If pay had kept pace with productivity gains, minimum wage would be $24 an hour
commondreams.org
commondreams.org
There is a fantastic long form article that articulates this better than I can at:
https://highline.huffingtonpost.com/articles/en/poor-millenn...
The portion relevant to this discussion:
"Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies.
The effect of all this “domestic outsourcing”—and, let’s be honest, its actual purpose—is that workers get a lot less out of their jobs than they used to. One of Batt’s papers found that employees lose up to 40 percent of their salary when they’re “re-classified” as contractors. In 2013, the city of Memphis reportedly cut wages from $15 an hour to $10 after it fired its school bus drivers and forced them to reapply through a staffing agency. Some Walmart “lumpers,” the warehouse workers who carry boxes from trucks to shelves, have to show up every morning but only get paid if there’s enough work for them that day."
The degree to which both costs and risk are shifted onto workers is at times astonishing:
“After paying about $1,500 for home office equipment: a computer, two headsets and a phone line dedicated to Arise; after paying Arise to run a check on her background; after passing Arise’s voice-assessment test and signing Arise’s nondisclosure form; after paying for and passing Arise’s introductory training, to which she devoted three days, unpaid; after paying for and passing a certification course to provide customer service for Arise client AT&T, to which she devoted 44 unpaid days; after then being informed she had to get more training yet — an additional 10 days, for which she was told she would be paid, but wasn’t; and then, after finally getting a chance to sign up for hours and do work for which she would be paid (except for her time spent waiting for technical support, or researching customer issues, or huddling with supervisors), Tami Pendergraft spent three weeks fielding telephone calls from AT&T customers, after which she received a single paycheck.
For $96.12.”
Thankfully some law firms have taken the approach to overwhelm Arise with individual arbitration claims. Arise likely calculated in to their model as a cost of business expense, so the best that can be done is to make that expense grow.
If you feel strongly against arbitration clauses, activism to get people to use them is the fastest way to kill them as the cost benefit will quickly become a negative.
The root cause is the demand for that type of labor is dwarfed by supply for type of labor, and the long lasting solution would be to provide those people with better options.
AT&T and Arise are not people. People made these decisions and put Tami in this position. We should use their names.
But getting to the core of your point, how would you allocate blame? Is the CEO responsible for every mistake? Do you part it out to various levels of management, based on their involvement with this specific case? Do you think it's better if more corporations copy Google's approach, and outsource all the low-wage work to avoid bring blamed for problems?
To be clear, I am not sure who is to blame for what, but I think the real problem is a shortage of opportunities for people at the bottom of the corporate ladder (as well as for those struggling to get on it). The average HNer isn't protected from exploitation by laws, they are protected by their BATNA (best alternative to a negotiated agreement).
Here in Michigan we had a front row seat to this happening with manufacturing. Everything peaked in 1973 and has been on a slow decline ever since. Sure there have been booms but the long term trend has been down.
The Japanese started importing cheap motorcycles to the West coast, then cheap cars. We didn't see them in Michigan and if auto execs did they would have laughed. The Big 3 saw VW and their Beetle as the big import threat. Suddenly those Japanese cars became better in quality. Then the Koreans went through the same cycle and Japan introduced luxury cars as well.
Because wages were much less in Asia even after accounting for shipping this exerted downward pressure on wages. Give America back the monopoly it had in the fifties and sixties and minimum wage would be $24 an hour.
It would take a lot more than that. Remember that the gains labor made after world war II were built upon decades of struggle by labor, including frequently being targets of violence by armed militia hired by corporations [1]. Despite that, America desperately needed labor for world war II (where the alternative was defeat at the hands of the Nazis), so for that moment in history capital and labor found themselves in a obvious win-win scenario. Most of the gains made by labor in America were made during this period.
The minimum wage does not naturally rise - it is a policy decision, one implemented under pressure from labor. And as labor's political power has waned and capital's political power has increased, minimum wage has stagnated.
Under our current system that heavily favors returning productivity gains to capital instead of labor, returning America to that global monopoly (which would require the highly improbable destruction the industrial capacity of the rest of the world while leaving America's untouched) would just turn the hypothetical gains of that monopoly over to the owners of capital.
Realistically, any attempt to return to the prior American monopoly would result in a massive regression in the American standard of living, through the destruction of purchasing power abroad for American goods and services (remember, we have a lot more people today than we did back then, and many of them - especially farmers - work in occupations that sell to other countries).
1. https://en.wikipedia.org/wiki/Anti-union_violence_in_the_Uni...
The minimum amount of money you have to pay for someone to show up for any job rises (and falls) alongside demand for labor in the broader economy.
> Under our current system that heavily favors returning productivity gains to capital instead of labor...
If you look at the profit margins of those companies that employ a lot of low-end labor, you will find that they're generally in the single digit percentages. I think that's a pretty fair deal for organizing all that labor and taking on the capital risk. Profits aren't guaranteed, after all. There just isn't that much money to redistribute here, you would have to raise prices, which can make you uncompetitive.
Oh, what that it were so simple. There are far more factors governing "market wages", which you are describing, including labor supply at a given skill level, automation, political representation of laborers vs employers, and how that representation manifests as power in the local and global economic contexts.
The "minimum wage" specifically is a policy designed to put a floor under the standard of living of people whose market wages in the economy would provide a standard of living below what the society considers humane. Some societies have no such humanity based floor.
Why do those other people get some automatic raise?
https://en.wikipedia.org/wiki/Scandinavia#Use_of_Nordic_coun...
There were a few potential inflection points / events that happened around then.
1971 saw the perhaps ill-considered abandonment of Bretton Woods - arguably this ineluctably led to an ongoing boom / bust cycle.
(Can recommend John Ralston Saul's discussion around this in his book 'The Collapse of Globalism'.)
What are these other companies doing that we are not? What can we do to make ourselves more competitive such that each employee has enough productive capacity to easily receive $24/hr or equivalent? The peak of 1973 is gone and not coming back, we have to look to the future now.
And/or the fruits of globalism have not been fairly shared. Depending on whom you ask.
The surprising thing about the current era is just how little wealth is inherited and how much has been largely generated during the owner's lifetime, in many cases due to labor and receiving compensation in the form of stock. The vast inheritances we read about from the 19th century aren't there this time, barring a few exceptions. Thomas Piketty wrote about this in Capital.
How do we maintain it? An obvious factor is our military capacity. That means defense spending. Under a capitalist system that also requires a competitive commercial defense sector and also a strong economy capable of sustaining such a sector via tax revenue.
Most tax revenue comes from individuals. In an era of mobile capital, corporate taxation is sub-optimal. So the economy's health is linked to the prosperity of individuals, in aggregate. Prosperity can come from competition, but the most durable forms of prosperity are tied to increasing productivity.
Continuing on this first principles trajectory should lead to a stable structure. It's not one that is dominated by "print-and-export-dollars"-style industries.
I have two theories on this. One is that we simply have improved our management processes. The economy became more developed and you could realize real efficiency gains from outsourcing. From a pure GDP perspective - this was good.
