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[entremet]

https://www.bloomberg.com/news/articles/2017-09-21/why-wages-aren-t-growing

Yet Japan, that land of eternal economic mystery, is apparently defying this most sacred principle. The problem is wages. Japan's labor market is the tightest it's been in decades. The unemployment rate has sunk to only 2.8 percent, the lowest in 23 years, while the number of available jobs compared with applicants has reached levels not seen since the early 1970s. Add in an aging, shrinking workforce unable to generate many reinforcements, and simple mathematics leads to the conclusion that wages should be increasing—based on current market conditions, by at least 2 percent a year.
But they're not even close to rising at that rate. Growth of worker compensation has been minimal this year. In July, base pay rose a mere 0.5 percent from the year earlier, while total earnings, which includes bonuses, dropped by 0.3 percent. Although very recently some signs have emerged that wages may be set for a pickup, workers are far from getting the gains you'd assume the market is signaling they deserve.

Japan, as usual, is an extreme case but not an isolated one. Wage growth in much of the world has been subdued, even as the global economy has stirred to life. In the U.S., where unemployment has dwindled to the lowest level in 10 years, at 4.4 percent, workers aren't much better off. Average hourly wages inched up 3¢ in August from the previous month. In the euro zone, hourly wage growth in the second quarter showed some improvement, with a 2 percent increase from the same period a year earlier. But 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.

And the biggie:

The dearth of wage increases is a serious problem for the global economy. Economists have proffered all sorts of complex explanations for the glacial pace of recovery from the Great Recession, including insufficient fiscal spending and excessive government regulation. Some have even argued that the world has slipped into a long-term cycle of meager growth. But one often overlooked factor is the plight of the wage earner. Employees working 9 to 5 have simply not benefited as they should have from improvements in economic performance or corporate profitability. Without fatter paychecks, the average household can't spend more, and that's bad for growth. Yes, it's really that simple

So the gospel of infinite growth will eventually collapse on itself it seems. I wonder if it happens in our lifetimes?

I'm not anti-capitalist. Ideally, I prefer Nordic social democracies--robust welfare state and economic freedom. The former is hard in my country of origin (US) due to deep-seated racism fomented by GOP political strategy along with the false individualist narrative.

 

[Chuck Norris]

Unions have been stamped into non existence in developed countries. There is nobody to demand fair pay for workers so why would employers or Governments worry

 

[PantherLotus]

There is no mystery and it's been demonstrated a thousand times already: most gains are going straight to the top.

 

[dgdas9]

GAF: Automation will make our economy so efficient billions will lose their jobs!!!

Also GAF: The gospel of infinite growth will finally collapse on itself!!!

Of course, neither is the likeliest truth, but that's an entirely different issue.

There is no mystery and it's been demonstrated a thousand times already: most gains are going straight to the top.

Unions have been stamped into non existence in developed countries. There is nobody to demand fair pay for workers so why would employers or Governments worry

Unions or not, if firms are paying less than what labour is worth, wouldn't they have an incentive to hire more people, pushing wages up? (or, framing it another way, wouldn't a new competitor appear and 'steal' the best workers away?). Yes, they would. Because that's exactly what happens: long term, workers are paid virtually what they are worth, as labour markets are usually very competitive, with some exceptions; though unions can be useful nonetheless

(Also, before you post one of those graphs where real wages are stable and productivity skyrockets, check if they include the value of other benefits employers provide, such as healthcare, and most importantly, if they account for the full labour population, and not just the bottom 80 or 90 percent. The real story here is that productivity growth is coming out of the most productive workers, mainly because of technology, and that's also quite worrying, but a different problem entirely)

 

[entremet]

Unions have been stamped into non existence in developed countries. There is nobody to demand fair pay for workers so why would employers or Governments worry

Bloomberg is an investor paper, so aimed at ardent capitalists. I do like the premise of this article comes from an investor point of view. It's like, "wake up, guys!" Spread the wealth or you will be eating the goose that lays your golden eggs.

GAF: Automation will make our economy so efficient billions will lose their jobs!!!

Also GAF: The gospel of infinite growth will finally collapse on itself!!!

Of course, neither is the likeliest truth, but that's an entirely different issue.

I'm actually pro-capitalism. Am I against the shareholder value myth, which dominates these infinite growth models.

https://corpgov.law.harvard.edu/2012/06/26/the-shareholder-value-myth/

 

[Kayhan]

CEOs aren't done feeding at the trough.

Sure, they are eating the future but hey, that is for the grandkids to worry about #YOLO

 

[Mistake]

Maybe it's because the mistrust put between coworkers when it comes to wages and the work environment, along with the inability to switch jobs. It's easier to hire for less, employers know that, and workers keep losing out on benefits left and right. It's not hard to see where things are going in the US, or anywhere else for that matter. They're even trying to get rid of overtime in some states

 

[platocplx]

the top is going to collapse on itself. They dont understand the only way you keep feeding into a capitalist society is that the majority you are selling to is making enough to buy. I already see the writing on the wall with tons of places with low occupancy but high rent prices, People choosing to not spend money on frivolous things as much (millennials killing X Y Z). They wont have anyone to sell their shitty ideas like craft PBJ etc. Trickle down economics was/is the biggest lie ever told.

