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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

#111

Post by extralego »

JumpCrisscross wrote: post #94
extralego wrote: post #87

Earlier quoted context omitted.

You probably lost a great bartender and taco server. Honestly, I’m sorry to hear that. But her victory is very refreshing. What do you think? Why not discuss it with her?

> You probably lost a great bartender and taco server I would have never tried the pastrami taco if it hadn’t been for her! > Why not discuss it with her? She’s campaigning. Not sure distractions would help. In any case, these sorts of proposals benefit from specificity. Next steps are doing homework and proposing specific rule changes.

If only that was all that stood in her way.

Let’s not take pastrami tacos for granted.

Re: The rich world needs higher real wage growth

#112

Post by tfehring »

GatorD42 wrote: post #65
tfehring wrote: post #14

Earlier quoted context omitted.

Interesting take, but I'm not sure I buy it. I certainly don't feel like I get ~2.5x more utility from my current iPhone than I did from the smartphone I purchased in 2012, which was just as fast (on the software of the time) and had most of the same functionality. I'd also be curious as to how you were able to conclude that the so-called "fashion effect" is not supported by evidence.

How much would you pay for a brand new iPhone 5 (the iPhone new in 2012) that looked exactly like an iPhone X and was indistinguishable by anyone else? If it's less than the price you would pay for a real iPhone X that price difference is because of quality improvement and not fashion. There are more rigorous ways to account for the fashion effect, but this thought experiment shouldshow that a significant part of the…

I'd probably be willing to pay more than 41% (the 16%/year discount taken from your article, compounded for 6 years) but less than 100%, which implies that your conclusion overstates the value (to me in particular) of quality improvements during that time.

Of course, I don't actually have the option to get the same experience from an iPhone 5 today that I could have 6 years ago. As an alternative, consider a budget Android smartphone manufactured today. It's possible to spend significantly less than 41% of the price of an iPhone X (or an iPhone 8, for that matter) for a device whose quality is, I suspect, better in every way than an iPhone 5. If 16%/year is taken as the true rate of quality improvement, doesn't that imply that the fashion effect has an impact on consumers who continue to purchase iPhones?

Re: The rich world needs higher real wage growth

#113

Post by [deleted] »

JumpCrisscross wrote: post #61
dalbasal wrote: post #56

This article really demonstrates how meaningless most economics reporting is, it's nearly as bad as markets/finance reporting. Oil is $75, about average over the last decade. It has almost nothing to do with employment, wage growth or GDP except inasmuch as all major economic measures affect eachother. A year ago oil prices were low, did that mean the opposite of this article (whatever that is) was true? This kind of…

> Are "labour market running hot" or "central bank tightening" references to actual things Yes. Unemployment is very low. That means if you need ten people, you may have to pay more or wait longer than you expected. That is what “labour market running hot” refers to. “Eliminating slack” means encouraging employers to raise wages (which can cause inflation) to fill productive jobs. “Central bank tightening” refers to…

[deleted]

Re: The rich world needs higher real wage growth

#114

Post by batterseapower »

TangoTrotFox wrote: post #76

Here are a couple of interesting and crucially related graphs: - Nonfarm Business Sector: Real Compensation Per Hour [1] - Nonfarm Business Sector: Real Output Per Hour of All Persons [2] - Real Median Personal Income [3] Nonfarm business sector is defined as "a subset of the domestic economy and excludes the economic activities of the following: general government, private households, nonprofit organizations serving…

Real compensation has become disconnected from wages mostly due to 2 factors [1]:

- Wage inequality (the average wage is growing faster than the median wage)

- Growth in benefits like pensions and health insurance which are not part of wages but are part of compensation

The inequality and benefits effects are about equally strong. Once you control for these 2 factors, compensation has risen at almost exactly the same rate as productivity growth, which is what you would expect of the economy in long run equilibrium.

[1] https://www.resolutionfoundation.org/app/uploads/2014/08/Dec...

Re: The rich world needs higher real wage growth

#115

Post by cperciva »

adpirz wrote: post #26

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 an…

It's important to not confused the distribution of income between labour and capital with the rates of return on labour and capital.

Right now we have an unprecedented amount of capital sloshing around. When you increase the supply of capital, two things happen: The total income returned to capital goes up, and the rate of return goes down.

If you care about wage growth, look at wage growth. Looking at labour's share of GDP is going to give you a wildly misleading view in the context of large capital flows.

Re: The rich world needs higher real wage growth

#116

Post by jessaustin »

extralego wrote: post #111
JumpCrisscross wrote: post #94

Earlier quoted context omitted.

> You probably lost a great bartender and taco server I would have never tried the pastrami taco if it hadn’t been for her! > Why not discuss it with her? She’s campaigning. Not sure distractions would help. In any case, these sorts of proposals benefit from specificity. Next steps are doing homework and proposing specific rule changes.

If only that was all that stood in her way. Let’s not take pastrami tacos for granted.

Is Crowley going to run on a write-in basis? What would that accomplish, other than proving how little [some] Democrats think of the electorate?

Re: The rich world needs higher real wage growth

#117

Post by dnautics »

adpirz wrote: post #26

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 an…

you don't suppose it's because low interest rates, QE, and stimulus are policies designed to decrease the cost of labor?

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

"even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts"

Re: The rich world needs higher real wage growth

#118

Post by dnautics »

tfehring wrote: post #14
GatorD42 wrote: post #2

I think there are many reasons to be skeptical of inflation and productivity statistics because they don’t seem to capture the rate of innovation in consumer goods such as smartphones and related areas like wireless plans. I wrote a piece on inflation statistics showing how U.S. inflation statistics fail to account for the quality improvement in iPhones: https://medium.com/@vince.pavlish/using-iphone-prices-to-che...

Interesting take, but I'm not sure I buy it. I certainly don't feel like I get ~2.5x more utility from my current iPhone than I did from the smartphone I purchased in 2012, which was just as fast (on the software of the time) and had most of the same functionality. I'd also be curious as to how you were able to conclude that the so-called "fashion effect" is not supported by evidence.

some people might get less utility or, more relevantly to this article, less productivity, due to being distracted by it.

Re: The rich world needs higher real wage growth

#119

Post by JumpCrisscross »

dalbasal wrote: post #107
JumpCrisscross wrote: post #98

Earlier quoted context omitted.

> Economics can’t be a science yet Macroeconomics, yes. Microeconomics is a proper science. It has theories which make predictions which can be demonstrated in experiments.

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.

Re: The rich world needs higher real wage growth

#120

Post by niccolop »

dalbasal wrote: post #56

This article really demonstrates how meaningless most economics reporting is, it's nearly as bad as markets/finance reporting. Oil is $75, about average over the last decade. It has almost nothing to do with employment, wage growth or GDP except inasmuch as all major economic measures affect eachother. A year ago oil prices were low, did that mean the opposite of this article (whatever that is) was true? This kind of…

This is why I stopped reading The Economist years ago. The lack of byline in my opinion allows that type of sloppy writing.
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