The second is more messy and i'm still working on it but it ties into a lot of macro issues. It used to be much easier start out with no experience, say as a janitor, and work your way up to a higher position in the same company. This was possible because it was all the same company. Now with outsourcing this is impossible, if you start as a janitor, the only thing you can do is maybe run the janitor company, but you won't ever become the CEO of the company whose office you clean. At the same time, you've made entry-level positions at the company harder to attain. The floor is no longer janitor, it is now junior developer (to take a software example). This is one of the reasons why I think there is such a bifurcation in our labor market. A college degree is now the minimum requirement to get your foot into the door. Again, it used to possible to start at the very bottom and work your way up but now there is a hard cap on growth unless you go the college route.
I think this was a clever way for companies to also push costs onto employees. Training used to be a thing companies did but now it's basically been abandoned. Go spend your own money and get a degree before even talking to us is the attitude.
I remember when I wanted to sell in France, I had to find a French distributor, make a French version of the product, guess how many would sell there, ship a pile to the distributor, the distributor collects most of the money, and unsold merchandise is scrapped. If I didn't have a distributor, the merchandise was always getting hung up in customs, would disappear in the mail, would take 6 weeks to deliver, I'd get paid in dollary-doos that no bank would exchange, etc.
Rinse, repeat for every country.
Today, I ship all over the world via the internet for $0, have no stock, no scrap, no middlemen, get paid instantly, ship instantly, and the transaction cost is 1% for paypal and 3% for credit cards.
Still have to pay taxes, though :-)
This all true, and empowering for those who have the relevant know-how and opportunities. However, these apparent efficiencies are built on the back of the factors that GP points out. Empowerment for some relies on structures that disempower others. Agency staff live precariously; the companies that use them have ever tighter margins, they are increasingly hollow shells that serve only to generate cash not to provide the security of employment.
The convenience we appear to benefit from is an ever-thinner veneer that disguises deeper problems.
An interesting outcome is that is becomes more difficult to rise to high levels unless that is what you’re optimizing for early. Ironically, this creates the same pressure that makes high levels so competitive and potentially miserable
The productivity gains went to either things that got automated (e.g. speciality equipment operator - wages are higher but there are less jobs) or knowledge workers (software engineering salaries have skyrocketed).
The wages in lots of sectors without productivity gains have gone up because they must compete against sectors where productivity has gone up. This is known as Baumol's Cost Disease.[0]
It's not a coincidence that there is a rotating crew of Russian speaking janitors who clean my office building and Spanish speaking landscapers outside my apartment. I'm not discounting that many of them are legal immigrants, just lower skilled and working their way on up. More power to them.
I can also see though how this situation is easily taken advantage of. Contracting firm hires undocumented workers for below market rates and is able to under bid for contracts. Big company fires their in house workers to save money and hires the contracting firm. Big company then gets the advantage of undocumented labor wages without the liability.
Wages are a function of supply and demand. If the people cleaning hotels had better options, their wages would go up (or hotels would shut down, or ask people to clean their own room before they leave, etc.)
> Yet the biggest difference between their two experiences is in the opportunities they created. A manager learned that Evans was taking computer classes while she was working as a janitor and asked her to teach some other employees how to use spreadsheet software to track inventory. When she eventually finished her college degree in 1987, she was promoted to a professional-track job in information technology.
> Less than a decade later, Evans was chief technology officer of the whole company, and she has had a long career since as a senior executive at other top companies. Ramos sees the only advancement possibility as becoming a team leader keeping tabs on a few other janitors, which pays an extra 50 cents an hour.
The spreadsheet story is nice, but even having these skills back in the 80's was way less common than today. The article should also have looked at how much tuition was relative to the cost of living/salary Evans was making, and if Ramos could afford it today.
> Evans was a full-time employee of Kodak. She received more than four weeks of paid vacation per year, reimbursement of some tuition costs to go to college part time, and a bonus payment every March. When the facility she cleaned was shut down, the company found another job for her: cutting film.
She was able to bootstrap her career at least in part because Kodak offered tuition reimbursement and other benefits.
I did.
What I would be curious to read is an accountant taking a look at Ramos finances and figuring out how she could afford (or not) to get the same degree.
Oh, you all weren't paid for your overtime? Sorry, you don't work for Hilton. You work for Rent-a-Janitor. And they just filed for bankruptcy and closed shop. Hilton had previously dropped their contract with them due to their unscrupulous practices. We have now contracted with a totally different company, Rent-a-Janitor 2.
(This is a made up example. I have no idea if Hilton does anything like this, but most all huge companies do it.)
It doesn't, you're literally paying a middleman to take away the risk and hassle of hiring an employee. That's the added value here.
Otherwise, you could just hire the worker directly for what that middleman is paying them. Working as a contractor, you get a pretty good idea of what your "rights" are worth in pure dollar terms.
It's sometimes difficult to fire employees as a way of lowering wages. The people left behind who are expected to make up for that through raised workloads and losing the experienced for green new hires might complain.
But if the employee is via third party, there is no hiring or firing involved, limiting the liability of the first company.
In that regard the sales pitch is similar to how Microsoft can sell a company email and word processing so that the company doesn't have to figure out how to write business software.
* X is available more cheaply from a third party supplier (who presumably has achieved some kinds of economies of scale) than our fully-loaded cost to deliver the same
* X is a commodity product where we do not feel we can differentiate ourselves by doing it in-house
* X is ancillary, but important, to our core business and we lack the expertise to do it well, so we will buy in rather than build that expertise
Not many hotels are bothering to drill their own wells these days, bearing in mind that water is available from utility suppliers - why would room cleaning service be immune from the same forces?
* Purchasing X through a third party allows us to circumvent laws and regulations meant to protect workers and/or consumers
Do you really belive there is a collective of business owners who thought "yeah, let's outsource everything, because f..k employees"?
Obviously it's about specialization. Why a software house should hire a cleaning lady? They are not in the business of cleaning, they know nothing about it and they don't want to even think about how you go about hiring someone for cleaning.
Or the other way around. Should a cleaning company hire software developers? They would fail so hard at it. Not to mention the frustration.
World got more complex, business got too.
I honestly think that having people in house to do these kind of jobs can be a benefit. A good receptionist for example can be a real asset. But they are hard to find.
All the rest are contract. Desk clerks, cooks, nurses, doctors, therapists, janatorial....
The structural shift to contractors is part of a broad trend after 1970 suggesting American labour isn't, economically speaking, a growth engine.
That should be made illegal to do...
https://www.cnn.com/interactive/2019/business/us-minimum-wag...
This is just wrong: the article is not talking about inflation; it is talking about indexing the minimum wage to productivity. Eyeballing the graph from the original article (and projecting productivity back to 1949), if indexed to productivity, then minimum wage would be at ~$15.
Your subsequent criticisms have more merit, but the article addresses them as well. You may disagree with the article's arguments, but you should at least acknowledge them.
> It would be claimed that the productivity of minimum wage workers has not kept pace with average productivity growth, so that it would not be feasible for minimum wage workers to earn pay that rises in step with average productivity growth.
> There is some truth to this claim, but only at a superficial level. The productivity of any individual worker is determined not just by their skills and technology, but also by the institutional structure we put in place.
