Re-coupling Productivity and Wages: A Post-Election Bleg for the Hive Mind
Over at TPM, Josh Marshall has written what I believe to be by far the best — and for Democratic strategists, the most challenging — post-election analysis I have seen to date.
According to Marshall, those Monday morning armchair quarterbacks from the left who are questioning why the Dems did not run on their record are largely missing the point. As Republicans and some Democrats have already correctly guessed, a rebounding and/or strong overall economy means little in an election if the vast preponderance of voters aren’t feeling its benefits. But Marshall goes one step further and pokes a hole in the second most popular shoulda-woulda-coulda, that the election might have somehow gone differently had the Donkeys run on inequality.
Democrats have toyed (and I use that term advisedly) with the issue of rising inequality for the last two elections. But let me suggest that as a political matter inequality is a loser… Fundamentally, most people don’t care particularly how astronomically wealthy people are living their lives. It is a distant reality on many levels. They care a great deal about their own economic circumstances. And if you are not doing any better than you were 5 years ago or a decade ago or – at least in the sense of the hypothetical median wage earner – 40 years ago, that’s going to really have your attention and shape a great deal of your worldview and political outlook.
Instead, counters Marshall, Democrats should focus on policies designed to re-couple productivity and wages. And although this issue may indeed be intertwined with the issue of inequality, Marshall is correct that the difference between the two are meaningful. Focusing on inequality is largely a populist trap. Railing against the super-rich can be cathartic and it can conceivably lead to limited victories at the ballot box, but it’s neither a solution to existing problems nor a guide to governing nor public policy.
Earlier this year when I was writing about my fears that the Left was beginning down the path that has made the Right an all-ratings/no-governance shell of what it once was, one of the questions thrown to me where I came up short was, “What would be the catalyst for the Left’s favoring of bumperstickers over public policy?” I am beginning to think that the answer might end up being the issue of inequality. Indeed, inequality as a political touchstone has all the earmarks of the Tea Party-ism that made the GOP into a such a joke over the past six years: Conspiracies led by shadowy, all-powerful, Illuminati-like figures who are shielded by a sinister media complex as they steal Our Country; all the while allowing those common Janes and Joes most outraged to be easily manipulated by the very political forces that are largely to blame for the fix that got everyone to be so outraged to begin with.
Or to be more succinct: Saying “F**k you, Koch brothers!” isn’t actually a public policy solution, no matter how many times you shout it.
The solution that Marshall proposes — finding policies that might re-couple productivity and wages — is the opposite of populism, in that it will require a lot of work by the Democrats. Because, as he himself notes, the Dems
don’t have a policy prescription to make that change… The great political reality of our time is that Democrats don’t know (and nobody else does either) how to get wage growth and productivity growth or economic growth lines back into sync.
Again, he’s right. Focusing on the obscenely wealthy (which to my eyes, is what the Left is doing more and more) is a way to beat the drums and get out the vote, but it isn’t a way to govern once you get those votes — which, again, sounds depressingly and suspiciously like the GOP in the era of movement conservatism.
If you haven’t, you should take the time to read Marshall’s entire case. For a while I’ve been growing slightly disenchanted with TPM as it’s dipped more and more into page-clicking-celeb-gossipy stuff, but this post is a good reminder of why I find TPM to be head and shoulders above most other political blogs out there.
As for the threads, I’ll throw this question out:
How do we go about re-coupling productivity and wages?
It’s a complicated and nettlesome question, obviously, and I’m sure that folks of different stripes will have different approaches. I’m very curious to see what people here might come up with.
Whatcha got, hive mind?
Follow Tod on Twitter, view his archive, or email him. Visit him at TodKelly.com
[Picture: “VOA Soup Kitchen,” via Wiki Commons. Graph: “Growth of real hourly compensation for production/nonsupervisory workers and productivity, 1948–2011,” via Economic Policy Institute.]
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How do we go about re-coupling productivity and wages?