 

[KingV]

GAF: Automation will make our economy so efficient billions will lose their jobs!!!

Also GAF: The gospel of infinite growth will finally collapse on itself!!!

Of course, neither is the likeliest truth, but that's an entirely different issue.

The automation people drive me nuts. The only evidence this is happening today is colloquial, since productivity is growing at a low rate.

That said, I think the US is set for a wage boom in the next few years (as long as there isn’t a recession).

Eventually some companies will wise up and realize they have to pay for talent and the rest will follow.

Edit; most gains ARE going straight to the top. Your graph does not disprove that in any way.

 

[FyreWulff]

The public was somehow convinced at some point if a company is super successful, literally only the CEO and maybe a couple of VPs should get all the money, and the other people in the company should be glad they have any job and certainly didn't play a part in the company's success, and even have been trained to consider jobs as not real jobs to fit their idea of "everyone should try to be a CEO!"

 

[entremet]

CEOs aren't done feeding at the trough.

Sure, they are eating the future but hey, that is for the grandkids to worry about #YOLO

CEOs themselves are just monkeys to their corporate boards anyway. They're easy to blame, but just really cogs in the machine. It's really a systemic issue with maximizing shareholder value at all cost.

 

[Steiner84]

because global economic culture favors short term profits over long term.

 

[Sesha]

I like the flood of such articles when the reasons should be obvious.

Graphs without proper context, my favorite.

 

[acheron_xl]

It's OK - when the world's conservatives kill all the brown and/or poor people, they'll start spreding the goods around, I'm sure.

CEOs themselves are just monkeys to their corporate boards anyway. They're easy to blame, but just really cogs in the machine. It's really a systemic issue with maximizing shareholder value at all cost.

Capitalism can't die soon enough.

 

[Fallout-NL]

Great, more people are just barely not starving. Useless fucking metric.

CEOs themselves are just monkeys to their corporate boards anyway. They're easy to blame, but just really cogs in the machine. It's really a systemic issue with maximizing shareholder value at all cost.

Would also be great if more people understood this.

 

[M3d10n]

And the boat will keep going straight into the iceberg, because nobody is going to reduce their profits in order to pay their workers more unless everyone else does it at the same time. Heck, we had an airline try to do exactly that and what was the result? They got sued by their shareholders.

 

[Spuck-uk]

The automation people drive me nuts. The only evidence this is happening today is colloquial, since productivity is growing at a low rate.

I literally work in automation. 5 years ago my department would have to be three times its current size to do the same workload. It's a sword of Damocles hanging over a lot of even very skilled work.

 

[sohois]

CEOs themselves are just monkeys to their corporate boards anyway. They're easy to blame, but just really cogs in the machine. It's really a systemic issue with maximizing shareholder value at all cost.

That doesn't necessarily mean that executive pay hasn't risen at the expense of other areas. The principal agent problem is alive and well in most companies.

And bashing "shareholders" is missing the point as well. If I'm not mistaken, the largest shareholding groups are pension funds, who rely on shareholder income to fund their pension liabilities, or in other words to allow millions of regular retired people to carry on living.

There is no secret group of people conspiring to run.off with all the gains. Everyone involved is responding to their own incentives

 

[RevoDS]

GAF: Automation will make our economy so efficient billions will lose their jobs!!!

Also GAF: The gospel of infinite growth will finally collapse on itself!!!

Of course, neither is the likeliest truth, but that's an entirely different issue.

Unions or not, if firms are paying less than what labour is worth, wouldn't they have an incentive to hire more people, pushing wages up? (or, framing it another way, wouldn't a new competitor appear and 'steal' the best workers away?). Yes, they would. Because that's exactly what happens: long term, workers are paid virtually what they are worth, as labour markets are usually very competitive, with some exceptions; though unions can be useful nonetheless

(Also, before you post one of those graphs where real wages are stable and productivity skyrockets, check if they include the value of other benefits employers provide, such as healthcare, and most importantly, if they account for the full labour population, and not just the bottom 80 or 90 percent. The real story here is that productivity growth is coming out of the most productive workers, mainly because of technology, and that's also quite worrying, but a different problem entirely)

That line seems to cross into prediction right around 2007, just before the crisis. The world economy has been radically different since.

Need more recent data here.

 

[Abstrusity]

Basically, full or nearly full employment is where the free market claims wages will grow. Work needs to be done, but people are no longer competing for jobs, so companies have to compete by offering higher wages or larger benefit packages.

