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Income vs. productivity


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2019 Feb 23, 5:04pm   4,342 views  47 comments

by Bd6r   ➕follow (2)   💰tip   ignore  

There was a post on Patnet about income vs. productivity. Something happened in middle 1970's, and they diverged. In short, most of income gains since early Carter times do not go to people who do the actual work. They go to owners of resources.
I was struggling with explanation (what happened in mid-1970's) and I am still not sure. One potential explanation is in this link:

https://www.tbwns.com/2019/02/18/the-bears-lair-ben-bernanke-killed-the-world-economy/#more-1601

The paper,“Low interest rates, market power and productivity growth” by Ernest Liu, Atif Mian and Amir Sufi, examines the behavior of firms in a competitive marketplace as interests decline, and demonstrates that, although lower interest rates at first increase competitiveness through increased investment, they also increase the comparative advantage of large firms, thus after a time discouraging the smaller firms from investing and making the market less competitive.

Small firms lose out competition to large, well-connected ones under low-interest rate environment. Does not explain everything (interest rates were high during early Reagan years), but perhaps they play a role. I would love to hear thoughts of other Patnetters. For record, this income vs productivity gap has increased through both R and D administrations. More regulations?

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1   anonymous   2019 Feb 24, 12:28am  

comment #19 on this thread perhaps ?

https://patrick.net/post/1317700?offset=0#comment-1572549

link for comment #19

Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay - Why It Matters and Why It’s Real

https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/

It wasn't Jimmy Carter....but let's not tell anyone.
2   PeopleUnited   2019 Feb 24, 4:34am  


Supply and demand. In the 60's and seventies more women joined the workforce. Supply and demand is also why the wealthy need legal and illegal immigrants to increase supply of labor and keep wages down.
3   Bd6r   2019 Feb 24, 8:05am  

Kakistocracy says
link for comment #19

Thx, will read through
Kakistocracy says
It wasn't Jimmy Carter....but let's not tell anyone.

I did not say Carter - said happened during his time. Seeds for this must have been planted before him
4   anonymous   2019 Feb 24, 8:58am  

d6rB says
I did not say Carter - said happened during his time


That part was meant for another reader based on a comment that was posted - some people like simple solutions even if they are not right
5   🎂 Tenpoundbass   2019 Feb 24, 9:05am  

Get a Job with more pay and you're OK mother Fuckers.

How about showing the graph where all of your Liberal Billionaire Philanthropists keep their monopoly games rigged so Small business competitors can't compete with them. And the only options Democrat voters have is staying home and on the dole or working a shitty Job, for shitty wages for an even Shittier Liberal fucking scumbag that says through exploiting your sorry useless fucking Ass he's saving the world.

Buffet
Bezos
Schulz
Musk

any of this Ringing a bell to You pathetic Nematodes?
6   FortWayneAsNancyPelosiHaircut   2019 Feb 24, 10:05am  

If you are working hard washing floors, you’ll never make top dollar, every idiot can do that for cheap.

If you change that, society falls apart financially.
7   FortWayneAsNancyPelosiHaircut   2019 Feb 24, 10:08am  

Best income if you can swing it, is stocks. Lower taxes, passive, does not appear on taxes unless you withdraw.
8   PeopleUnited   2019 Feb 24, 10:09am  

FortWayneIndiana says
If you are working hard washing floors, you’ll never make top dollar, every idiot can do that for cheap.

If you change that, society falls apart financially.


It is true. The question is, do we want to live in a world where even an idiot can afford a small house of their own? Or do we want the idiots to live in slums and get Obamacare?
9   FortWayneAsNancyPelosiHaircut   2019 Feb 24, 10:09am  

I always saw America as “little pink houses for you and me”. Now there are rentals everywhere and hella overpriced.

PeopleUnited says
FortWayneIndiana says
If you are working hard washing floors, you’ll never make top dollar, every idiot can do that for cheap.

If you change that, society falls apart financially.


It true. The question is, do we want to live in a world where even an idiot can afford a small house of their own? Or do we want the idiots to live in slums and get Obamacare?
10   PeopleUnited   2019 Feb 26, 6:34am  

How is it that everything Frank Capra tried to warn us about in Jimmy Stewart's It's a wonderful life came true and we are living in Pottersville ?
11   Patrick   2019 Feb 26, 7:19am  

I suspect one would see that the gap between the two lines is filled in nicely by the increase in Chinese median incomes as US executives moved our manufacturing over there to take advantage of crazy low wages, no unions, and no environmental laws.

