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Supply and Demand Does a Poor Job of Explaining Depressed Wages

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Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#81

Post by dougmany »

randomdata wrote: post #64

> Supply-and-demand theory once made sense. That was before employers gained so much power. Except power itself is determined by supply and demand. Employers have gained more power precisely because of the increased labor supply (more women, more robots, more foreign workers) that is also responsible for stagnant wages. The power, of course, comes from the need for others to have association with that person/business…

My summary of the article would be:

If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases and jobs were not loss. The conclusion was therefore that Supply and demand were broken.

Then then want on to say how they found a link between having a small number of employers in a field and lower wages.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#83

Post by lazerpants »

pedro_hab wrote: post #61

This is an interesting topic, but it is sad to see how people react to it. A lot of comments here saying the whole system is broken. An average poor man in the US probably lives better than kings lived in the past. Food, water, food, hospitals, AC, heaters and such. These evil employers/entrepreneurs are the one creating it. Life by every metric is getting better, can it be better? Maybe. Now we could discuss how to…

I'm don't think most of these conversations are really about material comfort, it's a proxy.

I believe most of this deep well of negativity is a reaction to the limited choices individuals perceive themselves to have due to market forces. When wages were a little higher, jobs were easier to find, and housing costs were far lower, people could choose their work, leave jobs, take pay-cuts, and reorient their lives in a more flexible manner. People are upset now because they're on a treadmill that they can't really imagine ever being able to get off, even if they never want to, which is a gloomy thing indeed. And it's not like skipping on A/C or avocado toasts will ever give people enough money to escape that.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#84

Post by andy_ppp »

andrewla wrote: post #56
andy_ppp wrote: post #8

Earlier quoted context omitted.

These jobs that are worth less than $15 per hour are going to be the first to be replaced by machines so whatever happens we need a solution to give people at the bottom high(er) quality lives.

I think this might be a misplaced assumption. Historically I think it has turned out that machines/computers are really good at jobs that people think are hard, but really bad at jobs that people think are easy. Machines are great at doing precision machining, which is hard for humans. But they're terrible at walking, which most people can do without difficulty.

Hmmmm: https://www.independent.co.uk/life-style/gadgets-and-tech/ne...

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#85

Post by sp332 »

leadingthenet wrote: post #17
sp332 wrote: post #11

Earlier quoted context omitted.

Yes but the workers have a drive for increasing profits too, and there are more of them. So that's not really a good explanation.

This is where an understanding of power structures and hierarchies helps.

Exactly. Drive for profits doesn't have much explanatory power.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#86

Post by brightball »

Frondo wrote: post #67
sprash wrote: post #24

Supply and demand does a great job of explaining depressed wages. We had two kinds supply shocks in the recent history in the labor market. One is women entering the workforce and the second is mass immigration. Both coincided at the end of the 60s and 70s. Exactly since then wages are not correlated to productivity anymore and are basically stagnating.

You blame women and immigrants, but a much more likely explanation is the decline of union participation in the private American workforce. They've been on the decline since the 1970s, and the more they've declined, the more that productivity has been captured by upper management and shareholders.

Sticking to the supply-demand theme...decline in union participation could also come as a result of bad experiences with unions over leveraging their positions causing business to prefer non-union workers.

At the same time, as working conditions improved the benefits of participating in a union could be much less pronounced.

Meaning that demand for non-union workers increased, which were in ample supply.

To truly make a case for union participation you have to also make a case for how hiring union workers benefits a business. If that isn't plainly obvious, then the demand for union workers themselves will go down.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#87

Post by fhood »

sprash wrote: post #24

Supply and demand does a great job of explaining depressed wages. We had two kinds supply shocks in the recent history in the labor market. One is women entering the workforce and the second is mass immigration. Both coincided at the end of the 60s and 70s. Exactly since then wages are not correlated to productivity anymore and are basically stagnating.

Do you have data on this? Because I looked and couldn't find anything reliable going past ~1964.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#88

Post by sigstoat »

matchagaucho wrote: post #22
andy_ppp wrote: post #8

Earlier quoted context omitted.

These jobs that are worth less than $15 per hour are going to be the first to be replaced by machines so whatever happens we need a solution to give people at the bottom high(er) quality lives.

It'll always be cheaper to pay minimum wage to mop floors vs a $250,000+ "AI Mopping Machine" that requires a $55hr Tech to maintain.

http://store.irobot.com/default/braava-floor-mopping-irobot-...

also janitors with large areas to clean have been operating mopping machines for 30+ years.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#89

Post by andrewla »

d0lph wrote: post #71
andrewla wrote: post #56

Earlier quoted context omitted.

I think this might be a misplaced assumption. Historically I think it has turned out that machines/computers are really good at jobs that people think are hard, but really bad at jobs that people think are easy. Machines are great at doing precision machining, which is hard for humans. But they're terrible at walking, which most people can do without difficulty.

Right, but surely you don't believe that robotics is stuck where it is, we haven't quite figured out everything, but it's still a new field.

Far from it, but this is in response to a comment which explicitly said "These jobs that are worth less than $15 per hour are going to be the first to be replaced by machines". I don't think they'll necessarily be the first, and in some cases will come well after much more highly compensated positions have all but disappeared.

For example, waiting tables is a classic minimum wage job (in fact, in most states in the US, the minimum wage for waiters is actually less than the standard minimum wage because tip income is assumed to make up the difference), and I'm not seeing waiters being replaced in any significant capacity by robots in the near future.

And on the other hand, a difficult job like being a machinist is becoming increasingly obsolete. A master machinist will always be able to find high-paying work, but the market for apprentice or journeyman machinists is drying up very rapidly, because a single master machinist can set the template for a hundred CNC mills and lathes, to the point where the pipeline for master machinists is on life support.

Re: Supply and Demand Does a Poor Job of Explaining Depressed Wages

#90

Post by awat »

ChuckMcM wrote: post #82

I miss the times when I thought Supply and Demand could explain wages. In a fully globalized economy I expect it would be more useful to do comparative GDP studies to understand the use of labor capital and its ability to fund production.

Exactly, supply and demand is pretty easy for people to grep (including myself) when explained in a simple cartoon or econ 1010 class. It’s current application in a globalized market is anything but transparent, which makes it even harder to properly identify manipulative forces in the market.
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