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Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

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Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#121

Post by eli_gottlieb »

minikites wrote: post #60
relaxatorium wrote: post #19

This reminds me of the recent American Airlines story where they raised employee wages and institutional investors hammered them for it http://www.latimes.com/business/la-fi-american-airlines-rais...

It's almost as if an economic system encouraging everyone to act in their own selfish interest produces harmful results without checks or balances.

It's almost as if shareholders have zero desire to operate in a labor market where labor can sometimes grow scarce, but would instead prefer to a subsidized or conscripted labor-force.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#122

Post by marcosdumay »

losteric wrote: post #108
jazzyk wrote: post #58

Earlier quoted context omitted.

>They can't get enough qualified people... ...for the price they are offering. There, fixed it for ya :-)

Yep, that's what a labor shortage looks like :) Labor can ask for a price that's higher than the ROI of their labor for many businesses. In comparison, there's an excess supply of unskilled labor so businesses can purchase unskilled labor for minimum wage. Those people survive but do not profit from their time investment, and cannot invest in acquiring skills (aka poverty trap). The issue is that automation drives ef…

That's not what a shortage looks like. Labor can always ask for a price that's higher than the ROI they would have on many business. That's also true for every cohort of labor.

If there's any definition available for "labor shortage", it is what happens when a middle class increases and wealth disparity decreases.

But anyway, your point about education stands by itself.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#123

Post by aninhumer »

IanDrake wrote: post #114
maxerickson wrote: post #106

Earlier quoted context omitted.

You switched to a statistical argument ( However, most people who didn't earn their money don't. ), you need statistical evidence, not examples.

"70 percent of people who come into sudden money are broke within a few years, according to the National Endowment for Financial Education." Now do we get to argue over the source? Does it somehow not fit your world view that managing wealth is real work?

People who come into sudden money will tend to lose it because they lack experience managing that much money and spend it too fast, not because they didn't do "real work" to preserve it.

Maintaining wealth requires understanding and discipline, but the amount of "work" required is minimal. Essentially, all you have to do is not spend too much, which is fairly easy when "too much" means "any more than 10x the average salary".

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#124

Post by IanDrake »

aninhumer wrote: post #117
IanDrake wrote: post #95

Earlier quoted context omitted.

You're not factoring in market timing and drawdowns. Average is great if you're living 10 lives at 10 different moments in history, but we only get one. Put 25 million in the S&P 500 (qqq) in March of 2000 and draw 2 million a year on it. You are out of money inside of 4 years. There is no 100% safe place to stick that much money and live off of it. The world is too dynamic and it takes real skill and work to make mo…

As far as I can see, QQQ seems to perform a fair bit worse than the S&P 500 itself? Maybe it's an unfair metric, or maybe it's just a fair commentary about the risks of index funds. But in any case, I said you'd make that much on average, not that you could withdraw that much every year. In reality, you would draw down a smaller fraction of that (but still an immense salary for no work). And since your capital would…

Sorry, how does one invest in the SP500 with "no work" without using an index fund?

I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average.

I don't work and I need to pay these bills with my 8% average. So what do you recommend I do in 2001?

I'm supposed to be living large like you promised but the market tanked. Am I now supposed to live off of 100k when you said 2 million? I already bought this stuff on a payment plan!

Seriously, think about it. You have 25 million and someone tells you you'll make 8% on average, but you can't actually spend it?

Try to really think what you could do with 25 million and no effort. Not much.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#125

Post by cjlars »

apo wrote: post #9

Eight possible explanations and not a single mention of the word "deflation." The Japanese have a long history of low unemployment and deflation working together: http://www.tradingeconomics.com/japan/unemployment-rate Maybe the idea that lower unemployment always leads to inflation is just wrong. For now, wage decreases have been masked by cuts to employer-funded health insurance programs. Eventually, there will be…

Using the Personal Consumption Expenditures (PCE) index instead of the CPI, as is more common, would strengthen this argument, as it shows inflation 0.3-0.5% points lower per year than the CPI [1]. In my view (and the Federal Reserve's) the PCE is a better measure of standard of living, since it adjusts more aggressively for changes in the quality of goods and changes in the basket of goods people purchase -- i.e. it better adjusts for the emergence of things like iPhones. So growth, both in wages, and in general would look a bit better under the PCE deflator.

Regardless, you're still at a low rate of growth, not deflation. If labor force participation was the issue, we'd see that trending up, which we do a bit, but not much.

One other theory somewhat consistent with the data is that we're seeing downward pressure from automation, yet if that was true productivity should be rising faster.

[1] https://www.clevelandfed.org/newsroom-and-events/publication...

