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Made in us
Battlefield Tourist




MN (Currently in WY)

A simple question, but I am not an economist; so someone please help me out....

If unemployment in the US is low now, why are wages still stagnant? If wages are stagnant, why are we raising interest rates?

Thanks for your help.

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Bryan Ansell





Birmingham, UK

 Easy E wrote:
A simple question, but I am not an economist; so someone please help me out....

If unemployment in the US is low now, why are wages still stagnant? If wages are stagnant, why are we raising interest rates?

Thanks for your help.


Careful, go down this rabbit hole and you'll have the whiff of socialist about you.

Ot though, Inflation has something to do with this.
   
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Last Remaining Whole C'Tan






Pleasant Valley, Iowa

 Easy E wrote:
A simple question, but I am not an economist; so someone please help me out....

If unemployment in the US is low now, why are wages still stagnant? If wages are stagnant, why are we raising interest rates?


I can't answer the question about why wages aren't rising, although I'd like to point out they've been stagnant for a really, really long time - it's seperate from interest rates. I don't know how that would be addressed.

The interest rates were lowered primarily to offset the economic impact of the global financial crisis starting 2007; the purpose was to get more liquidity into the markets. It was never intended to affect wage stagnation - the main role of the Fed as I understand it is to keep unemployment down. As unemployment is now below 4% and the economy is stable, interest rates should return to "normal".

If anyone subsequent to me says anything I posted here is wrong then believe them because my opinion is definitely a lay one.




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On moon miranda.

Short answer? This is broadly a very complex topic that has all sorts of factors, but broadly speaking? Because there is a major imbalance in market power and legal framework between Labor and Capital.

Per worker productivity is at the highest level in human history as a result of increased education and automation, but all the gains have been captured by Capital. Labor has been cut out and effectively commoditized.

When a company rolls out a new ERP system that enables workers to functionally do 3x as much as they used to once trained and experienced on the system, the benefits of that productivity boon go entirely to management/shareholders, while the workers who now have to train and learn and support the new system gain nothing from that and their newfound knowledge and training merely allows them to keep their job (rather than be duffed off as dead weight) as opposed to getting a proportional gain of the now larger pie.

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Fate-Controlling Farseer





Fort Campbell

What is a healthy rate of growth?

https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?panel=1

Per this, it seems to be showing about a 3% right now. My annual growth has averaged around 1.5-2% throughout my working career, so that seems good to me, but maybe I've just spent so long being short changed, that's the norm for me now.

Full Frontal Nerdity 
   
Made in us
Longtime Dakkanaut





Personally I haven't seen a raise in 4 years. Executives in my company have gotten double digit yearly increases.
   
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[DCM]
Secret Squirrel






Leerstetten, Germany

Because Minimum Wage has not grown.
   
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Proud Triarch Praetorian





Becauae the bargaining power of the worker has been slowly stripped away over the past few decades. Because the bosses do not want wages to go up.

Because the RENT is too damn high!
   
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Fixture of Dakka





Part of the problem is the incredible increases in the cost of health insurance. As that cost continues to increase dramatically faster than the overall economy, your employer has to pay more and more to cover their share of your health insurance.

Much of the increase in productivity has gone to cover increases in health insurance expenses, which leaves less for raises even if there was desire to give raises.

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The most correct answer is that it's complicated and realying on a numbet of different factors. The practical answer is that the wage gains have gone to the wealthy. Top 10% have thre quarters the USs wealth, the gap is the worst since the 1920s.

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 NinthMusketeer wrote:
The most correct answer is that it's complicated and realying on a numbet of different factors. The practical answer is that the wage gains have gone to the wealthy. Top 10% have thre quarters the USs wealth, the gap is the worst since the 1920s.


You'll probably notice that those in the 10% provide most of the jobs to the rest of the 90% just because the rich get richer doesn't mean the poor get poorer it depends on your place in the global market. (tis a silly argument as a stand alone statement)

But on the low wage its because of years of a saturated employers market allowing people to hire at slightly lower wages, incremetally without a backlash (because it has been an employers market for so long.) This will probably continue to worsen unless there is a large war, "plague" (antibiotic crisis?) or mass migration of the working class. There are too many people and not enough jobs. Even with the peak in employment it was only social and political pressure that kept the wage as high as they were. Its been an employers market for a while now and the employers have been able to keep dropping the wage (or keep it the same over many years) without the demand for that lower wage dropping.
   
