Hacker News Reader

Comment by mhjas | Hacker News Reader

There are reasons to believe that the free market isn't healthy at all when it comes to labor. Low salaries for low-skilled labor enable companies to delay modernization, automation and other increases in efficiency. High salaries for high-skilled labor creates inflationary spirals for things like housing.

There is absolutely reasons to believe that equalizing pay, across companies rather than occupations, could be part of the solution. Less efficient companies underpaying their employees would fold. More efficient companies would get more money to hire even more people. Prices would stabilize, careers would likely be more predictable.

This was part of economic policy in Sweden in the ~1960s and as far as I can tell generally considered successful. Though it will, and did, also created large wealth inequality without other measures.

View on HN

> Low salaries for low-skilled labor enable companies to delay modernization, automation and other increases in efficiency.

I don't see that modernization or automation have been kept back in the US due to unequal wages.

They are "kept back" until the exact moment they become cheaper than human labor, then they effectively take over.

> High salaries for high-skilled labor creates inflationary spirals for things like housing.

High salaries for anyone create inflationary pressures. In fact, high salaries for a relatively small group would do this far less than paying everyone more, as the article suggests.

I'm wary of government intervention in the market because every case I've examined deeply enough turned out to be a failure.

would you call federal and state-mandated minimum wages, which generally allow service and low-skilled workers access to a decent home somewhat near their place of employment, a failure?

high salaries create inflation at different rates for different groups of people depending on their marginal propensity to consume. if you give $5k to someone living on $20k vs $200k annual income, the $20k person is much more likely to spend most or all of that $5k on food, housing, etc. - variables that directly affect inflation. the $200k person may invest it or save it in a bank account, removing it from M0 and M1 so it doesn't show up in the inflation statistics, or in the price you pay for staple goods. this is a large part of the reason we're not seeing any inflation today even though unemployment is historically low - there are no wage gains going to the lower earners who have a high propensity to consume and spend.

there always has to be a balance between those who own the capital and those who work the capital for society to function. otherwise the free market functioning without any ethical or moral underpinnings would return us to slavery - ownership of other human beings as just another form of capital

> if you give $5k to someone living on $20k vs $200k annual income, the $20k person is much more likely to spend most or all of that $5k on food, housing, etc.

That would normally be the case, but I would argue that salary and housing has a strong connection in places like SV. People need to get a certain salary to be able to stay (and start a family) in the Bay Area. Which means that people have a high incentive to increase their salary and that some of those who don't have to leave. As overall the people who stay have more and more money the cost of housing increase, in turn giving people even more need to increase their salary.

That would all normally stop at some point, but since so many wealth companies centralize in the Bay Area the spiral continues.

sure, housing costs are extremely inflated in SV, definitely a reality

i'm talking about inflation and marginal propensity to consume at the national level. not sure what inflation looks like in SV - how much does your average fast food meal run you in mountain view?

i think it's also worth noting the effect of the internet on who owns property and where they are able to own and effectively maintain it. as well as the rate of return on real estate vs. market interest rates of "safe" investments and why the two have diverged so drastically

Reply on news.ycombinator.com