Economically illiterate soul here...

Economically illiterate soul here. Why have wages in the West been stagnating for the past 40 years whilst labour productivity has been increasing steadily? No, this is not homework. I am genuinely confused since I do not want to a priori blame evil capitalist employers.

Other urls found in this thread:

research.stlouisfed.org/fred2/series/LES1252881600Q
youtube.com/watch?v=PkWWMOzNNrQ
cepr.net/documents/publications/0702_productivity.pdf
marxisthumanistinitiative.org/miscellaneous/are-corporations-really-hogging-workers-wages.html
law2.wlu.edu/powellarchives/page.asp?pageid=1251
youtube.com/watch?v=fHm7P4TA97U
en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century
twitter.com/NSFWRedditVideo

This is not very well understood. A lot of weird things happened in the 70's, we had the oil shocks that still have underlying effects and the US stopped exchanging dollars for gold.

Neo-classicals would say that it has to do with the movement of capital overseas due to globalisation, the idea being that the labour market is expanding and there is more choice for employers so labour has lost bargaining power and continues to do so as globalization continues.

Some post-Keynesian would say it relates to a fundamental financial instability in capitalism. Steve Keen presented a model that suggests that as debt servicing costs in the private sector rise faster than profit to keep the rate of profit from taking a dip wages for workers has to fall. This is a theoretical conclusion however and not an empirical one.

If you cut up the data in a really fine way as Dean Baker from CEPR does you find that the rate capital had to be replaced in industry has been increasing ever since the 70's and you more or less see the wage share of profit constant(or only slightly decreasing iirc). This he suggests is due to the rise of information technologies who have to be replaced routinely. He coined the phrase "nobody eats depreciation" as a rejoinder to people who say it's class struggle.

Many others have taken a stab at it too, suggesting that a lot of the rise in GDP figures was due to bloated services which weren't actually part of the production sector like finance but I think that's a rather obscure if not confused explanation(since aggregate income is equal to aggregate expenditure, why would finance gains not have a wage component and thus also be represented in that section of the graph).

Either way I don't any single one explanation accounts for it all.

research.stlouisfed.org/fred2/series/LES1252881600Q

Well the answer basically is evil capitalist employers, and unlike what the other user said, it is well understood.

youtube.com/watch?v=PkWWMOzNNrQ

This video series will explain it.

I forgot one more thing, there are good arguments for the fact that it is due to class struggle. There is empirical evidence that lets us know that wages are related to union participation. There was basically a war against labour unions in the united states since the 70's. One important law relates to how workers are affected by union activity, it stipulates that all relevant workers whether they are a part of the union or not share in the victories of the union. This effectively means the death of class solidarity by exacerbating the bystander effect, union participation fell steeply since.

Right, and your explanation isn't ideological at all right?

Besides marxists don't agree about this. Andrew Kliman falls in with Dean Baker on the issue so no it's not uncontroversial.

>There was basically a war against labour unions in the united states since the 70's.
Long before that, the war has been around since forever. It's so ingrained in US history that it's amazing we don't talk about it more (actually not when you know how the propaganda operates).

Relax autismo, I agree with you.

Sorry, habitually confrontational online. So what is it that you agree with? I personally find the issue to be very difficult to get to the bottom of.

My gut says it has to do with the weakening of unions in America and the loss of the free market force of collective bargaining. But I may be wrong.

Thanks user. Let's see if I understand this:

>neo-classical explanation
labour was/is cheaper in developing countries, therefore it is rational to choose cheaper labour. Conclusion: evil capitalist employer.

>post-Keynesian
basically squeeze the wages in order for profit to exist. Evil capitalist employers.

>capital replacement cost
productivity is growing due to rapid expansion of information technologies but the wage share is constant? But aren't profits increasing?

>GDP rise due to service sector
I don't get this one. What is the correlation between GDP and productivity? So, if productivity in service sectors grew, so does GDP? But how do wages fit in?

>decline of unions
this makes sense, but it's also evil capitalist employers.