The workers and companies who were exporting those jobs were very "productive" at increasing corporate profits at the expense of our working class.
12   CBOEtrader   2019 Feb 26, 7:29am  

Patrick says
I suspect one would see that the gap between the two lines is filled in nicely by the increase in Chinese median incomes as US executives moved our manufacturing over there to take advantage of crazy low wages, no unions, and no environmental laws.

The workers and companies who were exporting those jobs were very "productive" at increasing corporate profits at the expense of our working class.


https://history.state.gov/milestones/1969-1976/nixon-shock

No coincidence this happened in 1972, right when the divergence began?
13   Shaman   2019 Feb 26, 7:50am  

Technology and automation are the most likely culprits. Every advance in tech has made things easier to organize and produce and eliminated drudge jobs.
14   Bd6r   2019 Feb 26, 7:50am  

CBOEtrader says
No coincidence this happened in 1972, right when the divergence began?

Thx, nice thought and this sounds right.
Patrick says
I suspect one would see that the gap between the two lines is filled in nicely by the increase in Chinese median incomes as US executives moved our manufacturing over there to take advantage of crazy low wages, no unions, and no environmental laws.

Must have been other place than China as industries started moving to China only in late 80's. But the idea is perhaps correct - and may be the underlying cause is one referenced by @CBOEtrader.
15   Bd6r   2019 Feb 26, 7:51am  

Quigley says
Every advance in tech has made things easier to organize and produce and eliminated drudge jobs.

May be, but until 70's increase of automation did not cause this divergence.
16   Shaman   2019 Feb 26, 8:24am  

Computers made a huge difference in organizing data and thus made tons of office workers obsolete. A couple of guys working punch cards replaced a roomful of clerks. And every advance made this difference more stark. I think computers have been the most disruptive technology we’ve seen so far, and eliminated the most jobs.
However, they’ve made so many things possible that were impossible before, they’ve created more jobs than they eliminated.
Turns out people can want/need things they never had before. Like a Facebook account, or cloud storage for their digital photos. Or a video game machine with games to go with it. The list is endless.

But workers can get more done these days with a few directed button pushes than ever before. Thus, productivity increases, but the constant elimination of jobs means there are still plenty of workers left to compete for wages.

What we don’t want is to make this problem worse with uncontrolled immigration or programs that replace all our college grads with workers from India.
Trump is working on the problem.
Meanwhile, tech marches on.
17   Heraclitusstudent   2019 Feb 26, 9:54am  

d6rB says
Something happened in middle 1970's, and they diverged.
d6rB says
I was struggling with explanation (what happened in mid-1970's) and I am still not sure.


Seriously?? Isn't that obvious?

Globalization started :
- offshoring.
- Competition with low wages workers abroad.
- winner take all worldwide dynamic.
- Coupled with massive immigration of low wages workers.
- All this labor supply nailed wages in the US to the floor....
- ... which put huge downward pressure on interest rates ever since.
- ... while finance made up the rest of the end demand growth. i.e. debts started exploding.
- inequalities started soaring.
- Housing prices started to go on a rampage
- etc...

All of the above linked in the same policy package.
The short history of the past 40 years in a nutshell.
And it felt good at the beginning, but we are now seeing the price being paid.
18   HeadSet   2019 Feb 26, 9:57am  

What we don’t want is to make this problem worse with uncontrolled immigration or programs that replace all our college grads with workers from India.
Trump is working on the problem.


+1000
19   anonymous   2019 Feb 26, 10:02am  

What we don’t want is to make this problem worse with uncontrolled immigration or programs that replace all our college grads with workers from India.

Trump is working on the problem.

---------------------------------------------------------------------------------------------------------------------------
Thread https://patrick.net/post/1222697?offset=0#comment-1573385

Comment # 1

Telemigrants are coming for your white-collar job, and a wall won’t stop them, workers stay in their country and telecommute to jobs in the U.S. and earn far less than an American.
20   anonymous   2019 Feb 26, 10:05am  

What kind of wall is Trump going to build to prevent international telecommuting including replacing coders in the U.S. ?
21   anonymous   2019 Feb 26, 10:07am  

Quigley says
plenty of workers left to compete for wages


That translates to we can offer whatever shitty wages and benefits we want because what one person does not take, someone else will and be happy they got the position.
22   anonymous   2019 Feb 26, 10:09am  

Quigley says
Turns out people can want/need things they never had before


They didn't need them before and they still don't need them but peer envy greases the skids so people buy things they think the need.
23   Heraclitusstudent   2019 Feb 26, 10:19am  

Kakistocracy says
What kind of wall is Trump going to build to prevent international telecommuting including replacing coders in the U.S. ?


The Trump solution is obviously tariffs. It's built, even partially, outside the US: pay up.