Could you expand on this a bit?
For example, free trade has undoubtedly lowered the cost of commodities for Americans, but at the same time has also cost manufacturing jobs. From a monetary perspective, there is no contention that America as a whole is richer because of free trade. But where has that wealth gone? Not much to the now-jobless manufacturing workers.
The economics profession deserves some blame. When evaluating a policy, economists often ask whether there society would reap a net benefit in "utility." But chiefly, economists often ignore questions about distribution -- which groups should benefit from policy? One reason might be because answers to distribution questions could be seen as "political" -- if you think labor should receive compensation for lost wages due to free trade, then people will question whether "leftist" politics biased your thinking.
Indeed, economics has a special name for changes that benefit society on net at the expense of another group of people -- a "Kaldor-Hicks improvement." A change is a Kaldor-Hicks improvement if the people made better off could, in theory, fully compensate those made worse off and still come out ahead. In practice, that compensation usually never happens. Uwe Reinhardt, who was an economics professor at Princeton, writes an absurd satirization of policies justified by the Kaldor-Hicks criterion:
> To highlight the tenuous ethical foundation of Kaldor's criterion, one might call it the unrequited-punch-in-the-nose criterion of social welfare. Suppose, for example, that I feel very aggressive today and therefore would like to punch you in the nose. An honest referee (an economist) asks me what 1 would be willing to pay for that privilege. Suppose the maximum I'd be willing to pay were $1,000. Next, the honest referee asks you how much you would have to be paid to receive that punch in the nose without hitting me back. Because you are strapped for cash, you might accept the punch for $600. The referee (our economist) is ecstatic, for (s)he perceives here the opportunity to enhance social welfare. Consequently, the deal is struck, you kindly present your precious nose, I punch, you bleed and hold out your hand in anticipation of my payment of $1,000. Alas, I walk away happily, along with my $1,000, which I refuse to surrender. Not to worry. The honest referee (our economist) will soothe you with the expert assurance that, according to Nicholas Kaldor, and in principle, we just have witnessed a major enhancement in social welfare, to the tune of $400, even though the expected $1,000 bribe is not actually paid. It is to be hoped that you have enough respect for the referee to accept this verdict gracefully, and you probably will, if you accept the benefit-cost analyses typically sold by economists to policy makers.
> Although this illustration may seem beastly and absurd, it can easily be adapted, with only minor modifications, to the context of environmental pollution, to health care or to many other situations in which public policy bestows benefits upon one group of people at the expense of others. One is struck by how readily and how uncritically many economists apply the Kaldorian criterion to their analyses of such policies -- particularly younger economists, many of whom no longer seem to explore very carefully the philosophical and ethical underpinnings of their profession and instead concentrate on mere analytic technique. [1]
(The whole paper is worth reading.)
So this is what the author might be criticising -- that policies have been evaluated mostly with consideration to whether society as a "whole" would benefit, with not much thought about who exactly benefits. Add to that the marginal utility of money -- that poorer people see a greater increase in happiness per dollar than the richer people -- and you could argue that those policies have caused a group of people, namely menial laborers, to experience significantly increased hardship than those nearer to the top of the economic ladder. The author's goal, then is to justify the "compensation" portion of a Kaldor-Hicks improvement -- according to them, wealth, wages, and healthcare should be redistributed to these workers who were made worse off -- at the benefit of everyone else.
I earn fantastically at work, but any vote I make will always be against the political party that spouts the same nonsense.
The most durable way to build middle class wealth is entrepreneurship. And not the SV kind. Family-owned business have something very few publicly traded ones do... long time horizons. We've destroyed the ability for the middle class to do that outside a select coterie of sectors.
This is not completely fair. There are countless innovations that have allowed these low skill jobs to have an increase in efficiency and productivity.
One example, when I was a teen and worked retail I remember we would all have to spend hours going around the store counting every product on the shelves in order to do our routine inventory checks because there was no other reasonable way to track that information. Now many stores have intelligent inventory tracking that requires little to no work from employees. The end result is that these employees are more efficient, stores need less workers, and stores can carry less inventory. Why isn't the benefit of that efficiency passed on to those employees who are now more efficient? How is that any different than a software developer receiving a higher salary because they are more efficient due to computers being more powerful?
What makes you feel that Software developer salary is linked to computing power? In fact, even if we were to consider it a fair comparison, computing power, if measured by Moore's law has doubled every 2 years. Software Engineer salaries have lagged far far behind.
Honestly, I don't think there is any relation between developer salary and computational power. I was just reaching for a possible explanation for this[1] that fits with the theory that people are paid based on their productivity. It is my belief that people are paid based off the supply and demand for their labor. Productivity only serves as a ceiling for compensation and even then, that is only in the long term. Plenty of people are paid more than their production either over the short term or when productivity is difficult to measure. An employer's natural inclination is to pay people as far below their level of production as possible while still filling the job.
It is my belief that the reason that low skill wages have stagnated is not because their efficiency has stagnated. It is because their supply is outpacing their demand. The supply of software developers is not keeping up with demand so their wages are increasing. Neither has anything to do with productivity in my opinion.
[1] - https://lh6.googleusercontent.com/5n4R_Osks_fVsVmedxJKsp9zPu...
We in the US once had a number of tax policies that were designed to disincentivize this kind of payout, and encourage companies to maintain full-time workforces with decent benefits, invest in R&D and facilities improvements etc. Other countries still have those policies. But we here in the US got rid of a lot of them. The result is that excess productivity benefits have been distributed in exactly the way you’d expect - with frankly alarming effects on our political stability.
Though the disparity is somewhat justified in that the efficiency of software (neither in its running nor production) haw kept up with Moore's Law. In any case, owners and executives are funneling up the excess value created. It's there, you're just not getting it.
It is, though, right? It is passed on to the employees who were responsible for the efficiency gains. Those employees who built those innovations — could be employees of retailer, or employees of the companies, say tech companies, for whom the retailer is a customer.
I think the parent commenter’s point is still valid that:
>>Someone stocking shelves in 2020 is about productive as someone stocking shelves in 1968.
I would phrase it slightly differently: “the skill of stocking shelves in 2020 has been as efficient as it has been in 1968”. It’s the skill of creating innovations in inventory tracking , better statistical modeling and predictions/estimates, and probably the advent of tracking all this in digital systems that has multiplied the efficiency at the macro level.
Employees who are stocking shelves have not been able to participate in those contributions.
Or take the programmers who worked on Walmart.com. They didn't invent the transistor, Linux, or Java. They just used them to build a crud app.
>How is that any different than a software developer receiving a higher salary because they are more efficient due to computers being more powerful?
I'll admit software developers might be a bad example for that given question since they are responsible for some downstream efficiency, but the overall point still stands. Why do high skill jobs get to capture the value of their increased efficiency but low skills jobs don't?
Because any teenager would be more efficient with automated inventory control. Teenager X didn't have to learn how to do something more complicated. The labor is interchangeable. It is a victory of capital.
Labor specialization and labor skills are what allow labor to collect more of the spoils. Otherwise, labor is interchangeable. The job must need you more than you need the job. Supply and demand.
