If pay had kept pace with productivity gains, minimum wage would be $24 an hour • Hacker News Board

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#41

Post by QuercusMax » Fri, Oct 09, 2020, 5:58 PM UTC

SpicyLemonZest wrote: post #27

vannevar wrote: post #25

Earlier quoted context omitted.

I think this a a demonstration that trickle-down economics doesn't work, because additional capital injected into a capitalist system tends to be captured by the capital at the top. Rationally, you would expect productivity gains to be captured disproportionately at the point where the gain occurs, on the assembly line, not back up through the hierarchy. But because of the rich-get-richer mathematics of capital, thos…

But do productivity gains occur on the assembly line in the first place? I would guess that people today are about as good at working on an assembly line as they were 50 years ago, and we're more productive only because of capital improvements in machinery and infrastructure. That's not to say we shouldn't work to improve the average worker's wealth and quality of life, of course! I'm all in favor. But it's not a mat…

Isn't that what Lean, Six Sigma, and all those processes were about originally? Everybody working to improve their productivity, going all the way down to looking at what workers on the line are doing? I'd expect that in the last 50 years we actually have gotten better at sequencing assembly-line work, and improving worker productivity through better techniques.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#42

Post by jfengel » Fri, Oct 09, 2020, 6:00 PM UTC

CyberRabbi wrote: post #24

Maybe I’m wrong but what is the causal link between productivity and wages, especially minimum wage? I always thought that cost of living dictated wages and the so-called wage stagnation was due to relative lack of inflation for basic living expenses over the past 20 years. Also the past 20 years have seen a relative large influx of immigration compared to the previous 20 years. Increasing the competition between wor…

There isn't a causal link. That's why we have minimum wage laws. The idea is that rather than paying people what we can get away with, we pay them what they are worth to us.

If productivity improves, but wages are indexed only to inflation, then the rich get richer and the poor at best stay the same. They produce more but don't see their lives get better. In a country that has produced so much additional wealth, it would be nice if the people who produce it became themselves better off, rather than have the gains concentrate in a smaller and smaller minority.

The minimum wage doesn't just stagnate. It's not inflation-indexed, so inflation eats into it: it hasn't increased since 2009, and even though we're often below the Fed's target rate, inflation has still reduced the value of that by 20%. That suggests it's time to raise it, and the $24/hour figure helps put the quantity into context. It makes a $15/hour wage seem very doable, since it's less than half of the productivity increase.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#43

Post by PaulDavisThe1st » Fri, Oct 09, 2020, 6:00 PM UTC

css wrote: post #37

PaulDavisThe1st wrote: post #34

Earlier quoted context omitted.

> Wages are a function of the scarcity of labor This assumes an unconstrained "market" for the exchange of labor and wages, just as the claim that "prices are a function of the scarcity of goods" assumes an unconstrained "market" for the exchanges of goods and money. But this is not the only model for economic exchanges of labor, goods and money. The Romans, for example, did not use market pricing, but instead were p…

That other models of thought exist does not belie than an abundance of labor is the reason wages do not track productivity.

There's no inherent reason why an abundance of labor would cause wages to not track productivity (either within a sector, or across an entire economy).

In a culture that viewed the economy as a tool to enhance the living standards and quality for all of its members, there might be a very weak or even non-existent connection between labor availability and wages. Productivity gains could be viewed as way to either (a) reduce the amount of labor required (b) increase the amount of goods & services available, or both. Wages could remain fixed, or increase in such a scenario.

This is nothing like the economic system in which we live, however; an economic system that is viewed as a playground in which which some will accumulate vast resources (and thus power) and others will not can never function the way I just described.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#44

Post by ikeboy » Fri, Oct 09, 2020, 6:01 PM UTC

NovemberWhiskey wrote: post #6

Is there any evidence that whole-workforce productivity applies equally to minimum wage jobs? If not, the claim seems unsustainable. Completely anecdotally, improvements in labor productivity due to automation (etc) are less likely to be impactful in jobs like waiting tables, delivering newspapers or flipping hamburgers. That anecdotal evidence is backed by research that shows that service sector productivity tends t…

The article brings up this objection and handwaves it away.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#45

Post by ikeboy » Fri, Oct 09, 2020, 6:03 PM UTC

The data isn't sourced. Most claims of this nature ultimately source back to EPI's faked data that uses two different measures of inflation to falsely portray the productivity gap as far higher than it actually is.

