So in general, productivity per worker has increased. Amazon can move more products direct to your home with fewer people than was possible in 1970. Greater and greater value is being generated in the economy due to these increasing efficiencies.
Yet the suggestion that businesses should pay their workers who enable this value proportionately gets responses that we will be squashing economic potential, dragging these enterprises down, etc.
Instead Walmart, Amazon, etc. use these great efficiencies of scale to compete on lower prices. Which totally does have economic benefits, but it also pushes out competition. Local stores can't compete with an international megacorp's productivity leverage, so we end up with a Walmart in every town and Amazon boxes on our doorstep. Is that truly an economic plus? It sure is nice in some ways, but are all those warehouse workers Amazon employs really new jobs? Or are they replacing a similar or greater number of jobs that were previously providing those same goods and services in a decentralized manor?
Your second link is not real wages per capita, it's average real wages for workers (and only non-supervisory workers at that!). A true per capita figure would have to count wages of non-workers as 0. The distinction is important: One reason real individual wages haven't grown with GDP is that a much larger fraction of women are now working than in 1970, and basic microeconomics suggests that as supply (of workers) grows, prices (wages) drop.
There are a bunch of other problems with the implied claim that workers are no better off today than in the 1970's: There have been major demographic shifts. Non-wage benefits make up a much larger fraction of total compensation today. Comparing against the mid-'70s is effectively cherry-picking due to the massive (and unseen since) run-up in inflation over the next decade. Trying to compare inflation-adjusted figures over decades is perilous because even small errors in producing "equivalent" classes of goods to compare will compound over time: This is the "cars are safer / houses are bigger / phones are now SciFI devices" argument ...
The micro supply and demand view that increased labor force from greater participation rate by women causing suppression of wages is incorrect.
Such a view would suggest that any increase in labor hampers wages.
What actually happens is that increased worker participation itself grows GDP, which increases demand of inputs, including labor. Unlike a short-term supply and demand curve, the economy operates on long-term shifts of aggregate labor supply and demand, in which an increase of aggregate supply of labor causes an aggregate increase in demand for labor (by modifying the overall demand curve of goods - consumption goes up), ending in a place where increased labor force participation may actually result in a higher price of labor than before.
In other words, women joining the workforce enhances per capita income. This is also why xenophobia can be damaging: immigration does not actually suppress wages, as would be suggested by a simplistic econ 101 static supply and demand curve; in most cases it grows per capita GDP and has a similar income-enhancing effect as was seen from women joining the workforce.
I do agree with some of your other points re: the difficulty in calculating improvement in quality of goods, and the basket substitution effect problem of calculating CPI. Accurately comparing wages from the 1970s to now is very difficult.
In other words, women joining the workforce enhances per capita income.
Absolutely, that's one of many reasons why it is a terrific trend that should be celebrated.
My point was that there's every reason to believe an expanding work force in a static population would not grow average wages at the same rate as per capita GDP, which was the comparison made by OP.
EDIT: A simple example to make this clearer:
A city has 50,000 men and 50,000 women. Men are forbidden to work, and the women make an average of $50,000 each while producing an average of $80,000 worth of stuff, the surplus being retained by the greedy capitalists. Average wages are $50k, per capita GDP is $40k.
The law against male employment is lifted, and the men jump immediately to equal the women. Given how much surplus the average worker is producing, there's no trouble giving them all jobs. Average wages "stagnate" at $50k, but per capita GDP is now $80k: The economy has doubled in size!
/u/mediaman is right that in an economy that's suddenly 2X bigger, it would be shocking if the demand of all those newly paid men and newly even-more-wealthy capitalists didn't push wages up. But even without that happening, it's not clear that anything has gone horribly wrong: The women are still working for wages they considered fair, and men now are also able to choose how to put their labor to the use they consider the most rewarding.
> Unlike a short-term supply and demand curve, the economy operates on long-term shifts of aggregate labor supply and demand, in which an increase of aggregate supply of labor causes an aggregate increase in demand for labor (by modifying the overall demand curve of goods - consumption goes up)
There are two problems here. The first is that not all goods have elastic supply and the second is that it's assuming the conclusion because you can't get an increase in demand if the initial decline in wages exceeds the increase in workforce participation.
In the first case, for example, you go from a one income household to a two income household with no increase in housing supply and housing prices just increase to eat the difference.
In the second case, if the increase in labor availability causes wages to decline from $60,000 to $30,000, there being twice as many people making half as much money doesn't lead to an increase in consumption. In theory it could even be worse than this because there is no requirement that the relationship be linear. Doubling labor availability could cause short-term wages to decline only from $60,000 to $55,000 or from $100,000 to $20,000. It depends on the supply and demand curves at the time.
And all of this is industry specific, so how it affects you depends on the work you're qualified to do.