Quit bailing out failing businesses? Failing banks?Report
Transfer ownership of the means of production to the workers?Report
Every single “knowledge worker” I know would hate having the means of production transferred to em.Report
I say this half-jokingly (the joking half because I know it’s not going to happen), but I recently read for review a book on changing the employer-employee relationship in today’s labor market, written in response to the growing trend for employers and employees to separate really frequently with neither side therefore feeling the least bit invested in the other. The book doesn’t really address the fact that employees are much more likely to feel invested in their employer if their wages are more closely tied to the employer’s productivity. When the only benefit people get from their employers if the employer makes a lot of money is a slightly lower chance of getting laid off, you’ve got a dysfunctional system.
Add on top of that the fact that we do a really good job of things like controlling inflation at a national level so that the fact that people continue to make shit while their employers get richer and richer only affects labor slowly, over an extended period of time, making it more difficult to notice, much less to feel motivated to do something about it, and you’ve got a system perfectly designed to separate productivity from wages with no real means for reconnecting them.
So if transferring the ownership of the means of production isn’t really an option, strengthening labor is your best alternative. When you have a group that is there specifically to look at the big picture from labor’s perspective, it’s harder for capital to make more and more money without sharing more and more of it.Report
The best way to strengthen labor, as I understand it, is to make the labor market tighter. Make corporations have to compete for labor, the way they compete for market share. One of the wacky things is that if labor gets tight enough, corporations start doing things like “hiring promising, if underqualified, people” and then Katy bar the door.
I don’t know of any palatable way to discuss tightening the labor market, though.Report
Another way to strengthen labor is to organize it.Report
Don’t unions end up screwing the folks who aren’t members? I suppose it’d end up reshuffling a little bit, but the folks at the bottom remain screwed, though the folks in the middlish will be better off than they were.
I don’t know how organizing labor would work in a society where jobs last for 3 years here, 7 years there, and then 5 years over there. Back when you worked for 30 or 40 and then collected your pension… sure. But changing jobs every half decade or so? I have trouble visualizing how that’d work. Not that my limitations should be seen as a criticism in itself, of course.Report
I wonder how much of the 3 years here, 7 years there, and so on, is a result of the fact that no one on either end has any reason to invest in the employee-employer relationship. That is, to what extent does the fact that neither side is invested a result of precisely what Tod’s asking about?
As for unions, depends on the union and how they’re organized, but yeah, they look out for existing members. Unions are always a suboptimal solution to a problem that requires changing the system, because unions are still capitalist institutions.Report
What exactly does that mean?
As I say below, I’m not quite sure that there is any particular reason to believe that wages and productivity ought to be connected in the first place, since a good portion of productivity is linked to capital and not to labor.Report
“I’m not quite sure that there is any particular reason to believe that wages and productivity ought to be connected in the first place, since a good portion of productivity is linked to capital and not to labor.”
The reason is to avoid heads being put on pikes.Report
I mean that the profitability of a company is not directly connected to wages. It’s connected to the amount of money people above a certain level make, but people below it are only compensated on the basis of labor supply, which in turn is only loosely connected to the profitability of an occupation.Report
I’m not sure how this helps.
And since the trend started in the early 70s and not at the beginning of the Obama presidency, I can’t quite tell if you’re being serious or not.Report
And since the trend started in the early 70s and not at the beginning of the Obama presidency, I can’t quite tell if you’re being serious or not.
If I had to guess when productivity and wages began to be uncoupled, I’d have to say it happened a lot earlier than six years ago.
The 70’s sounds about right. If the price for no more bailouts is better bankruptcy protections for business owners, I suppose that’s a price worth paying… so long as the business itself doesn’t get bailed out. Sell whatever’s left for pennies on the dollar to competitors.Report
It happened when women began entering the work force.