But leaving the Trump aside, the problem is obviously there: You can import programmers, you can have remote workers abroad, or you can compete with companies in India: it's all the same. And there is no good solution. You can't fully disengage from the rest of the world because you want US productions to sell abroad. Without it, the US will sooner or later be left behind. It sucks but you want that competition.

What you really don't want on the other hand is on 1 side this competition and the other foreign companies stealing your technology by forced transfer or hacking. Because then you have nothing left.
24   AD   2019 Feb 26, 11:00am  

Patrick says
I suspect one would see that the gap between the two lines is filled in nicely by the increase in Chinese median incomes as US executives moved our manufacturing over there to take advantage of crazy low wages, no unions, and no environmental laws.

The workers and companies who were exporting those jobs were very "productive" at increasing corporate profits at the expense of our working class.


I agree. The rate of output likely remained the same, but the rate of input decreased since it is a lot cheaper to produce in China, India, Mexico and other countries that marginalize safety and environment standards, as well as pay 3rd world hourly rates. Globalization is viewed by its corporate supporters as a reason to offer minimal salary raises in the USA since they view consumer prices (i.e., goods sold at Walmart) as not increasing more than 2% a year.
25   MisdemeanorRebel   2019 Feb 26, 11:05am  

Kakistocracy says
Telemigrants are coming for your white-collar job, and a wall won’t stop them, workers stay in their country and telecommute to jobs in the U.S. and earn far less than an American.


Then, when you sue them for non-performance, the Indian Judge rules in their favor after a bribe.
26   Bd6r   2019 Feb 26, 11:06am  

What everyone here is saying that outsourcing began in 1970's? It was my understanding that it started on a large scale only in mid to late 80's.
27   Heraclitusstudent   2019 Feb 26, 11:10am  

The divergence really becomes tangible after 1980.
Reagan!
28   Heraclitusstudent   2019 Feb 26, 11:15am  

The part of globalization that really hurt Americans workers is not just that they were made to compete with poor people, it is that the managers of this country took American technologies, know-how, factories, etc... and sent all of it to foreign countries, then put American workers in competition with thus equipped low wage workers.

This was hardly specialization in the Adam Smith wealth of nation sense.
29   MisdemeanorRebel   2019 Feb 26, 11:30am  

Heraclitusstudent says
The part of globalization that really hurt Americans workers is not just that they were made to compete with poor people, it is that the managers of this country took American technologies, know-how, factories, etc... and sent all of it to foreign countries, then put American workers in competition with thus equipped low wage workers.


In order to pump up Asian Countries against communism, we allowed Japan, South Korea, Malaysia, Thailand, etc. to export with minimal tariffs, while tariffing US imports.

Once business got a taste, they loved it. When the Wall fell, they pushed MFN with China and similar deals to be made with Vietnam, India, etc.

On the other side of things, we imported 10s of millions of unskilled workers where the male is working off the books while the female and children are 110% on welfare.

We should have 30-50M fewer people in the USA. 20% of the country is now foreign born.
30   anonymous   2019 Feb 26, 12:20pm  

MisterLearnToCode says
20% of the country is now foreign born


Any idea what those statistics come out to on % basis say from 1890 to about 1920 ?

Wonder how many would be here commenting if millions of unskilled workers were not allowed in during that period

.MisterLearnToCode says
10s of millions of unskilled workers where the male is working off the books while the female and children are 110% on welfare.


Anything to back up that 10s of millions allegation ?

Something released in the last 12 months or so covering a reasonable period of time that shows the male is working "off the books" while the rest of the family is on the dole.

What about poor native born - all races ?

And what about the employers of all those 10 of millions - who might they be ?

Come, come comrade. This proof, share. Have drink of vodka, loosen toungue
31   MisdemeanorRebel   2019 Feb 26, 12:52pm  

Kakistocracy says
Wonder how many would be here commenting if millions of unskilled workers were not allowed in during that period


No welfare back then, you worked or you died.

No Somalian Refugees on welfare for 20-25 years.
32   MisdemeanorRebel   2019 Feb 26, 12:53pm  

Kakistocracy says
Something released in the last 12 months or so covering a reasonable period of time that shows the male is working "off the books" while the rest of the family is on the dole.


Let the census ask the citizenship question and we'll know for sure.

Meanwhile, go hang out at a 7-11 or Home Depot and count the men working off the books with wedding rings.

Kakistocracy says
What about poor native born - all races ?


Lowered wages due to a Business/SJW deliberate glut of unskilled barbarians from the third world.
33   anonymous   2019 Feb 26, 1:01pm  

MisterLearnToCode says
Meanwhile, go hang out at a 7-11 or Home Depot and count the men working off the books with wedding rings.