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Humorless Arbite





Maine

I was once complaining about inflation to one of those 1% that get to have an impact on the US economy. They said "open up your wallet, do you see more money? No? Then there is no inflation. Inflation is when consumers have more money." This same person pointed out that as a producer, their wage increases did not drive inflation. They also described how after an injection of money to the people, or banks, that the government would have to "claw that money back". That was in 2006~8. Before the banking crisis, and before the healthcare cost increases.

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 Sasquatch wrote:
 NinthMusketeer wrote:
The most correct answer is that it's complicated and realying on a numbet of different factors. The practical answer is that the wage gains have gone to the wealthy. Top 10% have thre quarters the USs wealth, the gap is the worst since the 1920s.


You'll probably notice that those in the 10% provide most of the jobs to the rest of the 90% just because the rich get richer doesn't mean the poor get poorer it depends on your place in the global market. (tis a silly argument as a stand alone statement)

But on the low wage its because of years of a saturated employers market allowing people to hire at slightly lower wages, incremetally without a backlash (because it has been an employers market for so long.) This will probably continue to worsen unless there is a large war, "plague" (antibiotic crisis?) or mass migration of the working class. There are too many people and not enough jobs. Even with the peak in employment it was only social and political pressure that kept the wage as high as they were. Its been an employers market for a while now and the employers have been able to keep dropping the wage (or keep it the same over many years) without the demand for that lower wage dropping.
Heh, the 'job creators' argument.

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On moon miranda.

 Sasquatch wrote:
 NinthMusketeer wrote:
The most correct answer is that it's complicated and realying on a numbet of different factors. The practical answer is that the wage gains have gone to the wealthy. Top 10% have thre quarters the USs wealth, the gap is the worst since the 1920s.


You'll probably notice that those in the 10% provide most of the jobs to the rest of the 90%
Hrm, such a direct relationship is seldom the case, and a solid 20-35% of the labor pool is publicly or self employed in most western nations, the US among them, while many small business owners provide jobs without making it into the top rungs themselves. Of the rest, its publicly owned entites owning pieces of other publicly owned entities mostly, large organizations each with many actors and interests. Direct "job creator-employee" relationships are the exception.



But on the low wage its because of years of a saturated employers market allowing people to hire at slightly lower wages, incremetally without a backlash (because it has been an employers market for so long.) This will probably continue to worsen unless there is a large war, "plague" (antibiotic crisis?) or mass migration of the working class. There are too many people and not enough jobs.
The jobs are there, unemployment is at record lows. Labor demand however has dramatically more power in the equation than labor supply even given extreme demands. They can outsource, automate, play shennanigans with hours and scheduling, reclassify positions, lay off staff at will and seasonally hire, and datamine local labor market data in ways you could never hope to. More fundentally, most of the time its a classic Big actor vs Small actor negotiation, and that makes it hard for employees to negotiate on even footing, thats the entire concept behind unions and socialized healthcare and the like, to redress a market imbalance inherent to certain sectors.

IRON WITHIN, IRON WITHOUT.

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The correct pronunciation is Imperial Guard and Stormtroopers, "Astra Militarum" and "Tempestus Scions" are something you'll find at Hogwarts.  
   
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British Columbia

It hasn't quite trickled down yet.

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[DCM]
Fireknife Shas'el





Leicester

I can’t comment particularly in the US, but we have the same issue in the UK around wage stagnation and I understand a lot of it comes down to unemployment numbers being a poor measure in the modern world. The quality of the jobs is becoming more important and there is currently no popular measure for that. For example, there is a big issue over here with zero hour contracts, where people are technically “employed”, but aren’t necessarily actually getting much work to do and hence are on very low income. They’re off the government books and because of the cuts to social services (specifically to make being unemployed highly undesirable), they want to avoid losing what work they have, which leaves them trapped in dead-end, menial, work, with few rights and basically no bargaining power.

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Southampton, UK

Essentially, company owners *could* give their workers more money, but that would leave less money for them. You see their dilemma, right?
   
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Regular Dakkanaut





Michael Roberts has an interesting blog that talks about stuff like this and he wrote a blogpost about this issue last year. Summarized he points to the following reasons...