See https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc... for details. I'm almost positive the same is going on here.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#46

Post by bleepblorp » Fri, Oct 09, 2020, 6:07 PM UTC

PaulDavisThe1st wrote: post #35

dcolkitt wrote: post #2

Average annual wages in the United States for was $63,000 for the most recent year available.[1] Average annual hours worked was 1,779 per year.[2] That implies an average wage of $35/hour. [1] https://en.wikipedia.org/wiki/List_of_countries_by_average_w... [2] https://data.oecd.org/emp/hours-worked.htm

"Average" anything in populations with large ranges is a terrible, terrible measure. As the joke goes, Bill Gates walks into a bar, and on average everyone in the bar is a millionaire. Median is the appropriate statistic for such cases.

Along these lines, here's a graph from the Federal Reserve's data service which plots median household income in contrast to GDP per household over time.

https://fred.stlouisfed.org/graph/?g=bOfK

Note the increasing spread between GDP/household and median income. That's the US's entire socioeconomic problem--from rising consumer debt levels, rising deaths of despair, and the rise of reactionary politics--shown in one chart. The median person is falling behind.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#47

Post by alextheparrot » Fri, Oct 09, 2020, 6:09 PM UTC

stormbrew wrote: post #30

alextheparrot wrote: post #23

Earlier quoted context omitted.

Isn't this only first-order labor? If the butcher needs to pay more for labor as well, you're still experiencing an increase in price that's labor-related, just hidden.

Once you get away from point of service, I think two things kick in that make it really unlikely that any stage before it would substantially increase the % that goes to labour costs: 1) economies of scale, factory farming employs very few people per pound of meat produced, having been subject to a lot of automation. Likewise, supply chain areas like storage and shipping move a lot of product per employee. 2) 'butche…

I think this is natural, as you're always sub-dividing the remaining 66-75% of the pie. Even if you assume exponential decay of labor as a percentage of the remaining cost, it can still add 5-10%, which is a meaningful fraction. I don't strictly disagree with the original post regarding labor not being the lion-share of many businesses.

As a nit to my original post, butchers was more meant to be representative of a class of service that is relied on by consumer-level providers. I think we can agree that it is fair to assume there are more than just first-order workers who make less than $24 a hour in most supply chains these days.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#48

Post by css » Fri, Oct 09, 2020, 6:10 PM UTC

PaulDavisThe1st wrote: post #43

css wrote: post #37

Earlier quoted context omitted.

That other models of thought exist does not belie than an abundance of labor is the reason wages do not track productivity.

There's no inherent reason why an abundance of labor would cause wages to not track productivity (either within a sector, or across an entire economy). In a culture that viewed the economy as a tool to enhance the living standards and quality for all of its members, there might be a very weak or even non-existent connection between labor availability and wages. Productivity gains could be viewed as way to either (a)…

> This is nothing like the economic system in which we live

That some theoretical other economy might exist does not belie the one this article discusses correlates wages and scarcity of labor, nor does it preclude anyone from making different decisions about pricing their own labor.

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#49

Post by qeternity » Fri, Oct 09, 2020, 6:13 PM UTC

This is so horribly flawed. Productivity improvements have been concentrated at the high end, and those that have occurred in low skilled jobs have been almost entirely due to technology, not to labor efficiency. Technology gains have always disproportionately been captured by the providers of capital over the providers of labor (given they are the ones who invest in said technology).

Re: If pay had kept pace with productivity gains, minimum wage would be $24 an hour

#50

Post by H8crilA » Fri, Oct 09, 2020, 6:13 PM UTC

https://wtfhappenedin1971.com/

1971, 1968, doesn't really matter. But - many such "negative" effects only really show up after 1981, that is after the peak of the interest rates. RIP Volcker, the last Fed president with vision.

If you're into slightly crazy sounding theories about the cyclical nature of human progress I recommend: https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generatio.... Ray Dalio is also writing a lot on his own version of the "around 80 years cycle" theory.