 1990
with a $6.x trillion economy (20-25% of global GDP), doubling that quickly is
essentially impossible. A global economy of $28 trillion can absorb an
additional $100 billion in output from Norway fairly easily over a few years,
assuming it's competitive / desired output. As a smaller economy selling into
a massive ocean globally, you're dramatically less bound by the global growth
rate; if you're the world's largest economy, you're tightly (not strictly)
bound to global growth rates. From its smaller base, Norway can see huge
economic gains and defy global growth rate limits; for example, imagine Norway
having an Apple size company, that grew from $30b to $200b in sales over six
or seven years, it would add 50% to their economy and that output could be
easily absorbed by the global economy.

~~~
e12e
Good points - however, not sure if you're arguing against yourself here (or if
you're talking about different time frames):

> If you double America's output today, and take the GDP up toward $40
> trillion - who is going to buy all of those products and services in the
> near term? Nobody, it couldn't happen over a short period of historical time
> (10-20 years); that supply could not be absorbed (...)

> If you're the US in 1990 with a $6.x trillion economy (20-25% of global
> GDP), doubling that quickly is essentially impossible.

US GDP[1], inflation adjusted :

Dec 31, 1990 8.91 trillion

Dec 31, 2010 14.94 trillion

It's not quite double in 20 years, but it's closeish at 1.67x? (An actual
question, I'm not sure if you'd consider it close). Looks like it'll be
doubled this year - so I guess one could view that as the slow-down (the extra
7 years).

[1] [http://www.multpl.com/us-gdp-inflation-
adjusted/table](http://www.multpl.com/us-gdp-inflation-adjusted/table)

Apparently those numbers are in "2009" dollars - while the numbers in
"current" dollars is more like 6 to 15 (as opposed to 9 to 16) in the same
period - I guess this might have to do with the 2008 crash?

[https://bea.gov/national/xls/gdplev.xls](https://bea.gov/national/xls/gdplev.xls)

------
faet
Real compensation has been growing. It's just now a larger portion of
'compensation' is benefits rather than just wages.

[https://fred.stlouisfed.org/series/COMPRNFB](https://fred.stlouisfed.org/series/COMPRNFB)

edit:

in the 60s/70s wages were 80% of compensation.

[https://www.bls.gov/opub/mlr/cwc/compensation-in-
the-1970s.p...](https://www.bls.gov/opub/mlr/cwc/compensation-in-
the-1970s.pdf)

wages are now 70% of compensation and 63% for public employees.

[https://www.bls.gov/news.release/pdf/ecec.pdf](https://www.bls.gov/news.release/pdf/ecec.pdf)

~~~
dv_dt
So if healthcare costs are benefits, some portion of the compensation is
growing just because healthcare costs are growing. But that doesn't really
provide any net gain in positive economic effects (such as through added
disposable income).

~~~
prostoalex
Unless one is employed in healthcare.

~~~
YeOakAye
One is usually _not_ employed in healthcare......

~~~
prostoalex
"In recent years, the proportion of workers employed in private-sector health
services has exceeded 11 percent." says BLS in 2009
[https://www.bls.gov/spotlight/2009/health_care/](https://www.bls.gov/spotlight/2009/health_care/)

~~~
YeOakAye
Thanks for supporting my point, in that 89% of the working population is
"usually not employed in healthcare".

~~~
prostoalex
So back to the grandparent conclusion, employing 11+% of the workforce is not
beneficial to the US economy?

~~~
dv_dt
It's not beneficial if the same or better output could be had with half of the
inputs. I'm mostly comparing cost of healthcare in other first-world nations
with universal healthcare here with the industry as a whole (as opposed to
just the workforce). If you know the efficiency can be higher and you choose
to operate less efficiently it's some form of the broken window fallacy -
maybe the drafty window fallacy? You're basically paying people to move dirt
from one place to another - with the excess of insurance claim/billing
transactions as the new digital dirt.

Now if you're worried about the more immediate effects on the people displaced
by moving to a possibly higher efficiency way of doing things - we'll that's a
bigger general problem we have to solve as the displacement rate is seemingly
already moving higher than the re-employment rate, and it threatens to
accelerate for more areas than just better healthcare practices...

