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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

#91

Post by randomdata »

dougmany wrote: post #81
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.

> The conclusion was therefore that Supply and demand were broken.

Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.

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

#92

Post by taw-an »

crabasa wrote: post #44
andrewla wrote: post #42

Earlier quoted context omitted.

I feel comfortable saying, without evidence, that LinkedIn is unlikely to be useful for workers living at the border of the minimum wage, or in general workers who would be likely to be affected directly by a change in the minimum wage.

I agree with you about the current iteration of LinkedIn. But that doesn't mean a different kind of product, focused on professional development, career management and networking couldn't be useful for folks. I imagine that many people simply leverage Facebook, Twitter and other social networks for this today, in the absence of something for purpose-built.

Typical Silicon Valley libertarianism - trying to solve critical policy issues with a new app instead of fixing the root cause.

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

#93

Post by jopuwep12489 »

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.

A correlation. :|

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

#94

Post by cosmic_ape »

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…

>>Except power itself is determined by supply and demand.

not necessarily. consider what would have happened if the workers were unionized, for example. You might still have had the same number of jobs, but a different distribution of profits to employees/owners.

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

#95

Post by dnautics »

crdoconnor wrote: post #49
dnautics wrote: post #12

Earlier quoted context omitted.

How do you decide what the appropriate level is, gut feeling? I'm afraid that debates over what the number should be obscures debate over the harder question of what is causing the minimum wage to have to keep increasing. The question we should be asking is why are we devaluing the completed labor of the lowest wage classes?

>How do you decide what the appropriate level is, gut feeling? I would keep raising it incrementally until inflation hits around 4-5%. This is probably the simplest, most effective way of solving the income inequality problem. Minimum wage hikes cut in to the bottom line first and prices second. There's a lot of profit at the top that an just be redirected to the bottom by increasing the minimum wage - barely even af…

> So the value of their labor above and beyond which they are compensated for can be extracted and redistributed - mostly in the form of profits.

I don't think that is the working model. The value of labor is decreased by government policy because it's believed that wages are sticky and decreasing the wage value will lead to greater employment macroeconomically.

Yes, the downstream effect is that we line the pockets of corporations and the already wealthy, but the justification and motivation for it is progressive social policy.

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

#96

Post by randomdata »

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.

That is still explained by supply and demand though. A union works by artificially constraining the labor pool, reducing the employer to buying from (typically) one seller (the union) instead of many (each employee individually). Unionized workers are usually able to make more money than they would in a non-unionized market because of that smaller supply of sellers relative to the demand.

However, as a Canadian who saw peak unionization in the mid-80s, long after wages also started stagnating in our country, and a country that still has relatively strong unionization even today (especially compared to the significant decline seen in the USA), I'm not sure that this explanation holds.

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

#97

Post by adventured »

fhood wrote: post #87
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.

Take one example. US manufacturing has become radically more productive over time:

https://i.imgur.com/exTxW1O.jpg

The primary reason the US lost so many manufacturing jobs since the peak, wasn't China, it was persistent gains in manufacturing productivity.

At the exact same time that is occuring, and while domestic economic growth slows, you import millions of low skill laborers into a declining or stagnant labor demand situation (for that type of labor). What is going to happen? It's obvious: wage suppression due to labor over-supply.

It is simple supply and demand.

Tech workers have gotten to see this up close & personal, as companies from IBM to Microsoft intentionally imported lower cost foreign engineer labor to undercut higher cost domestic engineers.

It's why the Koch brothers are such big fans of unlimited low-skill immigration (and why so many business Republicans love it, that by itself should throw up a red flag), the entire point is to hold wages down and hold down business costs to maximize corporate profitability.

This is also why almost no other developed nation allows unlimited or large amounts low-skill immigration, including Canada. Most developed nations use either a ridiculously strict approach to any immigration (eg Japan, and presently Scandinavia), or specifically operate a skill restricted / merit-based immigration system (eg Canada and Australia).

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

#98

Post by randomdata »

cosmic_ape wrote: post #94
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…

>>Except power itself is determined by supply and demand. not necessarily. consider what would have happened if the workers were unionized, for example. You might still have had the same number of jobs, but a different distribution of profits to employees/owners.

Unionization is a form of supply management (as is minimum wage[1]). A union does not change the rules of supply and demand, it exploits the rules of supply and demand for the benefit of the employees by artificially limiting the supply. With the reduced supply of workers, the power of the workers increases as I described in the final paragraph of my previous comment.

[1] https://news.ycombinator.com/item?id=16775810

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

#100

Post by crdoconnor »

brightball wrote: post #74
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…

Exactly. The article implies that bargaining position is the deciding factor here. Bargaining position is ENTIRELY defined by economics. How many options does the company have to fill the role you are applying for? How many jobs do you have the ability to fill? What is the compensation level for those jobs? In a pool of workers, on a sheer measurable and presentable skill set...do you stand out? Networking, creates a…

>Bargaining position is ENTIRELY defined by economics.

In theory it is, but I haven't seen much if any economic research that actually analyzes, say, desperation as a factor in aggregate wage levels.

Much like the effect of raising the minimum wage on profits (ridiculously under researched), there are apparently some topics economists simply don't like looking at.

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