But, because of wage stagnation, price and currency inflation, shareholder valuations of short-term gain over long-term sustainability, wages aren't really growing. Sure, the average wage has seen some gains during our recovery, but most people don't have 400 bucks to their name to handle an emergency, most people make less than 30k/yr before taxes, and with ever-rising prices on goods, their marginal propensity to consume suffers. My initial thoughts on this are that the shareholders are trying to hold their ground and can see the slow decline in real time, but, like most bad business owners, they don't want to spend to reverse the trend. So cuts are made. ...Which only exacerbates the problem.

So! People cannot consume as much, which leads to another problem: because they don't consume as much, we don't need to hire as many people as normal, which then leads to fewer people consuming, and so on. The new equilibrium is replaced by a lower and lower point, and what we have is an economy wide demand-side market failure, secular stagnation, and a slow creep back into recession.

And yes, fiscal spending would help fix the issue, forcing businesses to pay more or lose people to extremely lucrative infrastructure jobs, but we could also raise the minimum wage. 12 dollars by 2021 would do it, but more pressing are the ones making around that middle point of 30k/yr, 15 dollars an hour. They need a raise, too, which is why minimum wage rising to 15 can be more preferable; if you get 15 bucks an hour at McDonald's, skilled labor making 15 bucks an hour can demand more, or companies risk losing that labor to other jobs.

Basically, wages haven't kept up with inflation for the bottom, they have for the middle (but only barely, while everything else is still getting more expensive), and the gains have mostly been at the top without recourse. Lower demand -> fewer products sold -> fewer products created -> fewer jobs needed -> lower demand.

It really does seem to be that simple.

 

[Crispy75]

A rising tide lifts all boats, to be sure. It's just that for nearly everyone, the water is rising a little bit, while a high-pressure jet washer is gushing miles high, with a very priveleged few balanced on it, enjoying the view.

 

[entremet]

That doesn't necessarily mean that executive pay hasn't risen at the expense of other areas. The principal agent problem is alive and well in most companies.

And bashing "shareholders" is missing the point as well. If I'm not mistaken, the largest shareholding groups are pension funds, who rely on shareholder income to fund their pension liabilities, or in other words to allow millions of regular retired people to carry on living.

There is no secret group of people conspiring to run.off with all the gains. Everyone involved is responding to their own incentives

The shareholder value creed is the issue, which is propagated by corporate boards and put into practice by CEOs. This is cultural. Meaning if you were to take your company public, you will find yourself in that same system.

 

[DyslexicAlucard]

My opinion is that there are numerous factors at play here.

For one, the corporate incentive is for short-term, company-specific profits. The only important thing is making money each quarter for investors, not the long game, nor the economy as a whole. So wages are kept low to keep profits high. However, in the long run this means that more of the country has less disposable income, which eventually will limit the amount of sales possible. Even Henry Ford, back in the early 1900s, knew that paying his workers well would result in even more sales for him. A strong middle class is good for these companies, but they're too myopic to realize it; or they're literally forced to ignore it, because if CEOs don't meet short-term goals, shareholders will can him or her and find someone that will.

Then you have jobs now requiring university degrees where they didn't before. So now young people have to go into large debt before they even start their career, and they're paid less when they do get a job. Again, less disposable income, so less sales in general for these companies, which leads to lower wages again. The cycle continues.

And then there's automation, online centralization (ala Amazon), and globalization. While these obviously can save companies a lot of money on wages and increase profits (at least in the short-to-mid term), they also take away jobs for a considerable amount of the work force. Again, less money for spending. And, if it gets bad enough and really hurts unemployment (and underemployment) numbers, it can lead to higher taxes in order to pay for welfare programs. So even the well off will pay for it, in one way or the other.

And all of this isn't even counting the death of smaller, rural cities that are more affordable. As more and more people are forced to move into large urban areas, more and more will find themselves unable to pay rapidly rising housing costs in those areas.

All of this seems like it's been coming to a head for a while, and I honestly don't know the answer. Higher minimum wages can help, I feel, but in the end I fear that is only a tiny bandage on a gaping wound that slowly grows larger by the day.

This is all only my 2c though. I don't claim to be an expert on economics.

 

[FyreWulff]

I literally work in automation. 5 years ago my department would have to be three times its current size to do the same workload. It's a sword of Damocles hanging over a lot of even very skilled work.

Case in point: WalMart is working on automating as much of it's stores as possible. Guess which jobs at Walmart got automated out of existence last year?

It wasn't the manual labor jobs. It was the back office jobs. And they're in the process of automating out their cash office, by making it so the CSMs have to get till cash out of a machine..

 

[entremet]

Global poverty going down is an amazing thing. And it's why I'm not an anti-capitalist.

But the crux here is that gains are not being funneled into the working class in the West, which will eventually cause the infinite growth model to collapse on itself.

Wall Street wants infinite growth, but they're not looking into the issue from a bird's eye view.

 

[dgdas9]

That line seems to cross into prediction right around 2007, just before the crisis. The world economy has been radically different since.

Need more recent data here.