Michael Roberts wrote:
Labour’s share in the capitalist sector in the US and other major capitalist economies is down because of increased technology and ‘capital bias’, from globalisation and cheap labour abroad; from the destruction of trade unions; from the creation of a larger reserve army of labour (unemployed and underemployed); and from ending of work benefits and secured tenure contracts etc.


If you are interested in this question I suggest you read the whole post.

The blog post
   
Made in us
Battlefield Tourist




MN (Currently in WY)

I was spurred to ask this question after reading this article:

https://slate.com/business/2018/06/the-labor-shortage-and-wage-reaction-puzzle-solved-with-one-graph.html


After the Federal Reserve announced on Wednesday that it would again raise interest rates, Chairman Jerome Powell stepped out for his customary press conference and admitted that, just like most of the economics world, he’s not entirely sure why employers aren’t raising wages faster. Unemployment is at lows not seen since the late 1990s, businesses can’t stop complaining about how hard it is to find good people to hire, and nonetheless pay has yet to really take off.

“Everywhere we go we hear about labor shortages. But where’s the wage reaction?“ he said. “So it’s a bit of a puzzle. I wouldn’t say it’s a mystery, but it is a bit of a puzzle.”

*******************

This graph tells a really neat, easy to understand story that makes the whole wage puzzle disappear. The graph uses the Department of Labor’s Employment Cost Index, which controls for the composition of the workforce, essentially tracking whether employers have to pay more in order to hire for the same kinds of jobs over time. Why was pay growth faster at the end of the 1990s (the green dots), even though the unemployment rate now is roughly the same? Because in reality more of the adult population had jobs. Why was pay growth slower a few years ago (shown by the yellow dots)? Because fewer people had jobs. It also suggests that the labor market, despite what the official unemployment rate would suggest, has lots of room for improvement before we have to worry about fast-rising wages fueling out-of-control inflation—which, again, is what the Fed ultimately fears.


The one problem with this graph is that it’s admittedly, well, a little dumb. Or, to put it another way, it’s not the sort of sophisticated analysis that economists typically like. It’s only a simple correlation, two sets of numbers plotted against each other that just happen to march more or less in lockstep, which we all know does not actually prove causation. And there are lots of theoretical reasons to question whether the picture is actually showing us a meaningful pattern, or a coincidence.




I knew I did not know enough about this subject, and wanted a diverse array of information.


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 Sasquatch wrote:
 NinthMusketeer wrote:
The most correct answer is that it's complicated and realying on a numbet of different factors. The practical answer is that the wage gains have gone to the wealthy. Top 10% have thre quarters the USs wealth, the gap is the worst since the 1920s.


You'll probably notice that those in the 10% provide most of the jobs to the rest of the 90% just because the rich get richer doesn't mean the poor get poorer it depends on your place in the global market. (tis a silly argument as a stand alone statement)


Which might make sense if they paid wages out of their own pocket. They don't. They get business loans to start up (at a very favorable rate because they're rich), and after that they pay wages out of what customers pay. NO rich man ever pays wages out of his own pocket except for personal servants like the chauffer, maid, cook, etc.

In short, it's CUSTOMERS who provide those jobs, not the owner. He'll fire everyone in a heartbeat if there's no customers.

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There is only one solution:
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Maybe its to early due to the new tax season and tax policy of Trump INC. All the Corperation (SP) and business are probably math hammering future estimates of profit. Also the the change in some EPA standards. Just throwing it out there

Also anyone else heard the "no more tipping" to waiter/waitress due they're pay like 13 an hour?

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Because people my dads age bought into the lie that unions were evil and threw away the bargaining power their grandparents bled for.

We have short memories. I grew up in a Union home and I know they work because my dad has his pension because of it. Without it he would be screwed and at the mercy of an donkey-cave who dropped a mountain on a bunch of miners and then tricked the families into signing papers that made it so they couldn't sue him.

Now companies can just declare bankruptcy and say feth it if they don't want to negotiate. Hostess, union busting goodness!

God damn is this world depressing.
   
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Resolute Ultramarine Honor Guard






Vancouver, BC

Im in a union. Not the best union, but we get yearly raises and are allowed to take our vacation time, get paid for our overtime, and cant be fired or laid off for no reason.

A lot better than the alternative.

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There’s a bunch of possible reasons why wages aren’t growing, even now. No-one knows exactly why, but I’ll try and give as complete a list as possible of the possible causes. Not listed in order of importance, just in the order I remember them. Some of these might not be having any impact, but all are more likely than not to to be playing some role.