Since that time, household wages have remained relatively flat for a household with two adults in it. But hours worked has increased 50%, too. The mortgage that required one income in 1970 requires two incomes now. Then, if the wage earner lost his or her job, the other partner (typically the wife) was often able to step in and maintain the family’s income while the recovered; now, if one wage-earner loses a job, the family’s home is at risk. Not to mention the time doing household chores, caring for children (now often a paid expense), and all sorts of volunteerism in communities that’s no longer happening quite as much.
During this same time, our views of raising children has also changed. in the 1970’s, you could be a latch key kid; now? There’s extreme burden on parents to make sure their children are never left out and about in the world unsupervised; and a lot of that supervision ends up costing a lot of money later into the child’s life.
I don’t think this problem is so difficult to understand — how income inequality grew — when seen through the lens of the major shift of women working. It created incredible jumps in productivity, and it really did enrich the wealthy. But the quality-of-life issues for families subsidized that growth, too.Report
Not only this Zic, it also happened when the trade barriers began falling and we globalized. In other words- we have tons more workers now.Report
@zic What you say is true. And it’s also true that the other thing that happened in the 70’s was that a long trend of moving manufacturing overseas in order to make use of cheaper labor began. Both of these things happened.Report
I’d add, beginning around 1985 or so, increased health-care costs. Looking back, it seems the first indication was malpractice insurance (remember, I had trouble finding a doctor to deliver my first child,) and by 1987, Clinton ran on health care reform.Report
It was also the fact the the gov’t really started really devaluing the dollar during this time.Report
@zic
I disagree on your theory about latch-key kids.
In the 70’s they were so rare that a special term had to be invented for them. Now they are so common that they don’t even merit a special termReport
@scarletnumbers not in my home, they weren’t. Nor in most of my classmates homes, either.
Probably in upper middle-class homes latch-key kids were rare, but not lower/working-class. And it strikes me that if what you say is true (they’re more common now,) than that itself is evidence of the growing slide out of middle class and into poverty.Report
While it may be a good policy on it’s own (though terrible short term politics so good luck selling the politicians and regulators on it) I don’t see how it’d have anything to do with the decoupling of wages and productivity.Report
Not only were the good parts of wages and productivity decoupled, but the bad parts too.
If you eff everything up beyond all recognition, this should result in your company failing. If it doesn’t, then there is a disconnect.
In addition to coupling success with the wages of success, I’m suggesting we couple failure with the wages of failure.Report
So you want to abolish bankruptcy and bring back debtors prisons?Report
Nah. Bankruptcy protection results in more risk and more risk has the benefit of the occasional Steve Jobs at the cost of a couple hundred Sonny Bonos. There’s no real upside to debtor’s prisons. Well, organ donation, maybe…Report
@north @jaybird
There is such a thing as too much risk. The people who are hurt the most in recessions are the poor. Now, how do we know that we are having too much risk? Well, we can tell indirectly if we see some mechanism where all the benefits of risk taking are internalised by the risk taker but some or much of the costs are externalised. Debt-forgiveness in the form of limited liability is one mechanism by which the costs of risk taking are externalised. Moreover, its not like steve jobs gives his stuff away for free. He sells his stuff on the open market so any benefit we gain from steve jobs is fully paid for by us whenever we pay for his stuff. The way to do this is to get rid of limited liability and weaken bankruptcy protections such that in the fullness of time anyone and his descendants will recover his debt with interest. That means wage garnishment until debts are paid in full. Of course this also means abolishing the corporate tax as well. Once we do both, then our corporations have fully internalised the costs and benefits of risk taking. Whatever level of risk taking we have then will be efficient. As it stands now, the easy way in which debts are forgiven means that we have an inefficiently high level of risk taking. Corporate taxes work in the opposite direction diverting money away from reinvesting in the company. It is unclear whether the effects cancel each other out, but the only way to be sure is to remove all distorting effects.Report
That sounds familiar.Report
Less so than you might think.Report
I don’t know and wish I did, but if I had to come up with a policy solution, I’d say it’s at the Federal Reserve. Tolerate higher inflation. Perhaps set a target of 3% instead of 2%, or maybe just hit the target instead of consistently undershooting. How you campaign on something like that is absolutely beyond me.Report
William Jennings Bryan managed it in the 1890s. I think it could be done again, and would probably be more helpful than a lot of other policy solutions (this would lead to the tighter labor markets that Jaybird suggests above).Report
When was President Bryan in office? 😉Report
What Hanley said. While running on economic populism might be the moral thing to do in the eyes of certain political philosophies, it doesn’t necessarily translate into votes.Report
Isn’t that a bit like saying that conservatism failed, since when was Barry Goldwater President?Report
@lwa
Conservativism is a general disposition covering a wide range of issue. Easy money is a more specific issue. So I doubt the two really compare well.Report
Bring back the Soviet Union, Red China, and the Warsaw Pact to scare businesspeople into sharing the wealth out of fear of Communist uprising.