Sure. Keep in mind that the 2007 crisis was more of a western problem, developing economies weren't affected much.

Article is from 2017, data from 2013.

Great, more people are just barely not starving. Useless fucking metric.

2$ per day adjusted for purchasing power isn't a starving wage. It's still quite miserable, but very much out of starvation.

 

[tkscz]

Global poverty going down is an amazing thing. And it's why I'm not an anti-capitalist.

But the crux here is that gains are not being funneled into the working class in the West, which will eventually cause the infinite growth model to collapse on itself.

Wall Street wants infinite growth, but they're not looking into the issue from a bird's eye view.

Not to mention most developed countries are in debt to developing countries and, for some stupid reason, aren't paying their debts off and forcing the worth of their money to lower. You can't have infinite growth if your money is worthless.

 

[Abstrusity]

My opinion is that there are numerous factors at play here.

For one, the corporate incentive is for short-term, company-specific profits. The only important thing is making money each quarter for investors, not the long game, nor the economy as a whole. So wages are kept low to keep profits high. However, in the long run this means that more of the country has less disposable income, which eventually will limit the amount of sales possible. Even Henry Ford, back in the early 1900s, knew that paying his workers well would result in even more sales for him. A strong middle class is good for these companies, but they're too myopic to realize it; or they're literally forced to ignore it, because if CEOs don't meet short-term goals, shareholders will can him or her and find someone that will.

Then you have jobs now requiring university degrees where they didn't before. So now young people have to go into large debt before they even start their career, and they're paid less when they do get a job. Again, less disposable income, so less sales in general for these companies, which leads to lower wages again. The cycle continues.

And then there's automation, online centralization (ala Amazon), and globalization. While these obviously can save companies a lot of money on wages and increase profits (at least in the short-to-mid term), they also take away jobs for a considerable amount of the work force. Again, less money for spending. And, if it gets bad enough and really hurts unemployment (and underemployment) numbers, it can lead to higher taxes in order to pay for welfare programs. So even the well off will pay for it, in one way or the other.

And all of this isn't even counting the death of smaller, rural cities that are more affordable. As more and more people are forced to move into large urban areas, more and more will find themselves unable to pay rapidly rising housing costs in those areas.

All of this seems like it's been coming to a head for a while, and I honestly don't know the answer. Higher minimum wages can help, I feel, but in the end I fear that is only a tiny bandage on a gaping wound that slowly grows larger by the day.

This is all only my 2c though. I don't claim to be an expert on economics.

You raise some good points, there; The death of rural cities is primarily based in lack of opportunity in those cities, which is primarily based in more opportunity for sales and skilled labor much closer to larger cities.

The warehousing and manufacture of goods in the US can be boiled down to "close as possible to major population centers where possible to dramatically reduce the cost to transport" and "close as possible to major population centers where possible to dramatically increase the pool of satisfactory job-seekers."

Rural areas tend to be old, aged, crumbling infrastructure, while the children from those typically go into college and then never come back. Fixing rural areas probably isn't going to happen, but mass expansion of urban areas will breathe life back into those places.

Then, rising housing costs and 20-year drags on spending because of student loans makes it difficult to get out of the hole to start consuming like we need people to do.

 

[acheron_xl]

Global poverty going down is an amazing thing. And it's why I'm not an anti-capitalist.

But the crux here is that gains are not being funneled into the working class in the West, which will eventually cause the infinite growth model to collapse on itself.

Wall Street wants infinite growth, but they're not looking into the issue from a bird's eye view.

I forgot who mentioned it, maybe Dan Carlin. but someone out there posited the idea that capitalism is a great way to pull a 3rd world country out of the doldrums, into the 2nd world at least. But after that, things go a bit pear-shaped.

 

[Lunar15]

I'm talking out of my ass here, but could it actually be related to quantitative easing practices and the central bank not using effective gauges of inflation?

Only reason I mention it is because Japan is basically the poster child for that and this article leads with how Japan is a good example of stagnant wages despite a high employment rate.

I have a rudimentary understanding of the federal reserve, but I do know that their main goals are balancing inflation and also ensuring high employment. Could it be that emphasis on one (ensuring employment) could decrease the power of money? Feel free to shit on me if I'm not making sense. I know a lot of libertarians are high on the "eliminate the fed" thing, so I have no idea if there's actually any truth to their ire.

 

[Spuck-uk]

Case in point: WalMart is working on automating as much of it's stores as possible. Guess which jobs at Walmart got automated out of existence last year?

It wasn't the manual labor jobs. It was the back office jobs. And they're in the process of automating out their cash office, by making it so the CSMs have to get till cash out of a machine..

Absolutely, for another high end job that could all but vanish in the next twenty years, Radiographers are getting replaced by software.

 

[tokkun]

It is an over-simplification to say that wages have not been rising. They have been rising steadily among certain skilled professions, like those in the areas of tech and healthcare. However wages are stagnant or declining among lower-skilled professions, and this is why the overall average shows little improvement.