1. Market concentration. Across the economy there’s been a general concentration of employers, with mergers reducing the number of firms in each field. It was expected this would produce inflation as companies with larger market power pushed up prices, that hasn’t happened but what likely has happened instead is companies have used their market power to keep wages down.

2. Market overhang from the GFC. In a perfectly mobile economy the crash in demand in the GFC should have pushed wages down. Instead we saw what is known as wage stickiness, where wages will not drop even when unemployment is high. Because wages didn’t drop then they were higher than they ought to be, meaning there remains little impetus to push them higher now. This argument was stronger a few years ago, and gets weaker each year further we get from the GFC.

3. A reduction in worker rights. A reduction in union positions has played a part, but unions have always been sector specific, and the stagnation of wages is remarkably constant across the economy, not just in areas where unions have declined. But there’s other factors as well, like at-will employment laws and the expansion of non-compete employment contracts that have greatly reduced the ability of a worker to fight for a wage increase.

4. Productivity hasn’t historically produced unemployment because companies have used the greater productivity to produce more, or if they have used it reduce staff those people have been shifted indirectly in to growth sectors of the economy. However, this process has relied on there being a constant expansion of other inputs, more land, more minerals, more energy, so that overall production can keep increasing. The modern world is not increasing its supply of raw materials at the same rate as it has historically, commodities are expanding in price. So where surplus labour has been created it hasn’t been consumed. This theory isn’t ideal as it argues more for unemployment than flat wages, but that can be talked around with a look at participation rather than unemployment. Still, it’s a bit meh but needs to be included because of its likely long term predictive power.

5. It’s possible wages are based more around cultural values than market demand than we realise. There’s a lot of work that’s looked in to how screwy labour markets really are, situations where certain jobs have lots of spare workers and high unemployment, but wages keep rising, and other situations where there’s been an absolute scarcity of workers but no wage growth. It appears wages are to some extent based on human, cultural ideas of what ‘ought’ to be paid, rather than pure market forces. In the last 30 years we’ve hardly seen managers become somehow more scarce or more valuable, but they’ve seen enormous pay increases while workers have barely kept pace with inflation. This is likely because a cultural value that kept some connection between the pay of workers and manager is now falling, and managers feel more morally able to offer workers pay increases that are a fraction of the pay increases they’re taking for themselves.

6. Uncertainty. Companies will expand and accept paying more to each worker to attract a larger workforce because they have some certainty about the economy they’ll be moving in the upcoming decades. But anyone who tells you they know what the next couple of years will bring is an idiot. No-one knows. This isn’t just because of the lunatic in the White House, though that’s one factor. But the medium term future of energy and of manufacturing are up in the air. Even growth sectors like health are hard to act in with any real confidence right now.

Anyway, there’s what I understand as overall the general list of things that are, in some combination, causing the stagnation we see today. If you want my list of surefire solution head to my webpage;

www.ihavenoideaweareprobablyscrewed.com.

This message was edited 1 time. Last update was at 2018/06/26 09:41:24


“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”

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MN (Currently in WY)

1,2,3 sound like Krugman's theories.

2,5, and 6 sound more right leaning.

4 sounds pretty out there as an immediate cause, but as you say may have some predictive power.

Thank you for sharing.

This message was edited 1 time. Last update was at 2018/06/26 18:07:24


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You know, the more I see this thread, the more I think, ‘why aren’t we rising now?

Granted revolutions tend to end up fairly poorly, historically speaking.

But seriously. Enough is enough. Marxist as a I am, there has to be a happy medium between my (ultimately impracticable) ideal and the crap we have to live with now?

   
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Dorset, England

I think this thread needs some positive vibes!

I would suggest that people are getting a better handle on what their work life balance should look like, and are realising that chasing the highest wage isn't necessarily the be all and end all.

Companies are getting on board as well and realising that 'more money' is quite a crude motivational lever to pull. You can attract and retain the best talent more effectivley with things like flexible working hours, working from home, personal development, travel opportunities etc.
   
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See the second quote of my sig.

Road to Renown! It's like classic Path to Glory, but repaired, remastered, expanded! https://www.dakkadakka.com/dakkaforum/posts/list/778170.page

I chose an avatar I feel best represents the quality of my post history.

I try to view Warhammer as more of a toolbox with examples than fully complete games. 
   
 
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