Another issue in this context is that we're just completely disregarding the value of the household labor that had been occurring in the alternative. If someone goes from being a homemaker to working a $35,000/year job, but then as a result loses $35,000 to taxes, childcare, commuting expenses, restaurants, a housekeeper and so on, from a GDP perspective it gets counted as net increases all around even though it's really just breaking even. Or worse than breaking even after the effects of the two income trap increasing the cost of supply-inelastic products like housing.
> Such a view would suggest that any increase in labor hampers wages.
Of course it does, if the supply of workers exceeds the demand, there would be a drop in wages. 10 people competing for 1 job is going to have a lower wage than 1 person competing for 1 job.
This logic would suggest that all increases in population (labor supply) in the history of humanity should be pushing labor down, because more people are competing for jobs.
This is obviously, clearly wrong. Re-read what you responded to, especially the part about the longer term effect of increased consumption and GDP from higher participation rates.
What you say is only true in a very short-term, micro view (labor supply in a small town over a matter of days, for example), not in the macro timeframe that is the context of this discussion.
This is a well-studied area of economics and the field is not in consensus with your statement.
Your fallacy here is to assume that the per-capita income growth is affecting the same people as the increased job competition.
2x the people might mean 2x the revenue for Amazon, but there is no guarantee that it'll trickle down. Maybe Amazon can, due to automation, satisfy the 2x in demand with only 1.9x in manual labor.
In that case, work supply and consumption both grow by 2x. But salaries for the workes will go down while salaries for Amazon management go up. So the total salary average might remain the same, but it'll increase inequality nonetheless.
You can't conflate population and labor supply as the specific scenarios being discussed are cases where population was fixed but labor supply changed anyway: like, the reason increased population is different should be obvious... you also have more consumers (and yet, amazingly, the average wages stay the same while total output goes up, per the comment by someone else, as that is also comparing two incomparable things); but, if you do something where consumption is the same but competing labor force goes up, that allows you to isolate the two effects. (FWIW, I have no skin in any of the rest of this position, so please do make another argument against it: it is just that your statement that it is "obviously, clearly wrong" is itself "obviously, clearly wrong" as it is at best arguing against a straw man of what other people are saying.)
The basics of life that consume the expenses of most people you had in the 1960s was significantly more affordable back then, and many would wish they could get that. You can't easily today, especially in health care.
In the past, college, room & board was payable with the part time work of a college student working low end jobs. You cannot do that today.
Single income households were a common occurrence, since dual income households competing for housing were not out competing single income houses. And I don't mean this in a crypto conservative way, even Elizabeth Warren wrote a book about it: https://en.wikipedia.org/wiki/The_Two-Income_Trap
Could you buy a 1970s level of service health plan today and expect a similar cost profile? No.
The non-essential extras that didn't consume much of the budget in the past anyway being nicer or cheaper, such as clothing, entertainment and so on? Cold comfort. After you have 10 shirts, 10 more cheap t-shirts have little utility. HD video is nicer, but TBH, old SD TVs also give you %80 of the entertainment value. 2500 sqft of house is nice, but 1500 sqft of house is still giving you %80 of the benefit and so on. There is diminishing marginal value to these improvements.
>The basics of life that consume the expenses of most people you had in the 1960s was significantly more affordable back then, and many would wish they could get that. You can't easily today, especially in health care.
While I agree with much of your comment, healthcare in particular is very hard to compare across different times. The quality of healthcare has improved dramatically, as has the qualifications of those providing healthcare.
Does a doctors visit for a flu in 1960 cost more even inflation adjusted in 2020? Probably. But the doctor is probably more educated, and the healthcare providers are more equipped and able to handle more complicated diagnoses. Current costs might not be in line with the increase in level of care, but the product offered in the 1960s is different to the product offered today.
There's also been significant changes to liability for healthcare providers since the 1960s that are tough to take into account comparison wise.
Yes I agree that it's impossible to buy 1960s healthcare today. What I'm saying is many would be very happy to be able to buy 1960s healthcare today, legal liability differences and all, for a much more affordable 1960s equivalent price, which you can calculate as hours worked at the median hourly wage during both times, thus sidestepping comparability issues. But you cannot.
Also many other developed countries deliver modern health care for significantly cheaper prices than the US does.
Yet cosmetic surgery and eye care have both gotten better and cheaper, so maybe there is something else going on... Perhaps it's the way the supply is controlled and a market can't work because of government intervention.
> Single income households were a common occurrence, since dual income households competing for housing were not out competing single income houses. And I don't mean this in a crypto conservative way, even Elizabeth Warren wrote a book about it: https://en.wikipedia.org/wiki/The_Two-Income_Trap
I haven't read the book, but her speech a decade ago is really eye opening.
> Greater and greater value is being generated in the economy due to these increasing efficiencies.
This is very unclear and it depends on what measurements you look at. Lots of economists claim we've had historically low productivity growth in the last two decades - eg Total-Factor Productivity growth has been very low (~0.5%/year) every year since ~2005.