My guess is that wages and producitivity started to separate in the 1970s for several reasons. The high wages of the post-World War II period happened because other countries were either flattened by the Second World War and/or embraced some rather counter-productive economic measures. By the early 1970s, the world recovered from World War II so the economic benefits of being the non-flattened economic superpower largely disappeared. The early 1970s is also when off-shoring from the unionized North and Mid-West to the non-unionized Sun Belt and developing countries started to occur in earnest coupled with an increase in productivity through computers and when the New Deal coalition finally frayed. In other words, the economics and political changes allowed for the decoupling of productivity and wages.Report
Bring back the Soviet Union, Red China, and the Warsaw Pact to scare businesspeople into sharing the wealth out of fear of Communist uprising.
What’s the worst that could happen?Report
Fear and War would be the worst and most effective ways to bring back the old way. It’d be morally and (in the long term) economically abhorrent though.
Also as an ideology communism is pretty much tapped out. You’d need some new charismatic plausible alternative theory to capitalism to really make a go of it.Report
In a couple of years, is Obama doing anything?Report
I’d assume writing his memoirs or community organizing or something. Why do you ask?Report
The movement is going to need a spokesperson.Report
They’d probably need somebody who doesn’t blow up muslims by remote control on his down hours.Report
You also need a new philosopher behind the movement and somehow I don’t think Thomas Picketty is up to challenge of being the new Karl Marx. Capital in the 21st Century might be the Das Kapital of our times but we also need a Communist Manifesto to go along with it.
“Service workers of the world unite, you have nothing to lose but your credit card debts” just doesn’t have a ring to it as rallying cry of the global left.Report
Lol yeah.Report
Yes basically this. Those increases are being shipped to the developing world to build entire economies.
CEO wages are increasing because they have the power and ability to claw as much increase as they’d like due to the structure of corporate governance and also because all that development means that corporations are doing pretty well so they can make a tolerable (at least to a board full of their pals) argument for their raises.
From a humanistic standpoint this is a pretty good state of affairs. Millions are benefiting from the cycle, the global economy is developing at an excellent pace and living standards are improving enormously for almost everyone involved. For the first world, however, the benefits are rebounding mainly to the powerful and wealthy while everyone else kind of treads water.Report
CEO wages are increasing because they have the power and ability to claw as much increase as they’d like due to the structure of corporate governance
Are you aware of the research showing that privately-held companies pay their CEOs more than publicly-traded companies of the same size?Report
I wasn’t aware but it surprises me not at all. Publicly held corporations at least sortof have to worry about what their shareholders think. I’d assume that with many privately held corporations the shareholders and the executives are much more often the same people and when they’re not they’re still not people who would be very closely monitoring their CEO’s pay.Report
Speed up the development of the developing world.Report
How, exactly, and how soon will the American worker expect that to pay dividends? I’m not saying that we shouldn’t try to increase economic growth in the rest of the world, mind you. It’s just that if this is all you have to offer workers in the first world that are no longer seeing much benefit from economic growth, you might as well just say that wage stagnation is here to stay and that they need to stop complaining.Report
That’s the twenty four hundred dollar question that no one on any ideological side has an answer to.Report
The Department of Sand Pounding will soon have your tasking orders. Please take a number and proceed to the back of the line.Report
@north
Or everyone knows the answer but no one wants to say it because the real answer could be 40-60 years from now.