------
indubitable
I think there's another very simple, yet often overlooked, reason that wages
aren't growing: information.

How do you decide how much to pay an employee? It's easy. You go online and
see what the median wage in your area for the role you're seeking to fill. You
then aim a bit lower than that either getting a below market rate hire, or
giving them a psychological victory as they negotiate their wage up to the
median. That's perfectly reasonable, but it's also in effect engaging in
horizontal price fixing without so much as saying another word to another
employer. This is an even better in cultures where discussing income and
compensation is relatively taboo since workers themselves inhibit their own
ability to effectively negotiate. Living abroad I was somewhat stupefied that
"How much do you make?" and "How much is your rent"? and other such questions
are perfectly normal.

Consider this thought experiment. Imagine employers were not allowed any
access to historic or current wage data. They simply had to choose prices they
felt appropriate for the work at hand. I think it's safe to say that wages
would be much higher than they are now since naturally you would price wages
relative to the value of the person being hired. Modern information not only
allows but inadvertently encourages employers to engage in mass price fixing.

And in a world where employment is, more than ever, something that's very
temporary (a quick search shows the average time of employment is about 4
years) - the price set for new hires is arguably the single biggest factor in
long term wage levels.

~~~
jsty
> Imagine employers were not allowed any access to historic or current wage
> data. They simply had to choose prices they felt appropriate for the work at
> hand

I think employers would have to get a lot better at measuring the value
produced by individuals, which always seems to have a chequered past with
knowledge workers. Offering the going rate for an average employee is IMO a
way of throwing your hands up and saying "I don't really know what this job
entails or how good you'll be at it, but I know it needs doing so I'll offer
what everyone else is"

------
dnautics
Why does everyone jump to "demise of unions"? There is a far simpler
explanation. For decades official government policy (especially in the us and
Japan) has been job creation. Have you ever heard of a politician that hasn't
advocated for job growth? The policy tool deployed to create jobs has been to
use the central bank (via its mandate to maintain employment) to inflate the
currency. Inflation works to goose employment by decreasing the real cost of
labor (because, sticky wages). [0]

Wages are not growing because of a policy to screw labor out of its earnings,
and the policy is working. No reason to impute other mechanisms or make things
unnecessarily complicated.

[0][https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-
hi...](https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-
inflation/)

~~~
blindwatchmaker
This is ass backwards. Central bank/fed policy in the US, Europe, and Japan
has consistently been to keep inflation low on behalf of the investor class
for a long, long time now.

~~~
matt4077
Investors and the Government are the first in line to profit from inflation,
since it devalues the one thing only they can afford: debt.

And investments in the stock market, real estate or anything else than actual
money are at least protected by usually rising with inflation.

The one group that suffers disproportionally from inflation are the elderly,
who receive a fixed pension (/social security) based on their lifetime dues.

Right after that are employees, because wages typically lag behind when
inflation picks up.

~~~
imtringued
>And investments in the stock market, real estate or anything else than actual
money are at least protected by usually rising with inflation.

Quantiative Easing is used as a tool to increase inflation by the central bank
through buying stock. Of course this means stock keeps it's value with
increasing inflation while everything else doesn't keep up with inflation.
Obviously this is bad for those who don't own stock.

------
WalterBright
> That means wages haven’t kept pace with gains in productivity, as economics
> says they should,

This is a misreading of economics. Total cost to hire for a job should match
the productivity of that job.

Long ago when I worked for Boeing, the benefits package cost the company an
additional 40% over one's pay. Add into that the cost of the so-called
"employer's contribution" to social security, etc. I recently read that the
benefits package these days can approach 100% of the salary. This likely
reflects increasing health care costs, increased maternity leave, and all
sorts of new benefits mandated by law, and the cost of the HR department
needed to monitor compliance with the ever-changing employment laws.