OK cool you brilliant a-hole: tell me the GDP impact of a 30% GDP implosion, not even considering the fact that they are not even stating the actual numbers across a ll industries, which means, the GDP is F* and that the economy is WAY LESS
The little device in everyone’s pocket can do is much that required other people’s time and labor. Purchasing travel, researching real estate markets, checking into a hotel, comparing prices, obtaining product information and reviews, etc.
If I need to find something at Home Depot or Target or Lowes, I don’t need a person to help me anymore. I go to their website and it tells me exactly where the item is.
All of these little efficiencies add up to me needing fewer other people to help me.
Improvements in consumer technology is arguably offset by lots of areas of the economy becoming less efficient every year. Consider infrastructure, health care and education - those sectors require more labor now to produce the same or less output than they use to.
Declining real wages for decades are my evidence that supply curves are ahead of demand curves. I don’t see why education needs more labor, the number of children will be declining for the foreseeable future. More importantly, the buyers of that labor (government) are famously stingy and with budgets already strained with pension and other debt, I doubt they’re going to give up any extra wage gains.
not that we should go back, but it's worth noting that women entering the workforce probably greatly increased the supply side of the equation. Concurrently we're needing less and less people whilst also trying to figure out what to do with all this new supply introduced.
And yet, people are still helpful. I go to the lowes search bar and draw a total blank. I can describe a part I need to another human, but I sure as hell don't know its archaic catalog name, and will probably buy the wrong part if I order online. As a result, even in a pandemic, all the hardware stores by me have lines wrapped around the parking lot because brick and mortar is just better from a consumer perspective.
I've been fleeced buying junk online, from amazon or even less shady places, too many times for whatever price efficiencies online offers to work itself above actually handling the product before you put money down and own it. Running to fedex to print and ship my amazon return is a cost to bear if you have a busy life.
There seems to be some dichotomy between what Americans as workers and Americans as consumers want. And they just want corporations to figure it out and fix it.
This is not how socially ethical societies operate.
1) Consumers want the product which provides them with the most value given the item's cost.
2) Workers and companies want the most value per their capital expenditure (whether personal labor or funds).
I don't see any problem with that, both can be maximized at the same time and work as a balance. One issue is that we've become much better at optimizing #1, and have become worse at optimizing especially the worker part of #2. Workers still relatively rarely switch jobs, which eliminates a good amount of upward pressure on wages.
Stuff like the employer-paid health insurance tax deduction is detrimental to this liquidity. Give the deduction to individuals, not employers.
Thats exactly how a ethical society operate if they know givin the idea that large government programs natural shift towards tyranny and that bad things are inevitable and trying to legislate them out typically works out terribly.
I don't think americans want corporations to solve this either I think they want people to have the ability for people to solve it for themselves for better or worse.
> I don't think americans want corporations to solve this either I think they want people to have the ability for people to solve it for themselves for better or worse.
i think ideally, this is what everyone wants, but like with anything
1. you can only do as well as the system lets you (fairness, opportunity, education, livelyhood, available free-time, paperwork, insurance, healthcare etc)
2. some people can cope with things better than others... these are personality traits, physical issues (endurance, headaches, anxiety, digestive issues etc)
(1 and 2) can be helped with more universal access to (to help them stand on thier own) such as heathcare, transportation, job opportunites for when the economy goes down, minimal sheltering, cheap postal services (free even for those who dont have an address), free counceling services etc
1 + 2 means that just less workers are needed to produce the same amount of value. That doesn't mean that those remaining workers should get more value. No more than capitalist that managed to stay in business do. What about the workers that are no longer needed? Should they get nothing while their peers that managed to cling to their jobs get way more?
I'm not suggesting a specific single solution here. It's evidence of an imbalance between overall economic productivity and what we are paying hourly workers to support that productivity.
Improving base pay and benefits could help, but it also doesn't help if there's no specific wage-paying job for every potential worker anymore.
1) GDP-Per-Capita has grown steadily and is at an all-time high https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?location...
2) Real wages per capita have stagnated since the 70s https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
So in general, productivity per worker has increased. Amazon can move more products direct to your home with fewer people than was possible in 1970. Greater and greater value is being generated in the economy due to these increasing efficiencies.
Yet the suggestion that businesses should pay their workers who enable this value proportionately gets responses that we will be squashing economic potential, dragging these enterprises down, etc.
Instead Walmart, Amazon, etc. use these great efficiencies of scale to compete on lower prices. Which totally does have economic benefits, but it also pushes out competition. Local stores can't compete with an international megacorp's productivity leverage, so we end up with a Walmart in every town and Amazon boxes on our doorstep. Is that truly an economic plus? It sure is nice in some ways, but are all those warehouse workers Amazon employs really new jobs? Or are they replacing a similar or greater number of jobs that were previously providing those same goods and services in a decentralized manor?