On the computer power point: scaling has changed as Moore's law has died. It takes something more subtle to make modern systems sing. Something inaccessible to most teenagers without both aptitude and training.
Let's not get started on discussing the interpersonal communication skills needed to survive Thanksgiving/Black Friday.
And for all this, you're getting paid less than Joe W. Cash Register got way back when.
There’s a much higher barrier to entry as a software engineer than a shelf stacker. The breakdown of returns to labor vs capital will always favour capital (absent regulatory intervention or shortage of unskilled labor) for commodity-type work.
Manual inventory is still done, often quarterly. Shrinkage will never disappear, and it needs to be accounted for regardless of smart or dumb inventory systems are:
* https://www.thebalancesmb.com/top-sources-of-retail-shrinkag...
* https://losspreventionmedia.com/how-to-calculate-shrinkage-i...
* https://paladinsecurity.com/security-prevention/prevent-shri...
* https://en.wikipedia.org/wiki/Shrinkage_(accounting)
An outside team (either in-house or third-party) is brought in so the regular employees aren't doing their own 'audits'.
I throw this number out there not for it to be taken seriously on its own purely because it’s “in the middle”, but to hopefully put into perspective how large this gap is, again naively assuming the “correct” number is somewhere between the two extremes.
I personally find it harder to imagine that the “correct” minimum wage is closer to $4.22 than it is to $14.11 or even $24, but that’s just me.
Here is a more complete picture, with words and discussion and multiple graphs too: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
If I could go to my landlord and trade them a months' worth of health insurance benefits for rent, then you'd be on to something. If you could find a way to separate out the part of "total compensation" that actually contributes to income, such as stock grants & such, then we could talk. But, just "total compensation" doesn't cut it.
If you really want to get a true picture of how screwed the American worker is, take a look at housing and education costs over time, as well. Both have increased faster than inflation, and vastly outpaced wage growth; yet everyone needs a home, and a college degree is practically a requirement for any vaguely middle-class career.
It was the first thing I thought when opening this, and as so often, it was the case.
Similarly I do not understand your assertion that the author is "cherrypicking troughs and peaks". from tfa:
> Until 1968, the minimum wage not only kept pace with inflation, it rose in step with productivity growth. The logic is straightforward; we expect that wages in general will rise in step with productivity growth. For workers at the bottom to share in the overall improvement in society’s living standards, the minimum wage should also rise with productivity.
Is their assertion regarding 1968 and minimum wage factually incorrect?
Total compensation includes the value of benefits and the (so-called) employer contribution to taxes. Total compensation can be up to 40% more than salary.
Which is to say, insurance these days might be worth vastly more than it was in 1968, since Healthcare costs have skyrocketed for the uninsured.
Note there was an article on the HN front page just in the past week or so about how Amazon warehouse workers were getting more repetitive stress injuries because partial warehouse automation allowed them to fulfill 3x the number of items per hour than before these systems were put in place.
But isn't this logic applied to average CEO pay, which has gone up many times faster than productivity? CEOs work isn't any more demanding than it used to be, either.
Microsoft’s market capitalization has more than doubled during Satya Nadella’s tenure as CEO. When Steve Ballmet quit as CEO the market cap jumped over $100 million. That kind of difference is why companies pay extremely well for top CEO talent. Management is a skill, some people are really great at managing large, complex, profitable organizations and they’re worth a lot of money.
When they get removed, they often receive golden parachutes even if they seriously effed up the company.
This can't be explained by return on equity. I guess it can be explained by bargaining power or cronyism, or perhaps other things I'm not thinking of.
So a big reason CEO wages grew is that companies became massive.
I think it has, actually. The CEO's job became more complicated as a result of the increased complexity in the world. There used to be only brick-and-mortar and mail order, now there is internet. They used to advertise on tv, radio, and newspaper. Now they can advertise tv, radio, newspaper, online ads, and social media influencers. They didn't have to worry about ransomware, now they do. And so on.
If we measure a CEO’s job difficulty based on how many years a typical company in their industry can safely operate while stagnating, then the job has become many times more difficult in the last 40 years in some industries. In others, perhaps only twice as difficult.
That is not to say that salaries should stay high, but we would look for reduction to come from systemic productivity gains in management that have come to other white collar professions: software, more efficient management hierarchies, cultural changes in communication, etc.
I’m certain that they delegate those issues to subordinates; do you feel that there is skill involved in managing and supervising subordinates, and melding their disparate opinions into a coherent and profitable direction for the company?
Completely anecdotally, improvements in labor productivity due to automation (etc) are less likely to be impactful in jobs like waiting tables, delivering newspapers or flipping hamburgers.
That anecdotal evidence is backed by research that shows that service sector productivity tends to lag other sectors significantly.
When I was a teenager, food service proved to be a much more complicated job than I anticipated it to be. My first tech jobs paid better (even though an internship would have paid more), and felt simpler. If only because I'd spread out the effort of learning the skills over 8 years instead of 3 months.
That will mean they get paid less than an entry level but skilled tech job.
Given an example of warehouse workers, and how companies are enacting more and more automated "anti-slacking" restrictions, yeah, I think we are.
Why would we tie minimum wage to worker productivity OR inflation?
What is the minimum wage trying to accomplish in the first place?
It seems obvious to me that we have to index it to the living wage instead.
A full-time job needs to cover: one half of a 2-bedroom apartment in the outskirts of town, plus food, bills, and basic medical expenses. If it doesn't cover this, then this person is going to rely on government programs.
And if the government programs aren't there, they'll be coming home each night after a full day of work and watching their kid get skinnier, seeing their CEO collect multimillion dollar bonuses in the news, and you can be damn sure they won't stand for it. They'd unionize, protest, and demand higher compensation.
Our social safety nets are an important part of our society, but when they're required and used by full-time employees, it's something of a taxpayer subsidy for the corporations who can now pay their employees less than what's required to live.
And if a job can't be done profitably for a living wage, we need to let that job go. Automate it, outsource it, let the companies that depend on this exploitative labor pivot to new business models, or let them wither and die. The jobs are going to leave eventually anyway - we might as well accelerate the push toward a modern labor economy that's already underway. We can funnel the productivity gains from automation into education, to allow the displaced a chance to retool and learn a new skill, and to bulk up our social safety nets for those who are too old to do so.
I'd argue the whole point of productivity gains is that they do outpace pay. The idea is the same work generates more value. Some of that extra value can be passed back to the employee, but if all of it is passed back to the employee, then the goods produced don't actually get cheaper. If nothing gets cheaper, there's no incentive for a business to invest in tech that makes employees more productive.
The data in the piece has a lot of problems with it too, but I think the core assumption is fundamentally off-base.
When people say that "wages kept pace with productivity growth" that's what they're saying - that a 10% increase in productivity resulted ina 10% increase in pay, not a $10 increase in productivity resulted ina $10 increase in pay.
That's because those people are sadly wrong. Salaries have never been based on value created. They have always been based on the minimum a company could pay for the talent they desire.
There's a spectrum between none and all.