Economically, these all ultimately come out of the workers' paychecks, one way
or another. There isn't any free lunch (and if the company does offer a free
lunch, it's accounted for as part of your compensation package and ultimately
is reflected in a lower paycheck).

~~~
tryingagainbro
OK, fair enough. But, how are corporate earnings during this time?
[https://www.nytimes.com/2014/04/05/business/economy/corporat...](https://www.nytimes.com/2014/04/05/business/economy/corporate-
profits-grow-ever-larger-as-slice-of-economy-as-wages-slide.html) "CORPORATE
profits are at their highest level in at least 85 years. Employee compensation
is at the lowest level in 65 years." Maybe via taxes USA should provide an
incentive to invest or to pay employees more. There is $250b in Apple's bank
accounts, $100B in Google's coffers, $100+ in MSFT's...maybe they should pay
more in salaries, invest it or whatever.

~~~
WalterBright
> Employee compensation

The article didn't say total compensation. Most articles only consider the
paycheck as compensation, and do not include benefits.

~~~
lotsofpulp
The significant majority of jobs are not those with considerable non cash
benefits, so I don’t think it’s worthy of much discussions. It’s well known
there is an increasing income and wealth gap, and it’s the increasing portion
of those with non benefit jobs that is problematic.

~~~
WalterBright
A properly done article would account for this. It's like doing a medical
study and failing to account for the sex/age/etc characteristics of the people
being studied. I.e. it's sloppy and can't be taken seriously. Even worse, such
omissions may be intentional on the part of the author, and then the article
tips into being propaganda.

I have seen articles (in the WSJ) that used total compensation. Meaning it is
possible to do.

------
mhb
[https://mobile.nytimes.com/2017/09/15/opinion/the-economy-
is...](https://mobile.nytimes.com/2017/09/15/opinion/the-economy-isnt-
broken.html)

 _In 2015, median household incomes rose by 5.2 percent. That was the fastest
surge in percentage terms since the Census Bureau began keeping records in the
1960s. Women living alone saw their incomes rise by 8.7 percent. Median
incomes for Hispanics rose by 6.1 percent. Immigrants’ incomes, excluding
naturalized citizens, jumped by over 10 percent.

The news was especially good for the poor. The share of overall income that
went to the poorest fifth increased by 3 percent, while the share that went to
the affluent groups did not change. In that year, the poverty rate fell by 1.2
percentage points, the steepest decline since 1999.

The numbers for 2016 have just been released by the Census Bureau, and the
trends are pretty much the same. Median household income rose another 3.2
percent, after inflation, to its highest level ever. The poverty rate fell
some more. The share of national income going to labor is now rising, while
the share going to capital is falling._

~~~
emodendroket
Ok but that doesn't really reverse the decades-long trend.

------
mahyarm
Wages don't grow because there isn't a shortage condition for labor. If there
was a shortage, the price of labor (wages) would increase.

From what I've read, it became fed policy to make sure this labor shortage
condition doesn't happen around the 1980s as a response to the stagflation of
the 1970s. It was believed that one of the causes of the inflation was wage
growth.

From what I understand, wages tend to go up when the red line is below the
blue line in this graph, and you'll notice the red line is under the blue line
a lot more before 1980 vs after. You'll also notice interest rate spikes start
around the point where the red line meets the blue line, and spikes of
unemployment happen soon after.

[https://fred.stlouisfed.org/graph/?g=3uOu&utm_source=direct&...](https://fred.stlouisfed.org/graph/?g=3uOu&utm_source=direct&utm_medium=exported-
chart&utm_campaign=myfred_referrer)

~~~
randomdata
_> If there was a shortage, the price of labor (wages) would increase._

If price of labour was increasing, that would suggest that there isn't a
shortage[1].

 _" In economic terminology, a shortage occurs when for some reason (such as
government intervention, or decisions by sellers not to raise prices) the
price does not rise to reach equilibrium. In this circumstance, buyers want to
purchase more at the market price than the quantity of the good or service
that is available, and some non-price mechanism (such as "first come, first
served" or a lottery) determines which buyers are served."_

What I believe you are saying is that we have reached equilibrium, so there is
no pressure to push prices up or down when measured across the population as a
whole (individuals may still see increases and decreases).

