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The labor share of income in the US is at its lowest post-war level

libertystreeteconomics.newyorkfed.org

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Re: The labor share of income in the US is at its lowest post-war level

#481

Post by monknomo »

rsalus wrote: post #367
larkost wrote: post #354

Earlier quoted context omitted.

> Or should the innovators, firms, and customers all get less, and instead my wages should get bigger? In almost all of the cases the "innovators" are themselves workers whose share of the outcome has been dropping. And the "customers" have never gotten a piece of the profits; we are already past the point where reduced prices would have happened (competition) in this system. And I think that by "firms" you really me…

the argument is productivity gains are increasingly driven by technological advances, which are spurred by capital investment. for example, if a company purchases software that increases their accountants productivity by 5x, should those accountants immediately be paid 4-5x more? I would contend that the accountant should not - it should flow to who bore the cost of the input (capital owners). however, if you starve…

idk, if we look at a lathe, where the factory bought the lathe, this makes some amount of sense (although a closet full of idle lathes isn't worth as much as a factory full of lathe operators making stuff on lathes).

a saas subscription is (per user) probably cheaper than a lathe, easier to stop investment into (no need to resell to recoup some of the loan, just quit paying). A closet full of unused saas subscriptions is worth even less than a closet full of idle lathes.

And yet, these subscriptions make the knowledge worker even more productive (in dollar amounts) than a lathe operator.

obviously a knowledge worker can just subscribe to claude and start building, but building in a vacuum isn't worth a lot more than the closet of saas subscriptions. It's a mutal dependency, and it's the combined efforts of the team that results in this tremendous value add. I wonder if there isn't something there that is above and beyond the capital input and the risks associated with deploying that capital.

But maybe that's an argument for workers of the world uniting and founding their own companies together

Re: The labor share of income in the US is at its lowest post-war level

#482

Post by hn_throwaway_99 »

hash872 wrote: post #466
hn_throwaway_99 wrote: post #336

Earlier quoted context omitted.

Thanks very much for providing those sources. That said, it's a huge pet peeve of mine when someone makes a statement, and then provides sources to back up that statement, but the actual sources contradict their original statement . You stated "but AIUI this is mostly a statistical illusion caused by changes to US tax law- previously income that was attributed to 'labor' shifted over to LLCs/S corps for more benefici…

I'm a bit skeptical that you absorbed these 3 pieces in the time it took you to respond (they are 27, 29, and 63 pages, respectively), but they find a range of effect sizes here- the other two a bit more strongly. I feel comfortable with my original statement, though I suppose there's always room for nitpicking

No, I completely read the first article. It was quite clear in what percentage of the decline in labor's share that it attributed to differences in statistical assessment of sole proprietors. I then looked at the abstracts of the other two. The third one basically completely agreed with the first ("We find that reallocating activity to the form it would have taken prior to the Tax Reform Act of 1986 accounts for 30% of the decline in the corporate sector labor share between 1978 and 2017."), and that's when I wrote my reply.

Frankly, I don't know how you can call this "nitpicking". In no definition in the English language is "one third" remotely the same as "mostly".

Re: The labor share of income in the US is at its lowest post-war level

#483

Post by 9x39 »

vannevar wrote: post #405
stretchwithme wrote: post #320

Earlier quoted context omitted.

Employee compensation comes from capital. And employees are working at companies that provide robots, etc. There's a return on capital than is not spent on employees. That reflects how much capital is growing and how much can be spent on employees in the future.

>And employees are working at companies that provide robots, etc. Just as are the top executives. And the shareholders that have put money into companies that provide "robots, etc.". All these people, including labor, are stakeholders. If there was 5% GDP growth that got reflected as 5% growth in net earnings for the company, one would expect that all the stakeholders would see roughly a 5% increase in their personal…

They didn't make the rising tide analogy, I read it as how much could be captured by labor if we increased leverage.

In any case, it doesn't follow that wages grow with earnings. Wages have historically been a lagging indicator.

Re: The labor share of income in the US is at its lowest post-war level

#484

Post by 9x39 »

stymaar wrote: post #284
u1hcw9nx wrote: post #180

Earlier quoted context omitted.

Also note: Labor share has declined similarly across OECD countries for several decades. Automation, robots, software etc. they are all capital share.

> Automation, robots, software etc. they are all capital share. I highly doubt automation and robots are a meaningful factor here, but IP and outsourcing have the exact same as automation.

Automation isn't foreign to the topic. There's some discussion here that refrains from estimating too hard, but I think it's closer to outsourcing's effect:

https://www.stlouisfed.org/on-the-economy/2024/jun/worker-sc...

Outsourcing and automation both reduce worker leverage, which reduces wages, which could explain reduced labor share. I'm not sure how one would weight it all.

Re: The labor share of income in the US is at its lowest post-war level

#485

Post by stephenhuey »

ETH_start wrote: post #398
lesam wrote: post #173

Earlier quoted context omitted.

Assuming your labour contribution to these agents is 'minimal': Why would you own them, instead of some well capitalized billionaire? To the extent that you do have capital, why do you assume that your 'minimal direction and guidance' would outcompete a full time specialist working for that billionaire?