This is what happened during the first stages of the Industrial Revolution. It took an entire generation or two before the wages paid by being a cottage (literally!) industry weaver was replaced by better paying work in factories and higher living conditions for the working class.
Of course no politicians (left or right) will say this because saying it is pretty much saying “You are fucked and there is nothing anyone can do about it. Please vote for me.” It could also lead to more radical redistribution and political movements than are currently existing.Report
The real answer is 40-60 years from now.
There are no miracles.
That’s not satisfying, because nobody ever wants to hear that there are no miracles.
But there are no miracles.Report
Well yes @saul Degraw but you and I are saying the same thing. You’re just predicting that whatever the answer is it’ll only show up in a generation or so while I’m being even more cautious than you by not making any prediction at all on timing. For all we know the next social revolution could be simmering on the web or in the brain of some clever young (or old) thing anywere on the planet as we speak.
But until what ever it is shows up the politicians have no good answers so they’re turning to bad ones instead. Yuck.Report
Color me unconvinced that wage growth in the 1st world would require a miracle when we are still getting steady economic growth, steady increases in productivity, and steady corporate profits.Report
@james-hanley
Are you officially coming out against the existence of sexy things?Report
Would a collapse of the dollar restructure things?Report
Don: in order to cause wage growth there has to be labor scarcity or some form of government control that is both effect yet not so onerous as to cause businesses to relocate to escape it.
Citizen: You would first have to suggest what currency would replace it and how. 90% of the world currencies don’t fit the bill because their economies are too small. Of the remainder there’s:
The Russian Ruble: Even the Russians won’t park there money where Uncle Vlad can get his hands on it; why would any non-russian be willing to do it.
The Chinese Yuan: China’s fiscal and judicial sector is a nightmare of fraud and theft. At least if you invested your money in drugs you’ll get high or shot- the Chinese financial sector would just disappear your money.
The Euro: By far the most plausible alternative except for the inconvenient possibility that the union could blow apart at the seams at any moment. All the problems the Greek crisis uncovered were simply papered over.
The Japanese Yen: Japan is suffering economic stagnation and huge population aging. If their economy isn’t already too small to back a global reserve currency then it soon will be.
In order to replace the dollar you need an American sized economy with American level transparency and American level stability/solvency*.
* And short of the barking mad GOP trying very briefly to blow up the foundations and despite what the loons who’ve been predicting inflation for eight years say America is a highly stable and solvent currency/government.Report
I’m not assuming it gets replaced by anything. Just one day people assume its worthless.Report
Saul,
damn straight!Report
@north If we’re just talking about after-tax income, then so long as we assume the political will to do so, higher income taxes and an expanded EITC would have the effect of increasing the share of growth that goes to the bottom third/half/whatever, no? Beyond that, I think that while globalization obviously makes it harder to generate tighter labor markets in the US, it hardly makes it impossible. As I mentioned above, I think a non-trivial part of the problem is that we’ve had a central bank that consistently errs on the side of low inflation for the past couple decades. There are still marginal gains to be made.Report
@james-hanley, there might very well be no miracles but it might be worth it to prevent standards of living and hardships from increasing too much in the developed world if only for cynical reasons. I’d rather have developed countries do something funny with economics rather than face the potential for violent revolution.Report
Don,
Well, it depends. If you want to pay less for border security (taxes!), then you can expect further child labor to pay off immediately. If you want it to pay off in terms of better wages for Most Workers? Isn’t ever going to pay off, because there will be further and ongoing work shortages.Report
Speed up the development of the developing world.