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

~~~
krath94
I don't know if we have reached equilibrium. But I think it's more complicated
when it comes to the labor market to just say "oh ok, we'll raise wages to get
rid of the labor shortage." This is especially true if the shortage is in a
high skilled position. For example, if there is a labor shortage in software
engineers, raising wages won't help, at least not right away, because people
will need to learn the skills required to do the job and maybe go to college
before they can fill the shortage gap. I don't think people are sitting there
saying "I need a job, but you won't pay enough so I'll stay unemployed," at
least not in the higher skill fields.

~~~
randomdata
> For example, if there is a labor shortage in software engineers, raising
> wages won't help

As long as it prices businesses out of the market it does. Mom and Pop
probably cannot compete with Google and Facebook, so when the price rises Mom
and Pop will stop hiring developers. When they do that reduces the demand for
developers. With reduced demand, the existing supply comes closer to meeting
the needs of what demand remains.

Demand, of course, does not measure what someone would like to have, it
measures what they are willing and able to pay for. And a rising price usually
means that more and more will no longer be able to pay the price (money isn't
infinite). I expect not even the likes of Google and Facebook are willing to
pay infinitely (the value of having a developer stops at some price point), so
eventually even one of them will have to step out of the market if price
reaches that level, leaving all of the developers in the world theoretically
available to work for the last company who can still afford them.

This is why shortage and rising price typically do not go together. As long as
the price is rising, then demand should be falling (especially when it is
something like labour that quickly loses appeal with rising price), until the
point that the supply and demand meet.

------
brownbat
Wages are growing dramatically, just not near Bloomberg HQ.

[https://tradingeconomics.com/china/wages](https://tradingeconomics.com/china/wages)

[https://tradingeconomics.com/south-
africa/wages](https://tradingeconomics.com/south-africa/wages)

------
panarky
Labor productivity is up.

That means workers are producing more per hour for employers.

Yet wages are flat.

Who captured that extra productivity?

And what changed in the economy to allow them to capture incremental worker
productivity instead of the workers themselves?

~~~
ue_
The Marxian response, although unpopular, is the rate of exploitation has
increased. For Marx, technological development leads to more constant capital
versus moving capital (i.e more machinery and tools of production) being
employed which means that there is a drop in demand for labour-power; while
the total value inputs and outputs are identical, only the composition of the
value has changed. The falling demand for labour-power means that labour has
less of a negotiating place at the table which can lead to real wages
decreasing.

(Edit: Why are my comments receiving instant downvotes within less than a
minute of posting? Who exactly is doing this, without explanation, and more
importantly _why_?)

~~~
mbillie1
Because it's HN, where opinions other than "hooray libertarian technocracy"
are frowned upon.

~~~
ue_
I know what you mean, but I wasn't even espousing an opinion here; I was
offering the view of a particular school of economics which has found a recent
resurgance in academia from names like Anwar Shaikh and Richard Wolff. I
simply can't think what would mean that someone comes along, reads my comment,
for whatever reason disagrees with the fact (not the view, as there is very
little view in my comment) and then clicks the downvote button.

I'm sure I've read that dang has said that downvotes shouldn't be used to mark
opinions you disagree with - yet here we are. I would really appreciate
explanations, surely this is not above those people who have 500 karma - like
I am, they are entrusted with extra powers over the content on the website;
perhaps if they behave in such a way antithetical to the idea of Hacker News
(that of sharing strangely interesting ideas and perspectives) perhaps they
should not have that ability.

~~~
dang
> _dang has said that downvotes shouldn 't be used to mark opinions you
> disagree with_

I didn't say that. People think this, mainly because they hear it from other
people who think this, but it has never been the policy on HN.

------
Mikeb85
Everyone should read Piketty.

As for why wages aren't growing, there's many reasons. For one, automation and
increases in efficiency undercut wages. In economic terms, income from capital
is increasing faster than income from wages.

Second, immigration. For example, in Canada, if you can't fill a job at a
certain wage, you can bring in temporary foreign workers or sponsor an
immigrant. This means the wage of that job will never go up because if the
labour market is tight, you can simply draw from another labour pool. The US
and most western countries have been affected by this.

So on one end you have less need for labour and on the other, a limitless
labour pool. Low 'unemployment' stats don't necessarily tell the whole picture
since low wages drive up employment, but because the demand for that labour is
only at that wage, it doesn't put upward pressure on wages.

~~~
brad0
I'm curious of what you think of Piketty's policy suggestions in Capital.

