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The rich world needs higher real wage growth

economist.com

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Re: The rich world needs higher real wage growth

#181

Post by eli_gottlieb »

ethbro wrote: post #80
harryh wrote: post #69

Earlier quoted context omitted.

GDP was still increasing in the late 90s in the US. The recession didn't start until March 2001.

The interesting corollary would be that in the run-up to a recession, all other assets and opportunities are so over-valued that capital has nowhere else to go. And that increasing wages for labor is in fact capital's least-preferred option. Which would be sad, but more or less jive with how the modern global, publicly traded economy works.

Well, that sounds pretty accurate: today's economies are so thoroughly dominated by the interests of monopoly capital that it takes a long-running bubble/overheat to actually raise wages.

Re: The rich world needs higher real wage growth

#182

Post by wonder_er »

pembrook wrote: post #123
Joeri wrote: post #85

Earlier quoted context omitted.

This article really demonstrates how meaningless most economics reporting is, it's nearly as bad as markets/finance reporting. The problem is not with the reporting, it’s with the field. Economics is pseudoscience. It has all the trappings but none of the explanatory or predictive abilities. So you get articles like these that use a lot of jargon pretending like they’re making a strong case, but there’s no strong con…

Economics is not pseudoscience. Pseudoscience is essential oils being marketed as medicine. Economics is a social science, just like anthropology, archaeology, history, linguistics, political science, psychology, sociology, etc. etc. It's never going to be something with Laws of Gravity or the like, because humans are never wholly predictable or rational creatures. But that doesn't mean we can't come up with models t…

> Why do you think central bank policy has been able to prevent a depression from occurring over the last 90 years, when in the past they were a regular occurrence?

There is a strong school of thought that argues that central bank policy has created _more_ and _worse_ depressions than before.

The fact that we can now debate if a central bank is a good thing or a bad thing is evidence that it's all pseudoscience.

Re: The rich world needs higher real wage growth

#183

Post by harryh »

eli_gottlieb wrote: post #181
ethbro wrote: post #80

Earlier quoted context omitted.

The interesting corollary would be that in the run-up to a recession, all other assets and opportunities are so over-valued that capital has nowhere else to go. And that increasing wages for labor is in fact capital's least-preferred option. Which would be sad, but more or less jive with how the modern global, publicly traded economy works.

Well, that sounds pretty accurate: today's economies are so thoroughly dominated by the interests of monopoly capital that it takes a long-running bubble/overheat to actually raise wages.

today's economies are so thoroughly dominated by the interests of monopoly capital

How do you measure this?

Re: The rich world needs higher real wage growth

#184

Post by refurb »

wildmusings wrote: post #97
tfehring wrote: post #95

One thing to keep in mind: It's easy to think of stagnant wage levels as implying that everyone is working the same jobs and getting 2% nominal raises per year. Another possibility is that a subset of the population is seeing real wage growth while a different subset is being pushed into lower-wage jobs by automation and/or outsourcing. The hivemind of Trump supporters would have you believe the latter, and while I'm…

The numbers are pretty clear. The top 20%, which roughly correlates to the college-educated professionally-employed class, has seen their real income and social welfare steadily go up for the last half century. The bottom 80% has seen stagnation and decline, as well as increased social ills like drug addiction, broken homes, and so forth. Notably, this pattern exists even if you look at just white people, so a racial…

Declines wages for the poorest are only true if you ignore non-monetary compensation (e.g. benefits) and government transfers (EITC).

Not really fair to compare it that way.

Re: The rich world needs higher real wage growth

#185

Post by WalterBright »

JumpCrisscross wrote: post #166
AnthonyMouse wrote: post #150

Earlier quoted context omitted.

> “Eliminating slack” means encouraging employers to raise wages (which can cause inflation) to fill productive jobs. If you reallocate money without creating new currency, what you get isn't really inflation. Prices may adjust because the demand for things lower income people buy increases and the demand for things higher income people buy decreases, and prices follow demand. But supply and demand isn't inflation. A…

> If you reallocate money without creating new currency, what you get isn't really inflation You’re forgetting about velocity. A dollar in a middle class earner’s hands gets spent faster than a dollar in a billionaire’s. That faster spending stokes both growth and inflation.

> gets spent faster than a dollar in a billionaire’s

Billionaire's don't hoard cash. Money they don't spent is all invested. Billionaires know how to manage money, and don't pile it up in Scrooge McDuck cash vaults.

Re: The rich world needs higher real wage growth

#186

Post by qmalzp »

mlthoughts2018 wrote: post #79
qmalzp wrote: post #67

Earlier quoted context omitted.

