Supply and Demand Does a Poor Job of Explaining Depressed Wages • Hacker News Board

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

#101

Post by fhood » Fri, Apr 06, 2018, 6:37 PM UTC

adventured wrote: post #97

fhood wrote: post #87

Earlier quoted context omitted.

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 de…

Sure, possibly valid points. But the original comment made an explicit point that I can't verify because I cannot find wage data going back past 1964.

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

#102

Post by defertoreptar » Fri, Apr 06, 2018, 6:43 PM UTC

> find that in areas where there are fewer employers in an industry, workers in that industry earn lower wages.

> [...]

> Together with the evidence on minimum wage, this new evidence suggests that the competitive supply-and-demand model of labor markets is fundamentally broken.

How does that contradict supply and demand? Less employers = less supply of jobs = oversupply of workers = downward pressure on salaries.

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

#103

Post by JamesLeonis » Fri, Apr 06, 2018, 6:43 PM UTC

I am reminded of this tweet from one of the Federal Bank guys [1]

> We were at maximum employment. We are now at maximumer employment.

> I thought the "tongue-in-cheekiness" of my tweet would be obvious. Allow me to translate: We keep saying we are at max employment and then all these people choose to work. It suggests we weren't really at max employment.

[1]: https://twitter.com/neelkashkari/status/972142317162369024

And more recent [2]

> 1. Yes it matters 2. Even more important is that we should now recognize our gauge of labor market slack is broken

>> What metric would you suggest instead?

> A combination of factors: prime age LFP and EPOP. Most importantly: when assessing supply and demand in a market, start by looking at the price. Wage growth has been surprisingly slow. Suggests more slack.

[2]: https://twitter.com/neelkashkari/status/978041558342791176

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

#104

Post by crdoconnor » Fri, Apr 06, 2018, 6:45 PM UTC

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.

Also:

* Austerity (e.g. leaving pothole fixing in portland to anarchists) - which reduces aggregate demand for labor, and thus reduces overall wages.

* Benefits cuts - which increases low wage workers' reliance upon their wage income, and reduces their negotiating leverage.

This is why certain politicians are extremely concerned about "fiscal prudence" when it comes to government spending on wages, pensions or benefits, but lose their sense of fiscal prudence as soon as the topic is tax cuts or military spending. They're mainly just trying to inadvertently push corporate wage bills down.

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

#105

Post by pedro_hab » Fri, Apr 06, 2018, 6:55 PM UTC

aylmao wrote: post #78

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…

> An average poor man in the US probably lives better than kings lived in the past. IMO very far from truth. An average poor man today _has more valuable stuff_ than a king in the past, but this doesn't translate into _living better_ because having a smartphone wont save me from the stress of disliking my boss, having cheap access to varied foods doesn't necessarily mean I have more significant relationships, the fac…

> things are perhaps better now, sure

I really think you are forcing here, I said:

> probably lives better than kings

And I do conceded that I have not studied kings lives to know, so I am guessing, but the poor of the past for sure lived way worse then the current poor. No question. The world is a much better place to live, MUCH.

Now we can argue if should be better, based on distribution (rich are richer, than poor should also be richer) or inflation.

But people used to have dozens of kids and only a couple would live, that alone is enough to justify.

My grandparents had 7 kids in the middle of nowhere and none died.

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

#106

Post by pedro_hab » Fri, Apr 06, 2018, 7:00 PM UTC

lazerpants wrote: post #83

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…

Yeah, but this kinda proves the point, these luxuries are not luxuries anymore, they became standard.

The way the world is portrait by many would make me think the rich are keeping the AC for themselves, and actually they only keep cutting edge technologies, which will be in mass market if proven necessary, as cellphones.

Can you believe a "poor" person can have the same cellphone as Bill Gates, there isn't a ultra expensive phone that only they can afford, this is huge.

Now isn't what you pointed out more of a human psychological issue than a economic one?

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

#107

Post by forkLding » Fri, Apr 06, 2018, 7:01 PM UTC

randomdata wrote: post #91

dougmany wrote: post #81

Earlier quoted context omitted.

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.

Sounds informally like a logical contradiction at work, thus the assumptions must be wrong

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

#108

Post by cosmic_ape » Fri, Apr 06, 2018, 7:03 PM UTC

randomdata wrote: post #98

cosmic_ape wrote: post #94

Earlier quoted context omitted.

>>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

ok, we can define it like that. but its useful to distinguish between these different ways supply and demand can act then, under your definition. One is concerned with just the number of available jobs, and concerns the "efficient market" situation where employers simply can not increase wages and stay profitable. This is the more common "supply and demand" notion, afaik. The other is artificial - workers can unionize, and what the employers can do is described in the article.

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

#109

Post by pedro_hab » Fri, Apr 06, 2018, 7:05 PM UTC

jonny_eh wrote: post #63

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…

> Life by every metric is getting better, can it be better? Maybe. Not with that attitude! > Now we could discuss how to improve the system, and its flaws, but this level of cynicism is hard to handle. Agreed, we need to identify the problems and then be optimistic about solutions.

You are right, I was a bit cynical there myself.

But then again, I can't refrain from the fact that is way better today, I talk to older people and see how thing worked and it does look way better than it was.

It seems that people are expecting life not to be filled with suffering, which is the case unfortunately, and it becomes harder to see the good parts.

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

#110

Post by cortesoft » Fri, Apr 06, 2018, 7:06 PM UTC

peoplewindow wrote: post #60

cortesoft wrote: post #13

Earlier quoted context omitted.

Except it isn’t, it because of the way labor and employers have different costs when an employee leaves, meaning each side has a different equation for how important it is to not sever the employment arrangement. If an employee loses their job, they lose 100% of their income, and for many they are unable to survive this. If an employer loses an employee, they only lose 1/n of their production, where n is the number o…

That assumes all employees are equal which in any non-factory-churn-operation company is not going to be true.

Even if all employees aren’t equal it will still be some fraction of total productivity that is lost, which is always going to be less than the 100% lost by an employee.