The rich world needs higher real wage growth

See: https://www.epi.org/publication/understanding-the-historic-d...

TL;DR 3 Things, in increasing order of magnitude:

- The increasing share of GDP going from labor to capital

- The "terms of trade", ie, how labor's share is measured, FTA: "the same growth in nominal, or current dollar, wages and output yields faster growth in real (inflation-adjusted) output (which is adjusted for changes in the prices of investment goods, exports, and consumer purchases) than in real wages (which is adjusted for changes in consumer purchases only)."

- a much bigger slice of the pie: inequality in compensation, ie, average compensation has risen dramatically, but median compensation has stayed flat. Basically executives have gobbled up a healthy portion of the income.

The investor class saw inflation marginalizing their endeavors, and they got us to target price stability as the goal instead of full employment.

The controls, liquidity of global capital, and action of the central banks that maintain price stability, end up suppressing wage growth.

So we have a world in which rather than the debtor’s paradise we had in the 70s, we have a creditor’s paradise now.

https://youtu.be/X5JI0_i_Xik?t=21m44s

Linked elsewhere in the comments, but this is an interesting read regarding the increasing gap between productivity and labor: https://www.epi.org/publication/understanding-the-historic-d....

The interesting fact is that the loss of labor's share of GDP to capital is less than you'd imagine, and a much bigger reason for stagnant real wage growth has to do with inequality regarding compensation. Automation is real and is taking jobs, but it's executives that have been soaking up the financial gains from productivity.

But why does everyone want to move to dense urban areas? You assume that there’s some small, easy-to-offset group of factors, like public transit or “jobs programs,” and that if the government just did something with these things, it would equilibrate population dynamics appropriately.

I’m not convinced. I think people are more driven by status symbols and glamor. Living in a city is considered relatively more “high status” and a “glamorous” lifestyle. Even poor people in cities are glamorized as having greater access to sex, subculture groups, participation in civic functions like meaningfully large protests, proximity to celebrities or wealthy people.

I think it’s plausible to argue that as developed societies progress, competition between people becomes increasingly focused on intangible social status, and one side effect is that people become more and more willing to sacrifice material comforts to crowd into cities for the chance to possibly compete for higher social status.

It wouldn’t matter if you incentivized people with cheaper housing, “jobs programs,” or anything else, “Ruralness” itself would be such a direct negative thing, in terms of social convention, that people would pay to avoid it, in the form of impossible rents, overcrowded infrastructure, etc.

I conjecture you’d need a generational propaganda campaign to glamorize rural living, combined with some huge changes in how employment is structured, before anything could even start to incentivize meaningful redistribution of population to rural areas.

The jobs programs thing is especially tricky, because there is a chicken and egg problem with modern employment and rural areas. It’s not just a matter of retraining people, because they’ll still want to move to cities independently of jobs, and then employers will want to be located in cities to have high-status clans of employees and to be colocated with other high-status people.

Jobs training doesn’t really solve anything unless you change the underlying culture such that employers can participate in some virtue signalling by locating there.

It’s why you might see start-ups in Grand Rapids, MI, but you don’t see Google opening a new 500-engineer research lab there. The people who want those engineering jobs want a life with status signalling only found in big urban centers associated with cultural progressiveness.

I’m not saying any of this to argue one way is better or is right. Only that I think any theory about why people accumulate in dense cities has to be primarily based on social status effects that exist by convention and not by any material factor.

>This is unsustainable

On what basis do you make this claim? I would have thought the opposite to be true.