When you consider that, the argument that this is all down to greedy CEOs and shareholders falls apart, unless you want to make the claim that the CEOs and shareholders of tech companies are somehow not as greedy. It is also an unsatisfactory answer because it doesn't address the more basic question of why normal market factors (price vs supply/demand) aren't driving wages. In theory, when there is low labor supply, wages should go up naturally, without the need for unions (which should be more necessary when labor is plentiful than when it is scant) and in the face of greedy shareholders.

My take on it is that per-country unemployment rates are simply no longer a good indicator of labor demand. As the cost of labor rises, it becomes more economical to outsource to another country or to seek to replace the job altogether with technology. This creates a negative feedback loop on wages, preventing them from rising too quickly even as the labor market tightens within a single country. It is more of an effect on jobs requiring fewer skills, because they are easier to outsource or automate.

The nice thing about this theory is that it actually jives with the evidence we are seeing of strong wage growth at the top, and little to none at the bottom.

Basically, full or nearly full employment is where the free market claims wages will grow. Work needs to be done, but people are no longer competing for jobs, so companies have to compete by offering higher wages or larger benefit packages.

But, because of wage stagnation, price and currency inflation, shareholder valuations of short-term gain over long-term sustainability, wages aren't really growing. Sure, the average wage has seen some gains during our recovery, but most people don't have 400 bucks to their name to handle an emergency, most people make less than 30k/yr before taxes, and with ever-rising prices on goods, their marginal propensity to consume suffers. My initial thoughts on this are that the shareholders are trying to hold their ground and can see the slow decline in real time, but, like most bad business owners, they don't want to spend to reverse the trend. So cuts are made. ...Which only exacerbates the problem.

So! People cannot consume as much, which leads to another problem: because they don't consume as much, we don't need to hire as many people as normal, which then leads to fewer people consuming, and so on. The new equilibrium is replaced by a lower and lower point, and what we have is an economy wide demand-side market failure, secular stagnation, and a slow creep back into recession.

And yes, fiscal spending would help fix the issue, forcing businesses to pay more or lose people to extremely lucrative infrastructure jobs, but we could also raise the minimum wage. 12 dollars by 2021 would do it, but more pressing are the ones making around that middle point of 30k/yr, 15 dollars an hour. They need a raise, too, which is why minimum wage rising to 15 can be more preferable; if you get 15 bucks an hour at McDonald's, skilled labor making 15 bucks an hour can demand more, or companies risk losing that labor to other jobs.

Basically, wages haven't kept up with inflation for the bottom, they have for the middle (but only barely, while everything else is still getting more expensive), and the gains have mostly been at the top without recourse. Lower demand -> fewer products sold -> fewer products created -> fewer jobs needed -> lower demand.

It really does seem to be that simple.

Yes, that is the traditional theory of how the labor market works. The problem is that it leads you to a conclusion that conflicts with all of the evidence - namely that unemployment rates are extremely low and corporate profit growth has been extremely high.

 

[Chozoman]

After the "great Recession" lots of companies reduced staff, but they also realized they could maintain or increase productivity with the same head count. So, they continue to operate at those staff numbers, keeping employees in line with the threat of unemployment, and the "you should just be happy you have a job" mentality.

Profits right to the top.

 

[Lunar15]

After the "great Recession" lots of companies reduced staff, but they also realized they could maintain or increase productivity with the same head count. So, they continue to operate at those staff numbers, keeping employees in line with the threat of unemployment, and the "you should just be happy you have a job" mentality.

Profits right to the top.

But if that's the case, why is employment so high?

 

[Ovid]

Basically, full or nearly full employment is where the free market claims wages will grow. Work needs to be done, but people are no longer competing for jobs, so companies have to compete by offering higher wages or larger benefit packages.

But, because of wage stagnation, price and currency inflation, shareholder valuations of short-term gain over long-term sustainability, wages aren't really growing. Sure, the average wage has seen some gains during our recovery, but most people don't have 400 bucks to their name to handle an emergency, most people make less than 30k/yr before taxes, and with ever-rising prices on goods, their marginal propensity to consume suffers. My initial thoughts on this are that the shareholders are trying to hold their ground and can see the slow decline in real time, but, like most bad business owners, they don't want to spend to reverse the trend. So cuts are made. ...Which only exacerbates the problem.

So! People cannot consume as much, which leads to another problem: because they don't consume as much, we don't need to hire as many people as normal, which then leads to fewer people consuming, and so on. The new equilibrium is replaced by a lower and lower point, and what we have is an economy wide demand-side market failure, secular stagnation, and a slow creep back into recession.

And yes, fiscal spending would help fix the issue, forcing businesses to pay more or lose people to extremely lucrative infrastructure jobs, but we could also raise the minimum wage. 12 dollars by 2021 would do it, but more pressing are the ones making around that middle point of 30k/yr, 15 dollars an hour. They need a raise, too, which is why minimum wage rising to 15 can be more preferable; if you get 15 bucks an hour at McDonald's, skilled labor making 15 bucks an hour can demand more, or companies risk losing that labor to other jobs.