~~~
Mikeb85
They'd reduce inequality but will never be fully realised as it'd be too
politically unpopular. Perceived fairness is more important to most people
than equality.

------
fallingfrog
I think the author is missing something- when labor productivity goes up due
to automation, the increase in profits goes to whoever owns the machines not
to the people working them. I mean after all, if you invest money in some
equipment, you expect to be the one to get the returns on that investment.
Altering that equation could take, as the author suggests, an outside force
such as labor unions or government intervention- but the only long term
solution is probably for the people who own the machines, and the people who
work the machines, to be the same people.

------
Heraclite
As a software developer in EU, sometimes I find it absurd that I'm only paid
2x as much as the average office drone for which the company would see no
difference if their department disappeared tomorrow.

The only way to be paid according to your real value is to freelance or start
your company.

~~~
a_imho
And there are major differences even in the EU. The wage gap for a developer
in the V4 compared to e.g. Germany (UK/Switzerland in a broader context) is
staggering.

[https://www.wageunion.eu/](https://www.wageunion.eu/)

[https://elsajohansson.wordpress.com/2017/09/13/what-does-
a-w...](https://elsajohansson.wordpress.com/2017/09/13/what-does-a-wage-gap-
look-like/)

------
rdlecler1
I wonder how much online job marketplaces are driving this. If talent is fluid
then the very top talent will iterate through jobs with increasing higher
wages as it’s easy to find that talent. For the rest, hiring managers may see
you as replaceable limiting your ability as an employee to demand higher
wages.

------
jakelarkin
the internet + globalization mega-trend unleashed in the 1990s has caused
deflationary pressure on wages of any blue-collar labor that has the property
of being easily transferable to the developing world. The effect lingers for
decades are capital assets are slowly shifted around the world.

------
CryptoPunk
This is a really poor article. Wages are growing, and have doubled in the
developing world since 1990. China has seen 13% per year wage growth since
2000. Japan is not the world. Worldwide, labour's share of income has declined
modestly, but that can be fully explained by the global decline in the labour
participation rate:

[https://data.worldbank.org/indicator/SL.TLF.CACT.ZS](https://data.worldbank.org/indicator/SL.TLF.CACT.ZS)

And a declining LPR is an expected result of higher incomes (more people can
afford to go to school, live on government assistance and retire when per
capita income increases).

------
CryptoPunk
This is a really poor article. Wages _are_ growing, and at their fastest rate
in history. Japan is not the world. Worldwide, labour's share of income has
declined modestly, but that can be fully explained by the global decline in
the labour participation rate:

[https://data.worldbank.org/indicator/SL.TLF.CACT.ZS](https://data.worldbank.org/indicator/SL.TLF.CACT.ZS)

And a declining LPR is an expected result of higher incomes (more people can
afford to go to school, live on government assistance and retire when per
capita income increases).

------
taw-an
"For unions to regain ground, governments will have to give them a nudge.
Former U.S. Secretary of Labor Robert Reich recommends Washington make it
easier to form unions, impose harsher penalties on companies that fire
organizers, and banish “right-to-work” laws in states that allow workers to
benefit from unions without paying dues, considered a back door to weakening
them."

Well no duh, we're in this mess because worker's powers have been completely
gutted. But does he actually believe this current administration or Congress
will give workers an inch?

------
programminggeek
Wages aren't growing because people don't ask for more money. It's not any
more complicated than that.

Go to a store - there is a price on the product. That is not the real price.
You can negotiate a different deal, but almost nobody does.

So you have a society of price takers, not price makers.

In that society, the people who set the price are people with the money -
business owners/managers and they will set the price as low as they can get.

People need to ask for more money. Then they will get more money. It's not
much more complicated than that at the core.

------
omarforgotpwd
I don't really hear anyone talking about this often, but is it possible that
there is systemic deflation across the economy as a result of efficiencies and
prices falling in the digital age? As companies get squeezed on price due to
more efficient competitors and high tech alternatives to their products, they
have less money to pass onto workers. When profits are fat, companies can
afford to pay workers a lot.

This would explain why the inflation rate has been much lower than some people
(like the Federal Reserve) had expected.