Assuming agent costs keep declining exponentially as they have over the last three years, why would everyone not own some agents? It's not like the number of agents is capped and the billionaires hoard all of them. I imagine it would be more like smartphones, where there were only 50 million smartphones after the iPhone was first released in 2007 and now there are something like three billion. They become more access…

I'm hoping it's likely the powerful cannot monopolize agents. If open models are easy to obtain, and every homestead has solar and large batteries, everyone can routinely charge their robots like Seven of Nine plugging into her Borg alcove. As long as they have the right to repair them, and a monopoly can't fleece you with robot maintenance!

Re: The labor share of income in the US is at its lowest post-war level

#486

Post by mschuster91 »

IncreasePosts wrote: post #251
mschuster91 wrote: post #184

Earlier quoted context omitted.

> All the ones I know of use questionable methodology like: "being able to afford a 2 bedroom apartment at median wage". Well, that's (at minimum) what you need to raise a family and replace yourself in the labor pool.

In the 1950s Americans were doing a good job at replacing themselves in the labor pool, and household size was larger and houses were smaller. Why is it impossible for Americans to live with 300 sq ft per person like baby boomers did as kids, but now we must live with 600+ sq ft per person?

> Why is it impossible for Americans to live with 300 sq ft per person like baby boomers did as kids, but now we must live with 600+ sq ft per person?

Because the American suburbia developers want some nice chunky profits. It isn't enough any more to sell glorified matchsticks and cardboard.

Re: The labor share of income in the US is at its lowest post-war level

#487

Post by mschuster91 »

sokoloff wrote: post #227
mschuster91 wrote: post #184

Earlier quoted context omitted.

> All the ones I know of use questionable methodology like: "being able to afford a 2 bedroom apartment at median wage". Well, that's (at minimum) what you need to raise a family and replace yourself in the labor pool.

In addition to that being obviously different from the line to “abject poverty”, it’s not at all obvious that a single median income should be able to support a 4-person family in a 2BR apartment or else the system is completely broken…

> it’s not at all obvious that a single median income should be able to support a 4-person family in a 2BR apartment or else the system is completely broken

Either the Western world allows people the financial and real estate resources to have children in the next 5 years or we're all fucked. The tail end of the boomers enters retirement in 10 years and while millennials can take care of the boomers, eventually we will need to be taken care of, and for that millennials need to have children now as long as we still can.

Re: The labor share of income in the US is at its lowest post-war level

#488

Post by 9x39 »

missedthecue wrote: post #314
rsalus wrote: post #225

Earlier quoted context omitted.

> amount of labor being generated per person has not really changed not true, labor productivity has been steadily increasing: https://fred.stlouisfed.org/series/OPHNFB workers are simply capturing less of the economic value generated by their labor.

Increases in labor productivity is a curious thing to think about. Do I deserve more wages for using AutoCad instead of drafting paper? - The amount I'm working hasn't increased. Still an 8 hour day. - My job honestly is easier than it used to be; certainly less menial. - Strictly speaking, the education requirement is actually lower . It's easier and a lower bar to learn to become a decent designer in AutoCad than t…

Looking at cohorts of workers, automation tools like AutoCad reduce the expertise needed and commodify the job, which reduces leverage and thus per capita wages.

Consider the taxi or unskilled worker examples here:

https://mitsloan.mit.edu/ideas-made-to-matter/a-new-look-how...

All to say, as an individual, individuals rationally try to maximize leverage in a negotiation to capture the increased output. But what happens to classes of workers in different jobs varies. My take is that capital appears to be gaining leverage over wages back from many classes of workers, even if some limited classes of expertise are stable or gaining.

Re: The labor share of income in the US is at its lowest post-war level

#489

Post by CGMthrowaway »

legitster wrote: post #264
CGMthrowaway wrote: post #202

Earlier quoted context omitted.

>the amount of labor being generated per person has not really changed, but the overall pie has grown massively around us I don't see where the article made that claim. Are you making it yourself and can you support it? That sounds like something that would happen when technology improves. What the article does do, is pose a question that it never answers: "When the labor share falls, it means that productivity, pric…

The Fed tracks this: https://fred.stlouisfed.org/graph/?g=tjto Unit cost on labor has increased at a more or less steady pace this whole time. Ergo, it's not so much that labor is decreasing as other things are increasing faster. It's hard to argue that technology is increasing labor productivity an order of magnitude faster than it was in the 50s. It's more likely something else in the dataset (returns on capital/re…

Is "unit cost on labor" the same as "the amount of labor being generated per person"? I don't believe it is, especially so in the context of the article's question which I raised.

Re: The labor share of income in the US is at its lowest post-war level

#490

Post by sokoloff »

mschuster91 wrote: post #487
sokoloff wrote: post #227

Earlier quoted context omitted.

In addition to that being obviously different from the line to “abject poverty”, it’s not at all obvious that a single median income should be able to support a 4-person family in a 2BR apartment or else the system is completely broken…

> it’s not at all obvious that a single median income should be able to support a 4-person family in a 2BR apartment or else the system is completely broken Either the Western world allows people the financial and real estate resources to have children in the next 5 years or we're all fucked. The tail end of the boomers enters retirement in 10 years and while millennials can take care of the boomers, eventually we wi…

Biology requires two people for the system to work.

Economics could as well and the system would still work.

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