Also, why wouldn't goods get cheaper? Scaling up production is easy so it's not a supply issue. There would be two outcomes: people would buy more goods overall (as has happened over time) or they would work less and enjoy more leisure time.
My point is just that I don't think "wages should keep pace with productivity" is true. If wages always rose with productivity, we'd be focusing all the gains on the people in the sectors where productivity is growing, and not lowering the cost of goods for everybody else.
Suppose a business with a profit margin of 20% increases its revenue by 10% without increasing labour input. If the owner captures that 10%, the profit margin is now 27%. If the revenue is paid out as higher wages (“pay keeps pace with productivity gains”), the profit margin falls to 18%. If wages increase by 10% (“pay keeps pace with productivity growth”), the profit margin remains constant and profit can also increase by 10%.
What happens to the profit margin of individual businesses will vary. But across the entire economy, it’s reasonable to expect that the wage share will remain pretty constant, and until the 1980s, it did. https://en.wikipedia.org/wiki/Wage_share
If nothing gets cheaper
Often that incentive is making goods cheaper, so they're more competitive. That's a huge generalization, but it makes the point that there's nothing wrong with productivity gains outpacing wages.
There's a reason why common good capitalism is an increasingly attractive model for a lot of folks. A society cannot maintain the maximize returns to capital model indefinitely. I think many people are realizing that Friedman's economics either cannot be sustained or lead to a place where many would prefer not to go. People, and therefore the invisible hand, are inherently flawed.
(Unlike Common Dreams, this article shows their work and discloses their exact methodology and data sources.)
There’s a couple of big picture issues to consider:
1) Why focus on just wages, rather than just benefits? If productivity doubles, but the cost of providing healthcare triples, should employers cover the increased healthcare costs and also double wages? It’s not Microsoft’s fault that it costs $5,000 to get an MRI. From the perspective of how much is transferred from the employer to the employee, a dollar spent on wages isn’t any different than a dollar spent on healthcare.
Failing to distinguish the two things obscured the real problems. It makes you think something is a structural economic problem when in reality it’s cost disease in a particular industry. Wages aren’t keeping up with the cost of housing in New York and San Francisco. But nationwide, the median mortgage payment as a percentage of the median income has scarcely changed since the 1970s. Are wages the problem or are local laws around housing the problem?
2) There is kind of a metaphysical question about who should get the benefits of investment in technology. If you replace 100 workers with technology + very expensive capital equipment, productivity will increase by a factor of 10. (That’s how labor productivity is measured.) Does that mean wages should go up by a factor of 10?
There's no doubt some fuzzy math involved to extrapolate inflation over the course of 50+ years, but I don't think that invalidates the fact that minimum wage has objectively not kept up with inflation even remotely.
The federal minimum wage has been stuck at $7.25 since 2009, and a handful of states are only just now breaching $15/hr. At this rate by the time a federal increase happens we'll already be another 20 years behind.
Worse yet is that labor data shows that more and more adults are working in minimum wage jobs, so the talking point of "it's just summer jobs for teenagers" and "it's entry level work to move on from" is very out of touch with reality these days. There are millions of people trying to survive on these wage levels and without benefits and it is not working.
But even more localities have higher minimum wages. Because the "minimum necessary" is extremely cost-of-living specific, it's decentralized.
Despite Washington having a State minimum wage of $13.50, Seattle's minimum wage is $16.39/hr.
Despite New York having a State minimum wage of $11.80, New York City's minimum wage is $15/hr
Despite Illinois having a State minimum wage of $11, Chicago's minimum wage is $14/hr.
Despite California having a State minimum wage of $13, San Francisco and Berkeley's minimum wages are $16.07/hr. Emeryville's minimum wage is $16.84/hr. San Jose, Santa Clara, Cupertino, Sunnyvale, Fremont, Belmont, Alameda, El Cerrito, Los Altos, Milpitas, Redwood City, Palo Alto, Richmond, Malibu, Los Angeles, Santa Monica, and Santa Rosa all have minimum wages at or higher than $15/hr.
You can view it by state and by city here -> https://www.epi.org/minimum-wage-tracker/
Then is it really true that productivity has increased? Millionaires and billionaires are not eating the food of millions of people or occupying hundreds of thousands of apartments and vehicles.
I think you might be forgetting that most benefits at that wage level come from the government not the employer.
When you count how those benefits have increased since 1968 then minimum wage has never been higher.
This is most particularly true for Medicaid Expandion states since the ACA, but even non-expansion states with the health care tax credits and cost sharing reductions which are worth $10k-$20k per year to a low-income family of four.
This adds about $4/hour to the effective wage of a dual-income family which TFA is just ignoring.
The increasing value and accessibility of SNAP benefits is probably another $1/hour.
From Baker's article.
1971, 1968, doesn't really matter. But - many such "negative" effects only really show up after 1981, that is after the peak of the interest rates. RIP Volcker, the last Fed president with vision.
If you're into slightly crazy sounding theories about the cyclical nature of human progress I recommend: https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generatio.... Ray Dalio is also writing a lot on his own version of the "around 80 years cycle" theory.
When a whole market can make 10x more solar panels for the same cost, solar prices go down by you guessed it - about 90%.
You don't suddenly have 10x more profit to pay your employees. Maybe a monopoly would, but not a competitive market like most businesses are in. These people have absolutely no clue what they are talking about.
What about the people who build and service the technology which allows these improvements to be implemented?
The people who build and service the technology are paid well. They’re techies who live in Silicon Valley, etc. But there are just very few of them compared to the 950 newly obsolete workers.
Since rent has been pushed up by political means why not wages?
Also, why are we assuming that technology brought down wages when offshoring has skyrocketed. What makes you think it wasn't competition from the third world labor rather than robots? There is a political position embedded in the assumption that robots are responsible for the missing jobs.
"The War showed conclusively that by the scientific organization of production it is possible to keep modern populations in fair comfort on a small part of the working capacity of the modern world. If at the end of the War the scientific organization which had been created in order to liberate men for fighting and munition work had been preserved, and the hours of work had been cut down to four, all would have been well. Instead of that, the old chaos was restored, those whose work was demanded were made to work long hours, and the rest were left to starve as unemployed. Why? Because work is a duty, and a man should not receive wages in proportion to what he has produced, but in proportion to his virtue as exemplified by his industry.
This is the morality of the Slave State, applied in circumstances totally unlike those in which it arose. No wonder the result has been disastrous. Let us take an illustration. Suppose that at a given moment a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins as before. But the world does not need twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price. In a sensible world everybody concerned in the manufacture of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?"
In a recent HN discussion, someone suggested that step one of emulating successful tech companies (Netflix was used as an example) was to fire half your workforce and pay the remaining half double. That logic meshes with my experiences; the machines made you more efficient, but you needed more intelligence to use them than the tools they replaced.
But the surplus value should definitely not go 100% to the workers and 0% to the owners. Otherwise, there is no reward for creating the surplus value, and productivity gains will not happen, which in general is no way to run a society. Plus productivity helps reduce scarcity, and scarcity disproportionately affects poorer people.
idk about the owners specifically, but I think it's fair that the lion's share of the gains go to the people who made it happen. in this example at least, the widget maker didn't do anything to increase their productivity.