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#126

Post by IanDrake »

maxerickson wrote: post #119
IanDrake wrote: post #114

Earlier quoted context omitted.

"70 percent of people who come into sudden money are broke within a few years, according to the National Endowment for Financial Education." Now do we get to argue over the source? Does it somehow not fit your world view that managing wealth is real work?

It takes discipline to not just piss away a million dollars (the sorts of windfalls that claim includes), it doesn't take enormous effort to set it up in low risk assets that yield income. As a cousin comment points out, it is even possible to buy management services.

But now I have 25 million and I've heard:

- Dump it into the SP500

- Dump it into CDs

- Give it to a money manager and hope for the best. If it doesn't work out at least you can blame him/her.

Who's advise to take?

It's really starting to astonish me the financial ingnorance on HN which must be attributed to younger folks who had no skin in the game in 2000 or 2007 and think investing is easy.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#127

Post by aninhumer »

IanDrake wrote: post #126
maxerickson wrote: post #119

Earlier quoted context omitted.

It takes discipline to not just piss away a million dollars (the sorts of windfalls that claim includes), it doesn't take enormous effort to set it up in low risk assets that yield income. As a cousin comment points out, it is even possible to buy management services.

But now I have 25 million and I've heard: - Dump it into the SP500 - Dump it into CDs - Give it to a money manager and hope for the best. If it doesn't work out at least you can blame him/her. Who's advise to take? It's really starting to astonish me the financial ingnorance on HN which must be attributed to younger folks who had no skin in the game in 2000 or 2007 and think investing is easy.

Yes, because as long as you don't spend too much any of these things will work. The market trends upwards over a long enough period, so as long as you're disciplined enough to handle the downturns, you'll continue to make money while doing no work.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#128

Post by ue_ »

roymurdock wrote: post #78
abakker wrote: post #50

Well, if Labor is a function of supply and demand, then it tells us that supply of willing labor is happy to work at all , even if wages aren't rising. Turned around, in a market where people are desperate for work, corporations have no incentive to raise wages. Still, this is overly simplistic. The problem in my mind is that unemployment rate is reflective only of those looking for work, and labor force participatio…

If you are interested in learning how labor markets are taught in macro today, check out these slides from Acemoglu of MIT: http://economics.mit.edu/files/10284 Labor market models are much more about flows, and frictions to those flows, rather than "static" views of labor supply and demand. When I was studying econ, I found some of these models and equations to be the most well thought-out and powerful tools present…

Marx's "Wage Labour and Capital" is also a rather short and easily readable work on the Marxian perspective of the labour market.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#129

Post by aninhumer »

IanDrake wrote: post #124
aninhumer wrote: post #117

Earlier quoted context omitted.

As far as I can see, QQQ seems to perform a fair bit worse than the S&P 500 itself? Maybe it's an unfair metric, or maybe it's just a fair commentary about the risks of index funds. But in any case, I said you'd make that much on average, not that you could withdraw that much every year. In reality, you would draw down a smaller fraction of that (but still an immense salary for no work). And since your capital would…

Sorry, how does one invest in the SP500 with "no work" without using an index fund? I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I don't work and I need to pay these bills with my 8% average. So what do you recommend I do in 2001? I'm supposed to be living large like you promised but the market ta…

>I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average.

I'm really not sure what point you think you're making here? Yes, if you spend too much, you'll lose your money. So don't spend too much.

Re: Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?

#130

Post by IanDrake »

jazzyk wrote: post #116
IanDrake wrote: post #84

Earlier quoted context omitted.

I must not have made my point well. Sure, you could do that and maybe you would. However, most people who didn't earn their money don't. Most of those same people think the rich "do nothing" and make money. It's this kind of ignorance that causes bullshit class warfare where it doesn't exist.

A lot (not all) of rich people who inherited money actually do nothing , they have money people managing their wealth (for a good cut of the profits). And making money on your capital in a perma-bull stock market (casino?), engineered by the Fed is not that complicated.

The inheritors you speak of aren't making money with money, they are spending money and will have none when they're done. I don't think I ever claimed that wasn't easy.

>"Perma-bull stock market".

Uhg. If it were only that easy.

Making money on paper is easy right? Any idiot can see through every little dip in the market over the last ten years and not get rattled and ride it all the way to the top and then have the 6th sense to see the next dip for what it is, a crash, and move all their money to another asset class just before it happens.

No, that's not what happens. People ride it all the way back down and often end up with less than they started with. Then someone who knows very little about investing tells them, at least you should make 8% on average historically as consolation.

Tell me when to yank my money out if it's so easy. It's not. A correction is coming, but when, how will I know, and what to do when it does?

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