Basically, wages haven't kept up with inflation for the bottom, they have for the middle (but only barely, while everything else is still getting more expensive), and the gains have mostly been at the top without recourse. Lower demand -> fewer products sold -> fewer products created -> fewer jobs needed -> lower demand.

It really does seem to be that simple.

As a person that studies economics (final semester), this is a good post.

 

[Abstrusity]

I'm talking out of my ass here, but could it actually be related to quantitative easing practices and the central bank not using effective gauges of inflation?

Only reason I mention it is because Japan is basically the poster child for that and this article leads with how Japan is a good example of stagnant wages despite a high employment rate.

I have a rudimentary understanding of the federal reserve, but I do know that their main goals are balancing inflation and also ensuring high employment. Could it be that emphasis on one (ensuring employment) could decrease the power of money? Feel free to shit on me if I'm not making sense. I know a lot of libertarians are high on the "eliminate the fed" thing, so I have no idea if there's actually any truth to their ire.

Quantitative easing, just like it was used in the US, was used in Japan to combat the deflation trap -- a cycle which would have seen wages worth more and more as time goes on, which then means that fewer investments are made. If your money is worth more tomorrow, why bother buying anything today? And that causes very bad things to happen very quickly. The US was in dire straits when our Federal Reserve started QE.

But QE is not a cure-all, it's one of those last resort type of things that merely staves off the worst effects. QE is only ever used when things are very bad and getting worse.

For instance, banks had no liquidity with which to successfully loan, so businesses wouldn't get started, couldn't expand with a line of credit, and thus employment would stay low and get worse in the same way that I outlined a few posts ago. So the Fed bought up assets that the banks had, giving them money in return, and lowered the rate at which they could borrow from each other or from the Federal Reserve, so they could continue to loan money out for expansion or business startup, or for other investments. This had an adverse effect on saving, but that's okay, because we wanted people SPENDING, not saving.

QE is combating deflationary pressure with inflationary pressure. Which is why the Federal Reserve, once that deflationary pressure has been much reduced, started easing out of QE and slowly dialing rates back up.

Japan's problem goes deeper. They had QE running, then they stopped it too soon, fell into the deflation trap, and have had hell on earth trying to claw their way out of it. They're doing much better now than before, but they're still struggling with an aging populace, declining birth rates, long-term -suicidal work rates, decent wages, but only just. The older folk can't retire(or won't retire), families are being raised at a decimated rate, because it's hard enough working on your own to support yourself, yet alone someone else, and yet alone two people supporting a child with them.

So I think you're a bit off base. While QE in normal times would increase inflation, QE in recessions with deflationary pressure staves off the worst effects. Basically, QE is why we didn't dip into a depression with harsh economic retraction. Consider the Eurozone and their response to the crisis -- austerity measures are the exact wrong thing to do. It got much worse for them in the short run...and in the long run we're talking trillions of lost growth and residual weakness. They're doing much better now, but there's a reason the ECB admitted they were wrong.

Yes, that is the traditional theory of how the labor market works. The problem is that it leads you to a conclusion that conflicts with all of the evidence - namely that unemployment rates are extremely low and corporate profit growth has been extremely high.

Well that IS the problem, isn't it? As you say, the traditional theory of how the labor market works would mean wages are supposed to be rising right now, and especially at/near (??) full employment. Now, I was under the impression that full employment was somewhere around 5%, but it turns out there's more slack in that than I thought OR no, the traditional theory is either being counteracted or incorrect.

Now, my take on it is more that investment in wage growth is a risk that companies are not willing to take for whatever reason. That this represents a market failure. It could be that most businesses are being slow to prioritize technology, or it could be that their investments are tied up in automating, or it could be a combination of all of them and the first idea is to cut back everywhere else.

The problem here might be more behavioral rather than structural. Which makes it all the better to force wages to rise, when companies will not -- for whatever reason -- do it themselves across the board.

 

[Ganhyun]

But if that's the case, why is employment so high?

Someone please correct me if this is wrong, but, doesnt unemployment purposely not look at people who have given up looking for employment/have been out of employment for a good while?

 

[Wamb0wneD]

CEOs themselves are just monkeys to their corporate boards anyway. They're easy to blame, but just really cogs in the machine. It's really a systemic issue with maximizing shareholder value at all cost.

Would gladly be a monkey to some board if that means I would earn more while taking a dump than I do in an hour now.

 

[Draft]

Capitalism is booming, but labor is commoditized. Good for capital, bad for labor. No way to fix this without society (ie- The Government) directing the invisible hand of the free market.

 

[gcubed]

Someone please correct me if this is wrong, but, doesnt unemployment purposely not look at people who have given up looking for employment/have been out of employment for a good while?

All the UE rates, including the ones that look at disaffected workers have improved greatly.