This method of organizing labor and value which disallows workers' to gain anything from increases in their own output keeps them from ever being able to participate in it, leading to alienation from their jobs and living in a perpetual cycle of poverty.
No, and neither is that the case. The increased profit is the wage the technology earns for the investor who wisely chose to make a successful investment. Other investors made different, less wise automation decisions and in so doing, earned less (or negative) profit.
The remainder of the surplus value is captured by the consumer who now has available to him or her a greater variety of higher quality products at lower prices. They capture this value when they go to market and get more better and newer things.
> What about the people who build and service the technology which allows these improvements to be implemented?
They are typically more skilled workers who get paid more because they are performing a higher skilled job. The old way of doing things was less productive and required less skill from the workers. The new way is more productive and requires greater investments in capital and skilled labor.
Thus, technology isn’t the cause of companies capturing a higher percentage of the increased efficiency due to automation.
Now everybody is rich enough that we can afford to debate the relativism of the capitalist social contract...but that’s only thanks to the advancements brought about in the first place.
See https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc... for details. I'm almost positive the same is going on here.
[1]https://en.wikipedia.org/wiki/List_of_countries_by_average_w... [2]https://data.oecd.org/emp/hours-worked.htm
> If Worker Pay Had Kept Pace With Productivity Gains Since 1968, Today's Minimum Wage Would Be $24 an Hour
It looks like when it was shortened one of its most important words were dropped.
It's an interesting question in its own right. Do the very lowest paid people in the economy have it better or worse than 50 years ago. I don't know the full answer to that question, but I do know that in 1968 about 5% of American households didn't have full indoor plumbing.[2] Just based on that datum, I'd much rather trade places with a very poor American in 2020 than 1968.
[1] https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm [2] https://www.aceee.org/files/proceedings/2004/data/papers/SS0...
I even met people whose diet consisted mainly of expired food. They had to fish it out of dumpsters, which wasn't nice. But they had free food!
(I have, with some shorter suggestions.)
Median is the appropriate statistic for such cases.
It's fine if you want to focus on median wages, but at the same time you need to compare against the median worker's economic output- not aggregate productivity. Otherwise you're just comparing apples to oranges.
https://fred.stlouisfed.org/graph/?g=bOfK
Note the increasing spread between GDP/household and median income. That's the US's entire socioeconomic problem--from rising consumer debt levels, rising deaths of despair, and the rise of reactionary politics--shown in one chart. The median person is falling behind.
>The wage distribution is right-skewed; the majority of people earn less than the average wage. For an alternative measure, the median household income uses median instead of average.
Unfortunately I'm having a hard time finding the median number of annual hours worked. But using the average hours worked, that puts the median worker at $20/hr.
Obviously not perfect unless we can get the median hours worked.
Also, like other commenters have said, I don't think anyone has ever claimed that the bulk of productivity gains will go equally to the minimum wage as the median wage, since the latter is usually pretty low leverage work in general.
Even then, the median annual wage divided by the median annual number of hours worked won't necessarily be equal to the median hourly wage.
Interesting to see how those numbers aren’t as drastically different from my country as I’d assumed.
Real life example, factory worker productivity rose dramatically with automation, and salaries did not keep up. Physician productivity did not increase much but salaries grew.
This article is trying to argue something else entirely. That we as a society are collectively screwing those less fortunate. The productivity has gone up, and the gains from the productivity go to the rich rather than the poor. While this might be true in principle, this article fails to provide the evidence, as the entire premise is flawed.
Wages are set by the market, not by productivity.
Right... but there's absolutely no mechanism to achieve anything apart from through the market (for the private sector.) You can argue all you want, but nothing will happen. Nobody (to an approximation) is going to voluntarily pay more for an abstract concept of fairness.
I always thought that cost of living dictated wages and the so-called wage stagnation was due to relative lack of inflation for basic living expenses over the past 20 years.
Also the past 20 years have seen a relative large influx of immigration compared to the previous 20 years. Increasing the competition between workers and would in turn lowering wages, at least according to supply/demand forces. This effect would be especially pronounced for minimum wage workers but with the expansion of the H1B program it will soon be observed for high income tech workers as well.
If productivity improves, but wages are indexed only to inflation, then the rich get richer and the poor at best stay the same. They produce more but don't see their lives get better. In a country that has produced so much additional wealth, it would be nice if the people who produce it became themselves better off, rather than have the gains concentrate in a smaller and smaller minority.
The minimum wage doesn't just stagnate. It's not inflation-indexed, so inflation eats into it: it hasn't increased since 2009, and even though we're often below the Fed's target rate, inflation has still reduced the value of that by 20%. That suggests it's time to raise it, and the $24/hour figure helps put the quantity into context. It makes a $15/hour wage seem very doable, since it's less than half of the productivity increase.
This is when minimum wage should come in, and this would be an argument for increasing minimum wage to that end, but businesses themselves can just ignore these kinds of arguments. Certain benevolent PR acts run contrary to this where they do increase wages because it's the right thing to do.
The interests of individual firms are not aligned with the interests of the broader economy. It's in the interest of every firm to pay its workers as little as possible, but it's in the interest of the broader economy that most people can afford to buy goods and services. Every employee's wage is ultimately some other firm's income; keeping the game going requires that enough people are paid enough money to be able to spend it on things other than absolute essentials.
Even minimum wage workers have to pay for the basic necessities of life at prices that are largely set on the basis of what the median worker can afford. If minimum wages erode, minimum wage workers can't afford to live. This is a both a humanitarian concern and an economic problem because starving people don't make good employees, and people who don't have money can't buy goods and services from other firms. Every person who is pushed out of the economy in this way is an economic loss as they are no longer contributing to economic demand or producing goods/services with their own hands.
In a society with a social safety net, under-paid workers are also a cost to government as they will not pay taxes and will be due social assistance payments/transfers to help cover their costs for food and shelter. Further, underpaid workers may also pose a crime problem (in part because starving people will steal food), which imposes direct costs on crime victims and costs to government for police, prosecution, and corrections.
Underpaying workers benefits firms that do it, but the practice harms the overall economy and imposes externalities on others. Preventing this is why minimum wage laws exist and should keep up with the cost of living.
Social safety nets are typically paid for via progressive taxation, the burden for which falls on the rich. In the alternative, the employer covers that cost and passes it on to buyers in the form of higher prices. Higher prices affect rich and poor equally. There's arguably social value in having the government pay for that safety net: and it's lower prices for lower and middle class consumers.
If they are being paid enough to live I don’t see anything malicious. If people want a higher paying job, they should learn a more coveted skill.
Bosses and owners are only interested if there's something in it for them. As in does it increase our output without a proportional increase in costs. The bigger the gap the more social capital I will burn on making that change (including, but not limited to, fucking over my loyal employees by replacing half of them with a machine, or imports).
We would have barely any of those productivity gains if they didn't also lower the cost of labor per item. So this number is a largely hypothetical. And perhaps a little unhealthy to dwell on.