~~~
mdorazio
Unfortunately, this isn't the case. Corporate profits have been hitting record
highs for years now [1]. Companies simply aren't passing along these profits
to their workers.

[1] [http://www.businessinsider.com/corporate-profits-hit-new-
rec...](http://www.businessinsider.com/corporate-profits-hit-new-record-
high-2012-11)

~~~
a_imho
_Companies simply aren 't passing along these profits to their workers._

Best tldr

------
lukasm
How does the wage growth is calculated? I work remotely so I have to be
employed as a contractor. I doubt I'm included. Significant portion of my
colleagues are "permtractors" with companies registered in Channel Islands and
other places. Another example is a friend that is paid only half legally.

I don't think the situation is as bad as press is describing.

------
iovrthoughtthis
> overall labor costs aren’t growing nearly as quickly as they did in the
> years before the 2008 financial crisis, even though Europe is enjoying a
> surprising revival.

What if access to cheap debit has allowed people to survive in jobs that don't
pay enough, preventing their exit from the workforce (dwindling supply) from
pushing the price of labour up?

------
jgalt212
Wages aren't growing because ZIRP is artificially increasing demand for plant
and equipment (a labor substitute). When Fed Funds get to about 3%, I bet
we'll start to see some healthy wage growth.

------
dfps
Can you have both "creation of lots of jobs" by government policy

and at the same time

Higher wages for all workers

?

------
dalbasal
For much of big picture economics, what we do is define a few fundamnetal
concepts with which to narrate the economic story.

The 20s - 80s "theory" that you refered to narrates its story with
productivity and bargaining power. It makes sense and is based on
microeconomic fundamentals. It makes sense for union-esque bargaining and
politics. It also implies a constant relationship between production and
wages.

Like any narrative choice, the productivity-bargaining power story works
better in some cases than others. For example, productivity (and output
generally) is just more abstract in 2017 than 1967^. It's hard to adjust for
inflation and its hard to measure productivity of office/info workers.

An alternative set of fundamentals to narrate our stories is now gaining
popularity because of the Picketty "family" of economists. It's early to tell
if that school of thought will have influence on economics and policy, but for
now we have some new terms, new characters for our story.

In this corner of economics, labour & capital are the main protaginists (or
antagonists :)

All net income in an economy goes to either labour or capital, our two forms
of income. For example, my back-of-the-envelope^^ suggests that about $60bn
has been paid by Google to employees in the 10 years since IPO. About 600bn in
capital has been created in that time.

Should we define this as high labour productivity or capital productivity?
Either way, I think the point illustrated is that economic productivity/growth
can go to one or both of these. There's no economic rule ensuring proportions
remain constant.

So, what is capital? To dip a toe into Marxist grand history, capital was
mostly land. Then it was mostly factories. Today, it is more ethereal. The
only way to define it is financial terms: discounted future income. $600bn in
capital is a $40bn annuity.^^^

Anyway... I don't have any big profound conclusions to share. I just think
labour-capital aggregates will continue to be adopted in these discussions.

For example, if the post work automated future happens, I think these terms
will be more useful. If Elon Musk automates the machine that makes the
machine, making driverless cars,then what is he creating? It will be a bundle
of capital requiring very little labour inputs to generate value. You could
try to describe it in labour productivity terms, but it starts to get
ridiculous and totally unlreated to wages.

^ I ws starting to write in examples, but stopped. This needs its own thread.

^^Just assumed 150k global average salary, I could be way off.

------
ben_jones
Increased population + Increased automation = Huge demand for jobs = Lower
wages . In my opinion.

------
oldpond
Search for 'velocity of money'. It's a Fed chart and shows what happens when
every citizen, business and government is swimming in debt. You printed all
that money and gave it to the banks, but you didn't relieve the debt logjam.
Oops.