>>neo-classical explanation
>Conclusion: evil capitalist employer.
Oh well, not really since they hold that wages are increasing outside of the US due to this. Should say conclusion: beauty of free market enterprise.
>post-Keynesian
Less evil and more systematic necessity, that is it's a desperate move to stave off recession. Interesting thing is the longer you stave it off the worse it will be.
>capital replacement cost
Yes. I'm not sure that profits are increasing however, I don't think that's necessitated by output increasing if all your competitors have access to this technology. I don't really know about that point so I'll just share the position I'm summarizing: cepr.net/documents/publications/0702_productivity.pdf
marxisthumanistinitiative.org/miscellaneous/are-corporations-really-hogging-workers-wages.html
>GDP rise due to service sector
That was meant to be finance sector. This doesn't make sense to me either but I mention it because I've heard people say it.

GDP is aggregate expenditure, a measure of productivity but if you're counting interest payments for instance that's sort of a double counting because nothing is being produce and thus it shouldn't be part of GDP - or so that argument would begin.
>decline of unions
>evil capitalist employers
Yeah, big time: law2.wlu.edu/powellarchives/page.asp?pageid=1251

Thanks again. I'll read the texts you've provided.

>they hold that wages are increasing outside of the US due to this
But won't wages fall there too? I mean sooner or later you run out of cheap whatever it is: labour, land etc. What happens then according to neo-classicals?

Ok, now I understand what you mean by the GDP-finance sector issue but like you said it's obscure in how it defines what counts as "productive".

>please do not start threads about events taking place less than 25 years ago

I actually think they are right about what they count as productive. Finance is really by definition not productive. But it's just that even if you add this unproductive component onto measuring GDP the finance sector still pays its employees so an increase in overall total productivity because of this would correspond with an increase in wages so it should have no effect on what we are trying to explain.

>Won't wages fall there too?
Wages will equilibrate overall between nations in the long run, workers overseas are at a relatively stronger bargaining position compared to domestic workers right now - the limit being they can force employers to pay them however much employers would have to pay other workers in other countries.

One reason that this doesn't really seem to be happening is that the goods they produce aren't really being sold to them so they don't really need to get a fair share of the profit(to buy back their own produce) as would be happening in the west. This makes the fight for wages harder for them than the logic suggests for a worker base that is also the consumption base but not impossible. The biggest problem here might just be education though, if you're able to educate a nation more corporations will be interested in their labour and so the worker will have more choice and thus more bargaining power. These developments would be connected and directed towards general equilibrium.

Firms have been concentrating their market share while lowering labor costs through offshoring and tax inversions.

Essentially, the firms are outplaying the worker.

There's an issue not mentioned here.

The cost of capital has fallen quicker than the cost of labor.

Firms with market power are much more likely to take advantage of lower capital costs, than workers are.

Think how much harder it is for you to get a home loan than a firm is to get a loan of an equal ratio.
I have $100 and get a $1000 loan at 3% annual.
Firms have $1000 and get loans of $10,000 at 2%.

What does this mean?
Firms can move capital overseas for cheaper (because labor overseas is cheaper than even the movement cost) than they can keep investing in America with higher wage labor.

For example, look at China in 2016.
China is able to provide foreign companies with capital loans of 2% because of China's financial repression.
China also has lower wages, yet relative to productivity and currency value it is actually worse for production than even Japan and especially ASEAN/South Asia.

Why don't firms race from China like they did from America 1950-2010?
Because of this low capital cost in China outweighing the higher labor cost.

In America a similar financial repression (arguable) has happened since 1950. Why? Because of the US's reserve currency status. Savings flow to America making the dollar artificially strong relative to other nations.
This leads to cheap capital in America as well, but the difference between us and China is the much higher labor costs in America.
Only in the last couple years or so has this offshoring process slowed.

Finally, since 2010 REAL WEEKLY wages have actually increased at the fastest rate sice the 60's. This is because of a once-in-a-lifetime falling energy/food prices, and because of fewer hours worked in the average workweek.