Conversely, though, if minimum wage had kept pace with inflation, we might see higher productivity today because process people would have had the ammunition to push for more and bigger improvements to production and overhead costs. New equipment would be rolled out sooner while prices were still high, making a steeper adoption curve and accelerating R&D expenditure.
Still, it would be better if management did not try to keep 99% of every dollar saved. We could easily see a world where, instead of the $12/hr we should have simply to maintain the spirit of the minimum wage as it was conceived, everybody had Seattle's $15/hr minimum wage and big cities were trying to legislate for $20.
So if their job could be replaced with simple script....
Why would I want to do a job that can be scripted?
There are all kinds of things in life that contemporary culture encourages us to stop doing and instead pay someone else to do on our behalf. While division of labor is almost certainly a net gain for human comfort and quality of life, that doesn't mean it's always the appropriate thing to do.
Now, the thing is there is a lot of factories and stuff that needs to be created in order for the entire world to get productive. So until the entire world is productive we need to spend a lot of our current productivity on it.
Btw, the 1% consumes more per capita than the rest but they don't really consume a big fraction of the economy overall, when you give them money they mostly invest it.
So the ultimate result is that in times where there is need to build a lot of factories or equivalent capital will get a bigger share of the pie, and as things stabilize workers will get a bigger share of the pie. Currently thanks to globalism there is need for immense capital investments to increase productivity so of course capital needs to take huge share of our productivity. And personally I'd rather see that another factory gets built in China providing them better productivity and living standard than seeing American workers get another car. This isn't rocket science.
I find it interesting to compare wages in terms of their value in gold. Gold has been used as money for millennia, so it lets us go back even further than we typically do with inflation data.
Everyone always references Henry Ford's $5 a day wage in these discussions. $5 during that time was worth 1/4 oz of gold, so at 260 days a year, they were pulling in the US dollar value of 65 ounces of gold a year.
You would need over $120,000 today to buy 65 ounces of gold. Sure beats the heck out of $48,000. If you buy the notion that wages should track productivity, it makes you wonder what they were doing in 1913 that made everybody so darn productive.
Silver was 1/20 the price of gold back then and 1/80 of the price of gold today, so your $120,000 turns into $30,000. Whoops.
Aluminum? $433.
It turns out that comparing wages over time with an arbitrary natural resource is a terrible idea.
An oversimplified example [with lots of nuances I'm sure people will comment on instead of the original point]: The supply of heart surgeons is small, therefore they can command a larger wage and have their choice of jobs. The supply of burger-flippers is much larger and employers can usually find someone willing to do the labor for cheaper than another person.
The point being, the best way to increase your wage is to switch jobs to something where the supply of applicants is smaller and the demand is strong.
Personally I don't think it would cause any significant unemployment as long as you don't do it all at once. Based on my own research, the evidence doesn't support minimum wage hikes increasing unemployment, except possibly in the very short term. The logic is basically that because the marginal propensity to consume is so high for low income workers any increase in the minimum wage creates large spikes in demand. No one wants to fire their workforce in the face of increasing demand. Prices go up some then stabilize. Companies bring in more absolute $s, and employ a similar (or even possibly a larger) workforce. It ends up being a redistribution without meaningful negative consequences. The obvious question becomes "why not keep raising it even more then?" and then answer is basically that at some point the MPC drops too low and you stop getting the positive effects, at which point you'd presumably start driving unemployment.
That's obviously an oversimplification, but so is the simple logic that large changes in minimum wage spike unemployment.
But in the longer term, I think you raise a great point---it's a huge incentive for the CEO to figure out how to automate making 200 million whatever so that they can pay $0. Which is good for the economy in general (automation means more free human time), but societies have to adapt to a lack of labor-intensive jobs to go around.
They already need to be adapting to that, because we're already in the middle of the automation revolution.
Those are going to be some terrible hamburgers by the time they're shipped back from Bangladesh to Kansas, and the wait time is going to really change the drive-thru experience. ;)
This is why employer lobbies are very keen on reducing public benefits (means you are more reliant on having a job) and reducing public sector wages (reduces competition in the labor market).
They fix the number of Doctors, and, the government usually provides substantial support for education and training.
So not a very good example!
But it's moot - on the 'low end' of wages, basically 40% of the population, people have 0 bargaining power - it's always been like that.
The 'free market' minimum wage would be ~2$ an hour. People would be living in favelas without electricity (or it would be stolen), no healthcare, no car, borderline subsistence living. An entire economy would pop up around that - instead of the 'Dollar store' you'd have the '25 cent' store.
Which is why every advanced nation has minimum wage laws.
The question is though - how much of the 'productivity gains' are from better labour in any ways?
Say for example a company hums along, and in an era of globalization is able to sell 5x more product, yielding really great surpluses. So the investors and execs start to get rich, the staffers get paid the same relatively speaking to inflation, their boat is possibly not lifted but stays the same. They are doing the same work, with the same skills etc..
That's more likely what is happening - labour used to be a commodity, but it's even more of a commodity now.
There are no easy solutions but minimum wage should possibly be hire, the jobs that can't be done at that price should go to Mexico to help that economy develop so they can be purchasers of American exports. Something like that.
MIT created a “living wage” calculator that tries to estimate what the minimum livable wage should be in a given city.[0] Some extreme variance from state to state and city to city. There is no reason to do this federally. States and cities should handle minimum wage.
The seeming divergence between productivity and wages is mostly a result of the price index used to track the price inflation of productivity diverging from the price index used to track the price of inflation of wages:
https://www.brookings.edu/opinions/sources-of-real-wage-stag...
I like money, but I would like every person giving an hour of their life to be compensated enough to get by measurably above poverty.
(That's not to suggest that software engineering is hard or dangerous.)
Paul Graham once explained the power of prestige - http://www.paulgraham.com/love.html . I daresay some people would do hard or dangerous jobs primarily because of the prestige of being known to do them.
And as for "dirty jobs", equal wages doesn't mean that everyone has a choice in which jobs they are capable of doing (or which jobs are locally accessible).
Businesses run on actual formulas. So if a mcdonald resturant doesn't make the the 100x% growth because the wages didn't create 100x% growth in each store revenue and wages went up 100x% how does it make sense to run most any small business in america
Minimum wage is bad for workers. Increasing minimum wage hurts low-skilled workers even more. Which is a cruel thing to do, especially for a programmer who earns significantly more and is not affected by minimum wage.
How can we incentivize taking jobs back and increasing wage for the low earners? Stop to automate..?
I don't know what fraction of the relative decline in real wages that makes up, but it is definitely significant.
It feels like the sensation is shared in most other western democracies.
(Actually, it's probably even worse for people in Europe, as in Australia we seem to have a stronger pull recently towards 'the American way of doing things', though perhaps I'm just more sensitive to it the last several years.)
I suspect the problem with explaining the lack of social justice is in part because, if you're living within that system, and have had no experience living outside it, then alternatives just sound infeasible and fanciful. It's a challenge to just find a bit of ground to start any such conversation.
An excellent article by David Bentley Hart published earlier this year included this quote, which did the social media rounds at the time, and conveys the exasperation any informed onlooker experiences.
