Productivity - Pay Gap

What gives?

globalization. most americans are overpaid. flood it with immigrants. and most americans are just as worthless.

in the philippines live in maids cost 3k. for some bizarrre reason the same work in the us is worth 45k.

A lot of this can be explained by higher capital intensity. Workforce is increasingly less of a company’s cost and asset base whether it be tech systems or machinery. So the companies are creating the productivity through investment. The higher role of capital has also deemphasized the bargaining position of the workforce which has become increasingly interchangeable.

So, UBI?


Is this the part in the Sims where the entire city just stops?

you don’t pay someone more because they are more productive, you pay them because you can profit from them. And that’s usually because the market rate is lower than their level of productivity!

Nerdy this is among your worst attempts at making sense.

More productive employees generate more profit, particularly in the manner productivity is measured in economic terms. It’s ridiculous we’re even discussing this. There is an overwhelming body of work demonstrating the obvious association between sustained wage increases and rising productivity.

Did you not see the aforementioned chart? You don’t pay people based on what they produce. You pay them enough just so they won’t quit or what you can pay someone else to do the job. So unless they have a better alternative, you don’t give them shit.

Obviously I saw it and explained clearly in widely accepted economic terms why that is occurring. You’re ignoring half the equation. Productivity goes up but it’s because you paid for your employees to have new equipment (capital), then they don’t get that pay. But to the extent that it’s driven by greater adjusted productivity then yes, pay goes up. And in aggregate, pay rises with productivity. It is well documented. You can twist your panties in a bunch over it, but there’s a pretty compelling body of research backing this up.

Obviously the higher the productivity the higher likelihood of getting paid more since that’s the only time you can. Important to remember correlation is not causation. Also just because you don’t spend on labor does not mean it goes to capital costs. There is something called shareholders profit.

Right, but if you look at shareholder profit over that period as a percent of GDP it is cyclical and range bound. At the same time, the outstanding PPE base used in output gap calculation it’s grown in line with the chart above. That was a well documented period of capital deepening.

I looked into this just now and I’ll share what I found, they appear to support BS’s POV. I can’t confirm if the charts are 100% accurate but they are representative of the trend I saw in comparable charts.

Corporate profits range bound

Capital stock per worker in the U.S.

Labor markets are fairly efficient, in my view. You have a few people arguing about monsopony holding down wages but that’s the exception in most cases and those large companies they cite have emerged pretty recently and are subject to disruption themselves.

Wow that’s an excellent chart. Is that corporate profits margin chart to 2019? I had thought that margins still had not seen a cyclical decline. Also I had thought that the decline in corporate tax would cause a surge in profits as a percent of gdp. Also I’m not sure how capital is defined in this situation but shareholder in a balance sheet would be considered capital as it is a form of equity under retained earnings. also I was not arguing that capital stock per worker had not risen. I was arguing that higher productivity does not lead to higher wages. If we use gdp as a measurement of productivity here is what you get: here is share of labor income as percent of gdp.–politics/why-did-the-us-labor-share-of-income-fall-so-quickly?post=222462

If you want to look at it at a per capita basis per hour. Here are hourly wages, they are stagnant from 50 years ago. Interesting that hourly rates are at its highest right now though! But notice the lack of cyclicality.

Capital in this situation = PPE

GDP is not a measure of productivity. We are discussing a specific economic metric. In shorthand it’s GDP/labor hours, so marveling that labor is a shrinking proportion of GDP while somehow productivity is rising is literally wondering at the marvel of how earnings yield (E/P) can be rising but P/E is falling.

We can keep marveling at charts or simply look at the body of research and the facts of the matter. As I’ve routinely pointed out, you need to account for capital deepening. The real issue is that the pseudo-economic blogosphere loves parroting a single charted metric and discussing half equation with no context,

“Over long periods of time, increases in “real” wages—that is, wages adjusted for changes in consumer prices—reflect increases in labor productivity.”

“In this paper, I first discuss the wage-setting process and the conceptual issues that are of critical importance to any empirical investigation of the link between compensation and productivity. I then highlight some recent evidence suggesting that, contrary to the current narrative in some policy circles, the link between productivity and wages is strong”

The gap between productivity and compensation can be divided into two components: (1) the difference between compensation adjusted by the CPI and by the output deflator, as detailed in the previous section and (2) the change in the labor share of income.7 The labor share of income measures how much revenue is going to workers as opposed to the other components of production—intermediate purchases and capital.8 Using the power generation and supply industry as an illustrative example, chart 4 shows how the overall gap in labor productivity and compensation within an industry can be divided into these two components.

the idea that products get better and cheaper for same price is actually a pretty good point. like buying faster computers, or bigger tv’s at the same price. personally. i think its an unfair wya to reason things out, since obvi shit gets better over time. just like prices are suppose to increase over time. but there is a point to it. but i hate the idea that a low income family today has a better life than a roman emperor. its an unfair comparison.

Mother Jones, but…


^^ I think we need more tax cuts. That’s the only possible explanation for those graphs

LOL at “capital deepening.” More like deepening the pockets of the oligarchs! From Black Swan’s paper:

A full 83 percent of industries studied here had productivity–compensation gaps when the same deflator was used for output and compensation. These gaps came from a declining labor share of income. Sectors with the strongest declines in labor share included manufacturing, information, retail trade, and transportation and warehousing. Although the causes of the decline in labor share are still unclear, focusing on industries may help to isolate and understand the causes unique to each industry.

"If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality." - Stephen Hawking

If I work twice as long, much harder, and much smarter than the avg person, take that extra money I made and invest into productive assets, why do those people who have done the exact same job and produce the exact same result for the last 50 years deserve any of the spoils. They didn’t share any of my risk, why should they share any return? And if I want to take that money and give it to my kids that’s my god damn choice. They should have improved themselves and kept up.

People need to stop using the word “sharing” and calling what they propose what it is, theft. People who want this should move to some shithole country and not try to change a system that produce the most powerful economy and most opportunites in the world.