That seems to have been left behind when I left California. Not seeing any of that around here - ever - not one single time since 2014

Technical note - if someone is standing around - they are not working unless employees from a State Department of Transportation are involved.

Those people can stand around all day and do nothing and we all get to pay for it.

Isn't that great and sometimes there is a one active worker to 5 idle standers ratio as well - that is on the days when something actually gets done.

MisterLearnToCode says
Lowered wages due to a Business/SJW deliberate glut of unskilled barbarians from the third world.


Funny - those same concerns were around during the great migration of Europeans, Scandinavians, Irish, Slavs etc. around the time period I reference above.
34   AD   2019 Feb 26, 1:23pm  

Kakistocracy says
Funny - those same concerns were around during the great migration of Europeans, Scandinavians, Irish, Slavs etc. around the time period I reference above.


You can't compare that to today since the conditions are a lot different. I am not sure if you foreign trolls (i.e., Moscow, Tel Aviv, Beijing, Tehran, Berlin, etc.) know this but rather contribute to the fallacy because it promotes your anti-American agenda.

First, there are the social costs (i.e., medicaid spending, public school spending, infrastructure, etc.) today that were not around back then. I posted about the Medicaid usage rate of Hispanics in California, and Arizona based on the Kaiser Family Foundation website.

Second, there was a need for immigration more back then compared to now. Think about the debt and tax revenue trends in California, particularly the influx of net-takers compared to the costs for pensions and salaries of Californian government employees (i.e., school teachers, social workers, police, etc.). Those current trends nowhere existed in the past when there was a major influx of European immigrants.

Third, there is more of a cultural domination of one group (i.e, spanish speaking) compared to more of a melting pot and diverse mix back to the period you are referencing. Examine the education pursuits and ambitions of today's group to the past's group, for example. Or examine the living conditions or standard of living as well.
35   Shaman   2019 Feb 26, 1:32pm  

Kakistocracy says
They didn't need them before and they still don't need them but peer envy greases the skids so people buy things they think the need.


I never had a cellphone until I was 22. Back then it couldn’t do that much either. Just talk, cuz I hadn’t paid for texting service.
But I’m not sure I want to navigate this world without a smartphone anymore. Things have become so complicated, a tool like this seems necessary to keep track of everything that’s going on. But if you think that my desire to have a smart phone is just a function of peer envy, why don’t you give up yours permanently?
36   Shaman   2019 Feb 26, 1:34pm  

Kakistocracy says
That translates to we can offer whatever shitty wages and benefits we want because what one person does not take, someone else will and be happy they got the position.


I’m glad you were following along.
37   Shaman   2019 Feb 26, 1:40pm  

If we have to have more immigration, how about we import more Asian people? As an ethnic group they have the lowest crime rate, the highest IQ, the most educated population, and one of the hardest work ethics. They’re responsible for much of the science and tech advancement in the past couple of decades, and have been having a positive impact on America since they arrived.
It’s hard to imagine a more ideal bunch of people to help grow America.

Tell me again why we want poor,violent, uneducated Central Americans?
38   Heraclitusstudent   2019 Feb 26, 2:06pm  

Maybe smart enough people don't want to come anymore. You take what you can.
39   anonymous   2019 Feb 26, 2:07pm  

Quigley says
But if you think that my desire to have a smart phone is just a function of peer envy, why don’t you give up yours permanently?


Mine went away on 1 February 2009 - permanently and I have never missed it one iota. That was the day my retirement became official and I no longer had to answer stupid bullshit calls from anyone in the company.

Have never sent a text, got one once and could not figure out how to answer since I never used text. Not interested to learn how.

Take a good hard look around on the next excursion to the mall, grocery, airport - what have you. Mindless clueless people with their faces buried in little screens oblivious to the world around them. And for what ? Some meaningless drivel that could easily wait especially when they are driving.

If someone wants to talk to me bad enough - I have a landline, several email accounts and of course their is old fashioned mail. I like old fashioned mail - means someone took some time and thought and actually gives a shit.

There is absolutely nothing in my life that requires me to pack around a phone 24 x 7 - nothing.

If I miss something, my loss and most likely I wasn't going to interested anyway.

Someone dies and someone else thinks I need to know - that's nice but my knowledge of the event is not bringing that person back to life.

Same for other "emergencies". Nice to know information - can I change what as happened - no.
40   Shaman   2019 Feb 26, 3:30pm  

Kakistocracy says
Mindless clueless people with their faces buried in little screens oblivious to the world around them.


And burying your face in a somewhat larger screen at home all the time is somehow better? You must be on your computer quite a bit to be this responsive. Unless it truly is your job to shill for the Leftist oligarchs...

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