>Firms with market power are much more likely to take advantage of lower capital costs, than workers are.
workers can't take advantage of capital you idiot

You see comrade, the capigalists are wringing out every cent of the worker while paying him less and less, revolution soon tovarishch.

>past 40 years
>less than 25 years ago

inflation, taxes, welfare state, importing cheap labor

>inflation
Most certainly not. These figures are real so inflation adjusted and of course different types of goods will have different inflation rates but that's a pretty meaningless explanation then. You need a more systematic explanation than just the word 'inflation'.
>Taxes
Has an effect on wealth distribution not income distribution.
>Welfare state
Wage share is related to transfer payments how?

Demographics, computers, the decline of low education high pay jobs

Automation and globalization. Workers nowadays produce very little directly and are mostly just responsible for overhead. It's all robots and Chinese people who actually build our computers and TV's.

> Wages
> Stagnating

I don't get it

In the real world people can afford more and more stuff compared to 40 years ago

Don't tell the liberals that. Only healthcare and education has gotten more expensive over time.

'More' stuff doesn't always include important stuff. Houses and real estate for example are much more expensive to acquire than they were just a couple decades ago and require much more time to actually pay off. Our ability to make big purchases has decreased substantially in Western countries.

women- letting them be wagecucks doubles the workforce and suppresses the wages out of sheer bulk that it makes one paycheck families fiscally assassinated.
third worlders- both as immigrants and their own nations due to the comparative advantage of free trade
technology- this has been covered already

But it's an observable effect outside of the US too in countries with comparatively strong unions. France is probably the most extreme example, where unions have essentially shut thousands out of the labor market and have created a permanent underclass of unemployed people. Despite this, wages to productivity have similarly barely budged adjusted to inflation.

It depends how you measure the he cost of real estate. We buy bigger and fancier than we did in the 70s, so the average purchase size had increased. If you compare new houses with an apples to apples comparison the cost has decreased.

>in the real world people can afford more and more stuff compared to 40 years ago.

That's just not true. Housing, education, and other big ticket items are the most expensive they've ever been.

>using the term "wagecucks"
>expecting your silly, fact-less argument to be taken seriously

gtfo. Or find me one real economist who thinks that women in the work force are the reason wages are stagnant.

but you can't buy shit in full anymore like in the 70s, you need the bankers and middlemen now and they each thumb the scale.

>literally debating supply and demand
liblub pls

Stop complaining and get back to work you entitled faggot.

Because no one wants to live in $50k houses anymore.

But even so, the costs still amount to much more than in past decades. And really, a lot of this can be explained just through supply and demand. The huge suburbs that sprung up after WWII were mass produced in a way that drove down the cost so that the average worker didn't even need credit to buy them. Now, there's barely any building going on anymore while the population continues to rise, meaning the demand has begun to outpace the supply that can reasonably meet it.

You're simply not able to afford a house after 5 years of work like your parents were able to anymore.
Maybe because 50k houses used to cost 5k?

they aren't 50k anymore since that is how inflation works.

And the women who now have more purchasing power?

after they get it taxed and have to pay some strangers to raise their kids for them they are not better off you materialist stooge.

Let's make it clear that all numerical comparisons in threads like these are I inflation adjusted numbers. The house that your grandparents parents purchased for twice their yearly income is not equivalent to modern housing that costs ten times that.

Economy is a complex beast.

You can't really expect people on any generic site to give you an accurate answer. At best we'll reach a close enough approximation, that would still be considered inadequete in any economic theatres.

With all the programs that are conditional, and that hey can choose to take advantage of, given that they meet conditions?

Or I suppose you mean the ones that won't work; which women as a group in contemporary democracy have more power than anyone in lobbying to change.

I should add, that they have more capacity to change more thoughtfully, as well. Their participation in the workforce requires many them to be educated.

working women is bad for the children as you default them getting raised by insitutions and you wonder why people have gotten shittier with passing generations. Women in the family are untaxable, that's why liberals don't like stay at home wives, that and they are the only segment of women that does not vote democrat as much.

all those are a waste of childbearing years the west is a demographic dystopia with its below replacement birth rates. Not only that delayed childbirth should be given shit about just as smoking is, it runs up society's health bill in preventable abortions, fertility drugs,greater proneness to birth defects, etc

>In the real world people can afford more and more stuff compared to 40 years ago

It's not lattes and smartphones that are making people bankrupt. It's food, housing, healthcare and education that eats almost 75 percent of the average American's income.