"Americans are, of course, the most thoroughly and passively indoctrinated people on earth. They know next to nothing as a rule about their own history, or the histories of other nations, or the histories of the various social movements that have risen and fallen in the past, and they certainly know little or nothing of the complexities and contradictions comprised within words like “socialism” and “capitalism.” Chiefly, what they have been trained not to know or even suspect is that, in many ways, they enjoy far fewer freedoms, and suffer under a more intrusive centralized state, than do the citizens of countries with more vigorous social-democratic institutions. This is at once the most comic and most tragic aspect of the excitable alarm that talk of social democracy or democratic socialism can elicit on these shores. An enormous number of Americans have been persuaded to believe that they are freer in the abstract than, say, Germans or Danes precisely because they possess far fewer freedoms in the concrete. They are far more vulnerable to medical and financial crisis, far more likely to receive inadequate health coverage, far more prone to irreparable insolvency, far more unprotected against predatory creditors, far more subject to income inequality, and so forth, while effectively paying more in tax (when one figures in federal, state, local, and sales taxes, and then compounds those by all the expenditures that in this country, as almost nowhere else, their taxes do not cover). One might think that a people who once rebelled against the mightiest empire on earth on the principle of no taxation without representation would not meekly accept taxation without adequate government services. "
From: https://www.commonwealmagazine.org/three-cheers-socialism
There have been a myriad of studies which try to link minimum wage to worker productivity and the default assumption is always that the worker should bear the fruit of all productivity gains. Why is this the case? Often, it is not the worker who was responsible for the capital investments that increased his/her productivity.
A couple crude examples to illustrate my opposition to this notion: - My employer pays me to create web applications. We agreed on a rate (could be 10 money units per hour OR 100 money units per application). My performance is assessed throughout my employment to see if my productivity is satisfactory for my rate. Maybe my employer refuses to invest in any tooling for me and I have to use vim to write all my code. If they then invest in an IntelliJ license for me (thanks employer!) and I am more productive, should I be paid more? Debatably, my job didn't get easier/harder. Now if I invest in the tooling myself, and am paid per application, I should get paid more; this often isn't the case.
- In 1956 if my laundromat employer paid me to wash clothes, I was probably doing it by hand and maybe getting 3-5 pounds of clothes done per hour. My wage (likely minimum) would be $1/hr. In 2020, we have laundry machines that can do 20 pounds of clothes every 30 minutes. $1/hr (of 1956 money) would be roughly $10/hr in 2020. No one would suggest that we pay someone upwards of $100/hr to run a laundry machine (unless the worker was paid per pound of laundry done and personally made the investment in the machine). It likely wouldn't even be a job if the minimum wage was $24/hr today.
It seems like these analysis of what the minimum wage should be should take into account that technology and capital investments have made a lot of jobs either lower skilled or less valuable. I'm not sure how to quantify the lack of job creation in sectors that would warrant $24/hr. Another option would be to pay workers directly for their output but this would have other consequences. Starbucks invests in making baristas efficient so they can handle the morning rush but pays them just the same for the afternoon lull.
Caveat that I am pretty ignorant to this so I may be wrong but I do not believe a low floor is what is driving wages down.
Wage aligns with replaceability - how easy is it to replace you? Professional athletes are hard to replace, doctors less so, cashiers even less.
Wages are driving down because, unless you get lucky, there’s not much to do. Big companies chop up specialized roles into a hundred “dumb” ones so people can be easily replaced.
CPI is a terrible indicator that doesn't include productivity gains. Inflation numbers from the government are notoriously unreliable.
Is the problem corporations? Or fiat currency?
Why?
> CPI is a terrible indicator that doesn't include productivity gains.
It's a price measure, why would it “include productivity gains”. There's certainly a use for a productivity index, but it has very little to do with the basic purpose of CPI.
> Is the problem corporations,
No.
> Or fiat currency?
Also, and even moreso, no.
It's largely fiscal policy doing exactly what it was chosen for the purpose of doing.
Also, commondreams.org is a known socialist website. Their claims on economic productivity should be taken with an enormous grain of salt.
It seems awfully dangerous to think that we should pay people less because otherwise things would be expensive.
This is exactly why/how wealth is moving up and up to a smaller proportion of people at the top
You're assuming that's why I was asking.
If you're asking for an actual number of the price of a Cheeseburger and a Shake? I don't know, but it may be a number that's ultimately better for society?
1) economies of scale, factory farming employs very few people per pound of meat produced, having been subject to a lot of automation. Likewise, supply chain areas like storage and shipping move a lot of product per employee.
2) 'butchers' and similar jobs are relatively high skill and likely pay above minimum wage anyways. They also have better economies of scale. But at any rate, it's unlikely professional butchers are particularly involved in producing meat for fast food burgers and likely 1 or 2 low wage employees in a factory are doing all the manual labour involved in producing meat for hundreds of burgers.
At any rate, I don't think the null hypothesis can really be that every level of the supply chain has the same level of labour costs.
https://www.businessinsider.com/denmark-mcdonalds-pays-20-an...
This assumes an unconstrained "market" for the exchange of labor and wages, just as the claim that "prices are a function of the scarcity of goods" assumes an unconstrained "market" for the exchanges of goods and money.
But this is not the only model for economic exchanges of labor, goods and money. The Romans, for example, did not use market pricing, but instead were primarily a "cost-plus" economy (you paid the cost plus a known margin).
I know it is extremely hard when most of us have been embedded in a neoliberal, market-centric culture for our entire lives to think this far outside the box, but there really is no law of nature that says that what I pay you to do work for me must depend on how many other people could do the work.
In a culture that viewed the economy as a tool to enhance the living standards and quality for all of its members, there might be a very weak or even non-existent connection between labor availability and wages. Productivity gains could be viewed as way to either (a) reduce the amount of labor required (b) increase the amount of goods & services available, or both. Wages could remain fixed, or increase in such a scenario.
This is nothing like the economic system in which we live, however; an economic system that is viewed as a playground in which which some will accumulate vast resources (and thus power) and others will not can never function the way I just described.
1968, 55745
2019, 86011
https://fred.stlouisfed.org/series/MEFAINUSA672N
Edit: Real median income has also increased: https://fred.stlouisfed.org/series/MEPAINUSA672N
Productivity is a ceiling on wages; once wages raise beyond a certain point, the company will take a loss, even after passing down the cost of labor to customers.
Wages not keeping up with productivity gains isn't just on the low end. Seeing how well they tracked before 1970, there was an overall labor shortage. Around 1970, that changed, and there was more labor than the market needed, so wages were kept low enough that it's cheaper to pay someone minimum wage to take your order than to install an order kiosk.
That's not to say we shouldn't work to improve the average worker's wealth and quality of life, of course! I'm all in favor. But it's not a matter of gains getting "sucked up" from where they naturally would have gone; recent gains in manufacturing productivity just aren't at the individual level in the first place.
- productive output increases
- wages remain the same
- the length of the working day remains the same
then you have gains accruing to the capitalists and not the workers. (In the case where wages also increase but at a lower rate than productive output, gains are accruing to both capital and labor but disproportionately so to capital)