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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

#121

Post by randomdata »

EliRivers wrote: post #114
randomdata wrote: post #96

Earlier quoted context omitted.

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 s…

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). Closed-shop unions, you say? Do they still exist? I work in the UK, and I've worked in many workplaces where there were active unions, and the very idea that you'd have to be a member of the union to work there was laughable and, if I recall c…

Closed-shop unions are typical where I live. My mistake on them being typical across the world.

However, even in an open shop, the collective bargaining is still limiting the employer to a single vendor with respect to those it wants to hire that are engaged with the union. The only other supply is those who want to bargain on their own, and even then you're probably not going to find too many who are willing to severely undercut the union, unless the union is on the brink of collapse anyway.

The supply is still constrained. Although perhaps not to level it is in a closed shop.

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

#122

Post by commandlinefan »

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 find myself becoming increasingly worried about the future. My quality of life _right now_ is pretty good. But last year, I was part of a massive layoff (whole company shut down with no notice) and I found myself out of work for months. And I'm competitive: I have a master's degree in CS, decades of experience, up-to-date "skills" in a market that is supposedly facing a talent shortage - yet I found myself rejected out-of-hand, sometimes without even an interview, from dozens of positions that I was 100+% qualified for. I can't help but wonder - if it's this bad for _me_, how bad must it be for people who have aren't quite as squeaky clean as I am?

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

#123

Post by coldtea »

anubisresources wrote: post #58
coldtea wrote: post #43

Earlier quoted context omitted.

> What is the difference between economics and power relations? In an ideal world, economics would study power relations as they relate to money -- that's what the old economists (19th century and so) called "political economy". In the present world, economics are a shallow ideology around the "free market", with naive abstractions and axioms. Usually these are mostly peddled by the media and "popularizer" economists…

What economics courses have you taken that are remotely like this? Economics is extremely quantitative and is not some “shallow ideology”.

It's "extremely quantitative" non-predictions premised upon a shallow ideology.

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

#124

Post by abakker »

fhood wrote: post #101
adventured wrote: post #97

Earlier quoted context omitted.

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.

https://slatestarcodex.com/2018/02/19/technological-unemploy...

Look at the charts on labor force participation rate, and read his analysis. I'd say it is very carefully done.

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

#125

Post by TheCoelacanth »

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.

That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour.

You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.

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

#126

Post by sprash »

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.

I first saw the plot here:

https://economics.stackexchange.com/questions/15558/producti...

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

#127

Post by randomdata »

TheCoelacanth wrote: post #125
randomdata wrote: post #91

Earlier quoted context omitted.

> 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.

That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour. You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pa…

> No one is going to say "I was willing to work for $6/hour but not for $7/hour".

I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage.

Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want.

> You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour.

That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential.

It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.

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

#128

Post by TheCoelacanth »

randomdata wrote: post #127
TheCoelacanth wrote: post #125

Earlier quoted context omitted.

That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour. You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pa…

> No one is going to say "I was willing to work for $6/hour but not for $7/hour". I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less . If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think y…

> It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.

That is exactly the point I was trying to make and I think the article was trying to do the same. Unless you make the assumption that demand for labor is perfectly inelastic or is one of the very rare goods, like Veblen goods, that have a positive price elasticity of demand, raising the minimum wage would be expected to decrease the amount of labor demanded. If it doesn't, then one of those assumptions must be incorrect. Either labor has perfect or positive elasticity of demand (unlikely because very few things do, even things that most people would describe as absolute necessities) or there are more factors at play than just the law of demand.

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

#129

Post by purplezooey »

One thing I've learned is that the right wing will always tons more money and resources than the left in the US. This is an example of how effective the right wing message machine can be, having been a loud opponent of minimum wage increases for what are increasingly bogus reasons.

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

#130

Post by orbitur »

comstar wrote: post #57
toomuchtodo wrote: post #20

Earlier quoted context omitted.

> we need a solution to give people at the bottom high(er) quality lives. Training and safety nets, funded through tax revenues. Keep in mind, the national minimum wage in Australia is currently $18.29. The entire US has been getting a discount on minimum wage labor for decades, and everyone is kicking and screaming now that those workers are having their wages ratcheted up to what they should be making when accounti…

Not to discredit anything you've said, as on the whole I agree with you. But movie tickets are nearly twice as expensive in Australia. [0] [1] And a popular videogame can be wildly more expensive. MLB The Show 2018 for instance is $60 in the US and $100 in AU. These prices are outside that which is explained by the current exchange rate. Yes, you are being paid more. The price of living is also drastically higher the…

> And a popular videogame can be wildly more expensive. MLB The Show 2018 for instance is $60 in the US and $100 in AU

That's actually easily explained by manufacturers tying their product to the US dollar. We're getting fucked by this in Canada, too. My favorite is when Apple laptops fluctuate by $200CAD in either direction while my salary stays the same.

Just look at a chart of your dollar against the USD. Movies are more local in a sense.

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