Google doesn't open a 500-engineer research lab in Grand Rapids, MI because there are not 500 Google-caliber engineers already living in Grand Rapids, MI. This is not a statement about the average talent there, but simply that the starting pool is not sufficiently large; hence the need to build offices in high density urban areas. Google doesn't open an office in Denver so that Bay Area engineers have a slightly chea…

So Google only interviews candidates already living in the cities where the offices are? Google never relocates a candidate from somewhere else? This is super false. Google doesn’t open an office in Denver because there is already a sufficient talent market in Denver to staff the whole place. There isn’t. They open an office in Denver so that when a person passes the interviews and will need relocation they can be re…

If you pass the interview as a generalist, Google absolutely prefers for people to work in their Mountain View office.

1. The cost of relocation is minuscule compared to the total cost of employing someone, so I don't buy that argument.

2. Do you have data to back up that Google engineers in Denver get paid less than their Mountain View counterparts? I believe this is true when comparing US to non-US salaries, but at least where I've worked, engineers get paid the same everywhere within the US (and indeed, you can relocate from the Bay Area to cheaper locales without taking a pay cut).

Re: The rich world needs higher real wage growth

#187

Post by JumpCrisscross »

WalterBright wrote: post #185
JumpCrisscross wrote: post #166

Earlier quoted context omitted.

> If you reallocate money without creating new currency, what you get isn't really inflation You’re forgetting about velocity. A dollar in a middle class earner’s hands gets spent faster than a dollar in a billionaire’s. That faster spending stokes both growth and inflation.

> gets spent faster than a dollar in a billionaire’s Billionaire's don't hoard cash. Money they don't spent is all invested. Billionaires know how to manage money, and don't pile it up in Scrooge McDuck cash vaults.

> Billionaire's don't hoard cash

Velocity’s relationship with income is well documented. (Note, too, that velocity most properly measures the purchase of goods and services. Transaction velocity also includes investment. Even that goes down as income goes up.)

Re: The rich world needs higher real wage growth

#188

Post by JumpCrisscross »

derf_ wrote: post #177
dalbasal wrote: post #68

Earlier quoted context omitted.

I have (more than a little dusty) degree in economics, and I still don't understand what this article is trying to tell me. Is it telling me that when unemployment is low, central bank policy is to raise interest rates? If so, why not say that? What I meant is that generally I don't see how the sentences in this article add up to .. an article. It's a bunch of metrics, chosen by convention, expressed in cliche. It ki…

> Is it telling me that when unemployment is low, central bank policy is to raise interest rates? You may dimly recall from your undergraduate Macro courses a relationship between unemployment and inflation called the Phillips Curve [0], which is used to evaluate one of the "dual mandates" the Fed tries to fulfill with its interest rate setting policy. The problem, of course, is that there is evidence from the Fed's…

> central banks (including the Fed) from pretending it's still true

I can’t recall a major central bank basing a policy decision on the Philip’s Curve since the 1970s.

Re: The rich world needs higher real wage growth

#189

Post by nabla9 »

GatorD42 wrote: post #59
nabla9 wrote: post #10

Earlier quoted context omitted.

There are independent measures besides official CPI numbers. For example MIT's Billion Prices Project. These alternatives measures show that CPI is doing pretty good job. http://www.thebillionpricesproject.com

My argument isn't that the CPI is misleading mismeasuring prices, but falling to amount for quality improvements in products. I'm not sure the MIT data disproves that claim.

When economists want to track quality changes they typically use hedonic models like hedonic regression or sales adjustment grids.

In the U.S CPI calculation uses hedonic adjustment in many item categories, including smartphones.

Bringing up quality when talking about wages does not seem relevant. Wages are important relative to the size fo the economy because they turn into consumption. CPI tracks that just fine. When trying to estimate economic growth quality may be more important.

Re: The rich world needs higher real wage growth

#190

Post by freeflight »

JumpCrisscross wrote: post #119
dalbasal wrote: post #107

Earlier quoted context omitted.

I don't think that makes it a science. When Karl Popper criticised economics (and freudianism) for being a pseudo-science, there wasn't a real macro-micro divide. Adam Smith, Ricardo and the like were essentially micro-economists. You can experiment in some very small (raise the price of a product on a shelf) ways. The bulk of economics is about how these small components interact as a large dynamic. When it comes to…

> The bulk of economics is about how these small components interact as a large dynamic If I’m setting pricing and volumes at a firm, I don’t give a rat’s ass about the larger dynamics. I want to know how production variables will impact sales. For this, I can A/B test and rely on a deep corpus of research on queueing theory, supply and demand network and latency models, and logistical models.

> I don’t give a rat’s ass about the larger dynamics

But just because you don't, doesn't mean they don't exist/matter. You can do a lot on your individual micro-scale, but you will have a very hard time understanding how these changes affect the overall economy on a macro scale.

For all we know, "the market" is pretty much just a giant black box. It's not totally black, but we have a very hard time properly defining, or even quantifying, what's actually going on there.

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