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Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

nytimes.com

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Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#21

Post by harryh »

Namrog84 wrote: post #13

Maybe I am cynical or naive but if more automation and other things are causing fewer jobs. And then the remaining employees are getting paid more but there are fewer paid workers overall. But that'd cause a rise in compensation of those employeed. Shouldn't this be done differently? Tl;dr; let's fire/automate half the workers. Pay the rest more. And worker Compensation will skyrocket!

> Tl;dr; let's fire/automate half the workers. Pay the rest more. And worker Compensation will skyrocket!

Compensation per worker might skyrocket, but total compensation paid to workers would not. This story is about the latter.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#22

Post by 6stringmerc »

>The evidence available so far in 2016 — steady growth in wages and weak earnings for publicly traded companies — suggests that the reversal is continuing this year.

...uhh...the evidence of weak earnings while equities continue to go up, buoyed by systemic cash-infusions by several central banks (Fed, EU, BoJ), shows the entire system is broken. I wonder what the chart would look like between corporate expenditures on payroll vs. stock buybacks since 2008. Just a hunch, but I'd guess percentage wise the investor class is doing just effin' peachy in these conditions.

Okay, I found a few numbers to kick around.

Here's one little tidbit from the article:

>For example, average hourly earnings for nonmanagerial private sector workers rose 2.56 percent in 2015 in a year of very low inflation

...and for contrast, the amount of capital deployed in buyback programs recently:

>S&P showed more data signaling that S&P 500 index members increased their buyback totals by 16.3% to $553.3 billion in 2014, versus $475.6 billion in 2013.

Hm.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#23

Post by logfromblammo »

djschnei wrote: post #10
antisthenes wrote: post #7

Earlier quoted context omitted.

It isn't a fallacy if you have even a basic understanding of economics. Unfortunately, most of the layman discourse on the internet seems to blindly follow the mantra of an infinitely expanding economy. While that may be true on an infinite timescale, in the short and medium runs (scale of economic cycles), the pie is indeed fixed.

I'm a fellow at one of the largest economic think tanks in the world. I've been studying various schools for 25+ years. I have a basic understanding. "On an infinite timescale"? That is literally meaningless. Show me ANY time scale where the pie has been fixed and I'll go away.

Planck time. 1e-44 seconds.~

Fluctuations in the mass of the pie at shorter intervals would appear to observers within our universe as discontinuous jumps between discrete quantities of pie. Therefore, during that interval, the pie is fixed.~

Now go away.~

On a geologic timescale, pie has just appeared out of nothing, and is now covering the entire planet. On an infinite timescale, by naive extrapolation, the pie will in the future be expanding faster than the universe itself, to the point where a wafer-thin bite of pie will expand and rupture the esophagus before peristalsis can even push it into the stomach, and persons dying from attempted pie consumption will literally explode in a shower of pie.~

Clearly, the parent post was substituting a hyperbolic term for the longest possible economic timescale, where new technologies may be invented and entirely new supply chains built based upon them. It is easy to claim that at that scale, economic growth will continue without bound for as long as human ingenuity can conceive new ideas.

At shorter scales, the observable size of the pie does sometimes shrink. And if there are periods when it grows, and periods when it shrinks, then logically, there must be periods when it remains the same size, even if those periods are very short.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#24

Post by hellogoodbyeeee »

djschnei wrote: post #10
antisthenes wrote: post #7

Earlier quoted context omitted.

It isn't a fallacy if you have even a basic understanding of economics. Unfortunately, most of the layman discourse on the internet seems to blindly follow the mantra of an infinitely expanding economy. While that may be true on an infinite timescale, in the short and medium runs (scale of economic cycles), the pie is indeed fixed.

I'm a fellow at one of the largest economic think tanks in the world. I've been studying various schools for 25+ years. I have a basic understanding. "On an infinite timescale"? That is literally meaningless. Show me ANY time scale where the pie has been fixed and I'll go away.

The pie is fixed in the short run, which is why the supply curve slopes upwards.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#25

Post by mathattack »

2 observations...