Kek.

So why did real wages stagnate between 1960 and 1990?

>This effectively means the death of class solidarity by exacerbating the bystander effect, union participation fell steeply since.

Except Nordic countries have sky high unionization rates and nobody is ever forced to be part of one. The unions even negotiate the minimum wages instead of being set by the state.

I don't know about Nordic countries, but in Germany which has the same setup, you have people working for very low income pay in factories in East Germany because Unions are effectively state owned. The current German state is obsessed with a neo-liberal market driven economy that has resulted in record economic growth, but little payoff for the workers.

and importing illiterates that will be working for 1 euro wages is going to inflame it

All part of the plan goy

youtube.com/watch?v=fHm7P4TA97U

this explains the contrary to your image. In the description, a link is provided with the essay and source data to back it up.

Anything under %350 has decreased in price if you adjust for inflation. This means housing has gotten cheaper.

A dollar in 1978 is worth $3.67 today.

I said that backwards. A dollar today is worth $3.67 in 1978.

The boost in productivity can be explained by advances in IT. It's been shown that a computer networked economy and computerized production systems are way more efficient and labor saving than older forms of production.

The stagnant wages? There's probably a lot going on here, but I favor the interpretation that most of the surplus value is being captured by capitalists, who leverage their bargaining power against over abundant labor due to population growth and other factors.

You raise wages to retain skilled employees. But when the only parts of the economy besides high finance and high tech that are growing is unskilled labor, retail and services, you don't have to raise wages. In fact, you can have a race to the bottom, lay off your workforce and hire reserve unemployed to replace them at lower pay.

In other words, classical Marxist analysis of late-stage capitalism's cannabalistic tendencies.

And it uses women and third worlders in its race to the bottom. The workers bid against each other by design. Immigrants and women in the workforce are how it manifests.

Immigrants dont want to work for less. They influence the data because they tend to have fewer skills than natives and often can't ask for the same wage as a native. This changes within a generation and the second generation out earns natives.

They pick oranges for pennies because they can do nothing else.

The whys matter less than the outcomes. The Irish at least kept the average stable, inviting in hordes of illiterates just creates an imported serf caste for multinationalists.

>1euro

oficially 0.80 has been proposed.

Until their kids grow up and are more successful on average than natives. If you want hire wages perform better than the kids of those who came from nothing.

No the ability to earn dies reduce to the ability to learn and all the equator ancestries will regress to the biological mean (

Well, the simplest and most obviuos answer is because all the money is going into the hands of the already rich. They control the means of production so they take the money from the workers when they can. There hasn't been a significant political backlash against this trend for quite awhile.

These.

See also: en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century

"The book's central thesis is that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability. Piketty proposes a global system of progressive wealth taxes to help reduce inequality and avoid the vast majority of wealth coming under the control of a tiny minority."

In the absence of great power wars or other destabilizing event, capital concentrates in the hands of a tiny minority. Having a billion makes it much easier to make another billion. Having 20 billion means you can sit on your money and earn another billion.

Add in globalization and what you have is a really huge imbalance between workers and employers.

Wages have actually fallen more than the graphs suggest because today's workers are far more educated. If you compare wages for college grads across the decades it's pretty depressing. All earnings as a whole for the young are actually declining. Boomers have locked in high wages, but new teachers and new auto workers actually make much less than their older co-workers due to new contracts.

We're looking at a future in America where 1/5th and then 1/4th of the population will be pensioners, but the generation supporting them is earning 15-30% less than they did.

The super rich will keep technological development going though, so we can at least expect some sort of cool cyberpunk dystopia.

Also, mass immigration in every developed country.