~~~
barrkel
Velocity of money doesn't have much to do with debt; money is a medium for
negotiating the exchange of value between economic actors, the transmission
fluid, as it were. If you were happy to get paid in very small increments very
regularly, and similarly pay for other products in very small increments at
very high speed, the economy could function with a numerically small amount of
money, moving very quickly. Since that's not practical, we need lots of slack,
buffer as it were, for converting our labour into money, before we in turn
consume that money by exchanging it for other goods and services. There's a
direct tradeoff between velocity of money and the supply of money; you need
less of the latter when the former is high.

Debt is about moving around consumption and production relative to one
another. It's inherently based on predictions about the future, which is why
it's risky.

"Printing money and giving it to banks" is not how it works either. Rather,
the government prints currency and buys debt with it. The debt represents
future money, and is an asset today. But the currency isn't just given away.

The relationship, such that it exists, is thus indirect; buying debt increases
money supply which makes up for low velocity of money.

~~~
oldpond
Spoken like a true believer.

------
remarkEon
>The very first thing any college freshman learns in Economics 101 is the law
of supply and demand.

I beg to differ. They do not learn this.

------
ue_
This is a problem which has, unsurprisingly been attacked from the angle of
Marxian economics rather than only orthodox economics; Andrew Kliman who is
particularly famous within Marxian economics for his TSSI solution to the
charges of Marx's inconsistency in Vol. III of Capital has addressed it in the
context of the operation of capitalism in general in his book _The Failure of
Capitalist Production_ [0], though its name spells something already
reiterated many times by Marxists, he takes the lens through the panic of 2008
and what has followed it. It's a very good read even for those who aren't
looking into Marxian economics.

He finds, contraray to mainstream Left accounts of the economy that "U.S
workers are not being paid less in real terms than decades ago; their real pay
has risen and their share in the nation's income has not fallen. It is higher
now than it was in 1960 and it has been stable since 1970." nevertheless he
pursues a Marxist analysis throughout the book even bearing this seemingly
fatal attack to claims of worker exploitation in mind.

For a more theoretical investigation into the roots and effects of automiton
on employment, I must recommend Ernest Mandel's short work "Marx, the Present
Crisis and the Future of Labour"[1] from 1985 which marshalls statistics, with
examples from Japan, for the validity of Marx's claims.

[0]
[https://libcom.org/files/The%20failure%20of%20capitalist%20p...](https://libcom.org/files/The%20failure%20of%20capitalist%20production.pdf)

[1]
[https://www.marxists.org/archive/mandel/1985/xx/future.html](https://www.marxists.org/archive/mandel/1985/xx/future.html)

------
evolighting
The economics are lying.

YES, I mean all the economic things together is a big fraud.

With more and more tools help us track money.There are more clear that they
are wrong.

We are slaved by money.

~~~
samhain
Low effort post? Why don't you provide more context and sources for your
opinion.

------
bb88
TL;DR

For real growth to happen, paychecks need to be fatter.

But not all companies are willing to tie performance with pay.

~~~
rayuela
That's a terrible TL;DR. The article is about wage growth first and foremost
not economic growth. The article actually does a pretty decent overview of the
many factors affecting wage growth, from the macro factors (cross border labor
competition, automation) and micro factors (weaker unions, more unequal
distribution of profits within firms).

~~~
randomdata
_> weaker unions_

In Canada, where we have experienced wage stagnation that mirrors the US quite
closely, our unions started to get stronger _after_ that stagnation began. The
peak union years in Canada were in the 80s and 90s, more than a decade after
the incomes stopped growing. While unionization has declined slightly since
that time, unionization remains quite strong, and Canada is named the 6th
strongest union country in the world.

Despite that, wages have remained stagnant regardless. It seems this one is
completely beyond what unions can achieve.

------
erikb
Weird. Nothing in this article seems to relate to reality. I wonder if this is
a story to keep people healthy minded, who are too scared to switch to another
company or two incompetent.

I mean, we know for about a decade now that the way to get raises is by
switching the company every 3 years. That's just how it is. And there are even
people that go corpA->corpB->corpA to make more money.

It would be reasonable to assume though that this kind of growth is shared
unequally. Some people just can't make that step to accept that this is the
system now. Some people really wouldn't get a job at the next company no
matter how hard they try. And some people are just shy.

But I don't think that the average here on HN is from the second group. It
should be common practice for people here to get their raises by getting new
jobs.