1) I recall being in an investors meeting in 2007 where the downward trend was pushed as a good thing. (If you're a shareholder, you want to keep the $)

2) The last time it went back towards the workers was during the recession. This tells me that it's more of a story of corporate profit growth than how much people are able to capture. (Corporate profits have more volatility than compensation)

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#26

Post by djschnei »

harryh wrote: post #19
djschnei wrote: post #4

Ah the fixed-pie fallacy... A foundational pillar for so much of today's political rhetoric (on the right and left).

This has nothing to do with the fixed-pie fallacy. Of course both worker's incomes and shareholder gains can both increase by growing the pie. But at any given point in time there absolutely is a "piece" that goes to one and a piece that goes to the other. And it's interesting to look at how the relative sizes of those pieces change over time and what forces can drive those changes.

We certainly agree. The voluntary, mutual, cooperation between employer and employee which creates a wage vs. profit interaction IS certainly fascinating. However, it is clear in not only the title of this submission but also the article itself that the fixed pie fallacy is at play.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#27

Post by No1 »

> After all, the pay for C.E.O.s and other highly paid people counts in those compensation numbers.

Most people consider workers to be rank-and-file employees, not executives. The writer goes on to discount the effect of executive pay on the numbers, but the methodology is far less than scientific, and doesn't really justify the headline.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#28

Post by No1 »

crpatino wrote: post #5
grej wrote: post #2

The article notes that a greater percentage of national income is going to workers now, which may very well be true according to how the accounting is done. However, how much of that is because many large corporations are booking a great deal of their profits outside of the US, reducing the denominator in kind of an artificial way? I didn't see anything in the article that mentioned the potential effects of corporati…

Another possibility is to look at the compensation for upper management. C-level officers are usually paid in stock as well as cash, but the staff reporting directly to them are salaried employees. If you actually look at the graph (presented in the same article) it does not look like "the trend is reversing" at all. It rather looks like a very clear downwards trend with a strong cyclic component. So, when the times…

> C-level officers are usually paid in stock as well as cash, but the staff reporting directly to them are salaried employees.

A great point, but note that the writer considers C-level officers to be workers in this case. The headline might as well be Workers Pay Probably Keeping up with Inflation, Execs Doing Great, but that's not really news.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#29

Post by djschnei »

fhrjfjc wrote: post #8
djschnei wrote: post #4

Ah the fixed-pie fallacy... A foundational pillar for so much of today's political rhetoric (on the right and left).

It's fallacious to assume the contrary. You can transfer billions of dollars of capital in an instant by signing on the dotted line, but it takes decades to create that kind of value. The lumped sum analysis assumption for capital is valid in this case because the rate of capital transfer is many orders of magnitude greater than the rate of capital generation.

Wow, haha... While you are able to spell "capital transfer" and "capital generation", you've proven your grasp on the ideas to be... suspect. I've never seen the relationship between arbitrary capital transfer rates and anecdotally slow CGRs as an argument trying to prove the existence of a fixed pie, so I guess that's inventive.

Re: Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less)

#30

Post by fhrjfjc »

djschnei wrote: post #29
fhrjfjc wrote: post #8

Earlier quoted context omitted.

It's fallacious to assume the contrary. You can transfer billions of dollars of capital in an instant by signing on the dotted line, but it takes decades to create that kind of value. The lumped sum analysis assumption for capital is valid in this case because the rate of capital transfer is many orders of magnitude greater than the rate of capital generation.

Wow, haha... While you are able to spell "capital transfer" and "capital generation", you've proven your grasp on the ideas to be... suspect. I've never seen the relationship between arbitrary capital transfer rates and anecdotally slow CGRs as an argument trying to prove the existence of a fixed pie, so I guess that's inventive.

Lucky for both of us economics is a philosophy instead of a science, and condescending attitudes can go both ways. :^)

Suppose as you say, all capital grows uniformly (which it doesn't, but that's another issue) at +x% annually. Now suppose that certain demographics experience -(x+n)% of capital transfer, in the form of housing, healthcare, and other expenses. It doesn't matter how fast the "pie" grows as along as capital transfer away from the middle class outstrips the rate of capital growth. You're cherrypicking hypotheticals here.

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