There are a handful of issues though. There are jobs available, but the problem is WHERE they are available. Job creation has also been centered around urban and suburban areas. Small town living just doesn't get the employment anymore, so while our numbers look good, if you don't live near a city, your prospects for opportunities drastically decease

 

[Abstrusity]

Someone please correct me if this is wrong, but, doesnt unemployment purposely not look at people who have given up looking for employment/have been out of employment for a good while?

Why would we count someone who is not working and not looking for a job in the measurements of the health of the job market?

There's the answer. We don't use U-4 as the primary measure because it's really only the difference between U-3 and U-4 that matters at all. Similarly so for U-5 and U-6.

https://www.bls.gov/news.release/empsit.t15.htm

So the percentage of people not looking for work because of the job market is .3%.

The percentage of people who are not working, aren't looking for work, but want to(because in the last 12 months, they looked for a job but are not currently looking) is the difference between U-5 and U-4. .6%.

And the number working part time jobs BUT wanting to work full time jobs is the difference between U-6 and U-5. 3.2%.


So if you're not looking for work, you have no noticeable effect on the job market. Basically, we use U-4, U-5, and U-6 as supplemental information to the U-3, which measures total unemployment: people consistently looking for a job but have been unemployed for a longer period of time, people in between temporary jobs temporarily (this also includes people who quit a full time job but haven't yet started a new job that they've already lined up), and people who are unemployed and looking for a job, but haven't been unemployed for a long period of time. These people searching for a job change the dynamics of the labor market health in general.

 

[iamblades]

It is an over-simplification to say that wages have not been rising. They have been rising steadily among certain skilled professions, like those in the areas of tech and healthcare. However wages are stagnant or declining among lower-skilled professions, and this is why the overall average shows little improvement.

When you consider that, the argument that this is all down to greedy CEOs and shareholders falls apart, unless you want to make the claim that the CEOs and shareholders of tech companies are somehow not as greedy. It is also an unsatisfactory answer because it doesn't address the more basic question of why normal market factors (price vs supply/demand) aren't driving wages. In theory, when there is low labor supply, wages should go up naturally, without the need for unions (which should be more necessary when labor is plentiful than when it is scant) and in the face of greedy shareholders.

My take on it is that per-country unemployment rates are simply no longer a good indicator of labor demand. As the cost of labor rises, it becomes more economical to outsource to another country or to seek to replace the job altogether with technology. This creates a negative feedback loop on wages, preventing them from rising too quickly even as the labor market tightens within a single country. It is more of an effect on jobs requiring fewer skills, because they are easier to outsource or automate.

The nice thing about this theory is that it actually jives with the evidence we are seeing of strong wage growth at the top, and little to none at the bottom.



Yes, that is the traditional theory of how the labor market works. The problem is that it leads you to a conclusion that conflicts with all of the evidence - namely that unemployment rates are extremely low and corporate profit growth has been extremely high.

Also, when you look at total compensation instead of hourly wages, there has been growth, it's just that almost all of it has been eaten up by increases in benefits, because of the way the tax code is structured to advantage benefits over wages.

Global poverty going down is an amazing thing. And it's why I'm not an anti-capitalist.

But the crux here is that gains are not being funneled into the working class in the West, which will eventually cause the infinite growth model to collapse on itself.

Wall Street wants infinite growth, but they're not looking into the issue from a bird's eye view.

This is another place that the tax code creates bad incentives. Investors want growth because it is more tax efficient than steady profit and paying out dividends.

Capitalism does not require growth, even wall street doesn't require growth, there are plenty of successful businesses on the stock market that don't really grow, it's just that the tax difference gets priced in to the market, therefore CEOs and shareholders are encouraged to prioritize growth.

 

[afternoon delight]

There is no mystery and it's been demonstrated a thousand times already: most gains are going straight to the top.

Literally for fucking decades.

 

[BigDug13]

Basically, full or nearly full employment is where the free market claims wages will grow. Work needs to be done, but people are no longer competing for jobs, so companies have to compete by offering higher wages or larger benefit packages.

But, because of wage stagnation, price and currency inflation, shareholder valuations of short-term gain over long-term sustainability, wages aren't really growing. Sure, the average wage has seen some gains during our recovery, but most people don't have 400 bucks to their name to handle an emergency, most people make less than 30k/yr before taxes, and with ever-rising prices on goods, their marginal propensity to consume suffers. My initial thoughts on this are that the shareholders are trying to hold their ground and can see the slow decline in real time, but, like most bad business owners, they don't want to spend to reverse the trend. So cuts are made. ...Which only exacerbates the problem.

So! People cannot consume as much, which leads to another problem: because they don't consume as much, we don't need to hire as many people as normal, which then leads to fewer people consuming, and so on. The new equilibrium is replaced by a lower and lower point, and what we have is an economy wide demand-side market failure, secular stagnation, and a slow creep back into recession.