About 5% of the American population were immigrants in 1970. Today it is over 15%, higher than at any point in US history. We even eclipsed the migration boom years of the early 1900s.

By 2040 1 in 5 Americans will be foreign born and half the population will be either immigrants or the children of immigrants.

Current population is 320 million. Without changes in immigration policy during the 1970s the population would be around 260 million. Adding 60 million people to the labor force is going to effect wages. It will also effect the government's ability to invest because immigrants to the US tend to be low skilled and as a whole take more in benefits than they contribute to the welfare state.

Housing prices, particularly in big cities have been hugely inflated by immigration. Current policy is great for employers though.

What about the wages in the service sector? Did those rise the past years?

Oh by the way US labor productivity might have increased but if that it is due to investment into fixed assets there is no real reason for wages to increase.

>thinking a subject deeply tied to politics and its consequences won't be filled with ideology

Weird how Trump of all people wants to built a wall, if anything republicans would want everyone to emigrate to the US.

In fact, more productivity can actually reduce wages.

Searchable databases and automation mean that you need far fewer lawyers to prepare big cases.

Firms respond by cutting staff. People keep going to law school because universities straight up lie about their career stats and people think "lawyer = good job." There are now more lawyers for fewer jobs. Wages go to shit.

Happens in every field. Writing and editing are more and more uberized. Social science research think tanks can now rely on a steady year round cadre of unpaid interns to help fill out their staff.

A friend of mine spent 14 months doing unpaid intern work in animation while working a second job before getting a job offer. Job doesn't pay well because there are tons of artists looking for work.

Well, first Tump is not your average Republican.

It's a mixed bag for the GOP.

Their white working class base doesn't like the competition, and they still need votes to keep power.

Also, if immigrants are able to vote in more benefits and higher taxes for themselves, it makes the elite worse off.

The GOP and Dems basically struck a deal where illegal immigration was unaddressed for two decades. Millions came during that time period. Owners got low wage workers, the Dems knew it would become impossible to expel the migrants once enough came (plus all of their kids are automatically citizens).

Now Dems can use race politics to gain power. The GOP is finally realizing they could lose Texas due to their past choices, and wants to keep the immigrants in the country, but deny them voting rights so as to not upset their electoral prospects.

>, if anything republicans would want everyone to emigrate to the US.

You're making the mistake of thinking the GOP is still the pro-business party. It's not anymore, at all. It has fully transformed into the nativist/populist party.

TFW you come from a civilized country with strong labor unions.

Feelsgoodman.jpg

>tfw third year law student

What does the Austrian School day? Is it le big government and the cycle of interventionism?

>tfw double major in history and philosophy
>after 18 months of unemployment and endless hours of coaching, business incubators, schnellkurs of programming I have broken and retraining to be a caregiver

Except for the fact that every candidate wants to drop taxes preferentially for the rich. Nativist political agendas are just a means of placating the masses such that they don't desire to take the wealth back.

>We're looking at a future in America where 1/5th and then 1/4th of the population will be pensioners, but the generation supporting them is earning 15-30% less than they did.
This wouldn't be a problem if we had scrapped social security and replaced it with a defined-contribution program.

I'm not a retarded marxist using fucking marxist words.

Capital can be used by workers and firms alike.

$100 of spare money is capital.

More stuff != stuff in high demand (AKA what we need the most)

French average weekly wages have barely budged because french are working less.

Why are Americans such cucks?

>both of their current presidential candidates are shills for the 1%

lmao.

And those are not the things we need the most.

Trump != Republican elite

Democrat voters are blinded by racebait

Republican voters are simply retarded

Drumpf is a traitor to his class.

Or he's just full of shit. Which is already suggested by his campaign, which he supposedly funded out of his pocket with is alleged lodesamone, being in notable debt.

Because the greedy capitalists have appropriated surplus value that labor creates.

Nothing I said is wrong by your account. I claimed it exacerbates the situation, it would do so by making it possible to shirk. This is a statement about opening the gates for such a development and not a statement of cause, europe and america have vastly different cultures and us industry is a much more powerful beast.

I don't know, never bothered with them.