And yes, fiscal spending would help fix the issue, forcing businesses to pay more or lose people to extremely lucrative infrastructure jobs, but we could also raise the minimum wage. 12 dollars by 2021 would do it, but more pressing are the ones making around that middle point of 30k/yr, 15 dollars an hour. They need a raise, too, which is why minimum wage rising to 15 can be more preferable; if you get 15 bucks an hour at McDonald's, skilled labor making 15 bucks an hour can demand more, or companies risk losing that labor to other jobs.

Basically, wages haven't kept up with inflation for the bottom, they have for the middle (but only barely, while everything else is still getting more expensive), and the gains have mostly been at the top without recourse. Lower demand -> fewer products sold -> fewer products created -> fewer jobs needed -> lower demand.

It really does seem to be that simple.

The thing that's often missed is the part where you say "people can't consume as much". But they are. They're just not consuming more in the same location. Since companies are more global than ever, merged with other major companies across multiple continents, modernization in places like Africa is creating millions more people who can buy stuff. Small businesses in each country suffers while major multi-national conglomerates keep finding new customers. They don't need to pay you more because they've already found new customers to increase demand and your extra dollars in pay that helps buy things to keep their business afloat aren't needed as much anymore.

 

[Fenderputty]

My take on it is that per-country unemployment rates are simply no longer a good indicator of labor demand. As the cost of labor rises, it becomes more economical to outsource to another country or to seek to replace the job altogether with technology. This creates a negative feedback loop on wages, preventing them from rising too quickly even as the labor market tightens within a single country. It is more of an effect on jobs requiring fewer skills, because they are easier to outsource or automate.

The nice thing about this theory is that it actually jives with the evidence we are seeing of strong wage growth at the top, and little to none at the bottom.

.

This seems like a good take. Especially within the context of global poverty going down as evidenced by other graphs in this thread. Wages are not siphoning down like they should. Both can be squared

The automation people drive me nuts. The only evidence this is happening today is colloquial, since productivity is growing at a low rate.

.

Will you be saying this when the trucking industry is automated in 10-15 years?

 

[Bolivar687]

The quality of legal scholarship on capitol hill has declined significantly for a while now. The problem isn't necessarily that our regulations are overly restrictive - its that they're poorly constructed and it's difficult for companies to predict how they will be applied in court. They run an analyses and come to the conclusion that it's safer to extract more work out of fewer employees for the same price than to risk investing in their work force and running up against vague refulations. In this way, recent Democratic economic policies ironically exacerbate economic inequality instead of addressing it.

 

[KingV]

I literally work in automation. 5 years ago my department would have to be three times its current size to do the same workload. It's a sword of Damocles hanging over a lot of even very skilled work.

Sure. But where is the hockey stick change in productivity numbers?

Businesses have ALWAYS been trying to automate things, and make things more efficient. There is nothing in economic data that says that What is happening today is any different than what has been happening since Henry Ford and the assembly line.

 

[KingV]

This seems like a good take. Especially within the context of global poverty going down as evidenced by other graphs in this thread. Wages are not siphoning down like they should. Both can be squared



Will you be saying this when the trucking industry is automated in 10-15 years?

Where is the evidence that this will happen? It MIGHT happen. It also might not happen. It also might partially happen.

That said, I’ll be ready to do something about it when somebody can produce any economic data that suggests that it is currently happening at a meaningful scale that affects the labor market.

Until that point, you are fearmongering about hypothetical scenarios. You might as well talk about Europe being taken over by Muslims and instituting Sharia law.

 

[TheLaughingStock]

GAF: Automation will make our economy so efficient billions will lose their jobs!!!

Also GAF: The gospel of infinite growth will finally collapse on itself!!!

Of course, neither is the likeliest truth, but that's an entirely different issue.

Unions or not, if firms are paying less than what labour is worth, wouldn't they have an incentive to hire more people, pushing wages up? (or, framing it another way, wouldn't a new competitor appear and 'steal' the best workers away?). Yes, they would. Because that's exactly what happens: long term, workers are paid virtually what they are worth, as labour markets are usually very competitive, with some exceptions; though unions can be useful nonetheless

(Also, before you post one of those graphs where real wages are stable and productivity skyrockets, check if they include the value of other benefits employers provide, such as healthcare, and most importantly, if they account for the full labour population, and not just the bottom 80 or 90 percent. The real story here is that productivity growth is coming out of the most productive workers, mainly because of technology, and that's also quite worrying, but a different problem entirely)

I liked the first point you made about automation at least. The robots must need an update because the global economy isn't something to be proud of. Productivity growth was slowing prior to the Great Recession.

 

[StrikeNinja24]

I've recently got a new job working in Supply Chain in NJ, making 15 bucks an hour with options of quick internal growth, and was feeling pretty good about myself. About to once again move into a place with a roommate closer to work and looked into pricing.

How anyone lives in this state is beyond me. And knowing that California and NY is even worse further questions how people pull this off.