What exactly does that mean? What should Americans want to see being done by America’s policy-setting class (the government, parties, and major companies) to promote their wages starting to grow again on the shortest timeframe possible? And in the world, what needs to happen for that to happen? “Development” is a vague term.Report
What I think what @james-hanley means is that if the developing world can be brought up to first world or near first world standards of living than the benefits of off-shoring would decrease rapidly for the capital class. This would mean that they would need to pay everybody developed world wages and salaries because there would be no place to turn to for cheap or cheaper labor anymore.Report
How do we bring the entire world up near 1st world standards without Star Trek level tech and energy supplies? It seems more likely there will always be a third or four or fifth world to supply cheap labor when any one spot starts doing a little to well. That doesn’t mean the entire idea is daft, just not quite that simple and surely ain’t happening in our lifetime. Well mine at least but i’m 48 but i doubt it would in 50 or 60 years either.Report
Greg, wages in China are already getting up to the point where some of the lowest value added manufacturing tiers are weighing anchor for less developed economies. Japan and South Korea were in China’s position when I was born and growing in the Eighties yes? So that’s not enormously slow and when you also consider that every economy that hits first world status heightens the demand for cheap labor then one could expect the virtuous cycle to accelerate.
Other questions rear their heads though. Environmental concerns, energy prices, geopolitics etc…Report
Very true about all the extra questions at the end. China is a good example of the progress that is being made although are still many many poor people in China. Good for the Chinese that are doing better though. It just shows what good an authoritarian government can do when they control power, limit freedom and carefully manage capitalism.
What what???
India is also doing well which is hopefully a better example.Report
Authoritarian governments can do labor mobilization for rapid industrialization very well. It remains to be seen whether they can make the transition to a post-industrial economy while maintaining their authoritarianness, though. Neither the ROC nor ROK managed to do so. The PRC is the next test.Report
What exactly does that mean? What should Americans want to see being done by America’s policy-setting class
Open borders, end all trade barriers, end all farm and other industry subsidies. Do not require companies who outsource to make up the tax difference between countries. Stop designating countries as tax shelters etc etc. End all economic sanctions. End all aggressive military action.
The answer is relatively simple. Its just incredibly unpopular.Report
I don’t think the field will level until minimum wage is abolished. Its nearly the definition of neoliberal imposed stagnation.Report
@citizen
I don’t see how the minimum wage is a neoliberal policy. In fact, if you read neoliberalism as free market liberalism, minimum wage is not neoliberal.Report
@murali
And if all that is done, are you making a guarantee that average American wages will eventually rise from where they are now more than if we don’t?Report
…BTW, does the U.S. “designate” countries as tax shelters?Report
And if all that is done, are you making a guarantee that average American wages will eventually rise from where they are now more than if we don’t?
Effective American wages will rise faster and more. If Krugman is right and the macroeconomic problem facing the US is an under-utilisation of productive resources, then opening the borders will solve that problem very quickly. Opening the borders will actually reduce unemployment over the medium and long run. If America can convince other OECD nations to follow suit, the effect will be seen even faster. As it is, the size of the American economy means that America’s own policies in this regard can have a sizeable effect on global poverty. As the plight of developing nations eases, the attractiveness of relocating to those countries decreases rather quickly.Report
Opening the borders will actually reduce unemployment over the medium and long run.
I agree with this, though wage effects (our subject) as opposed to unemployment effects in the short and medium term are more of a question. But there are costs to these policy changes as well. It’s very rare, for example, that there’s consensus that any given military campaign is not aggressive as opposed to defensive, so functionally that means taking force as well as sanctions off the table as foreign policy tools. That’s a big hit to the FP toolkit. Opening borders is a big lift. Getting countries not to try to recoup tax losses from business relocation is a huge lift.
So my question goes to confidence in this diagnosis and prescription, and to building the political confidence that the diagnosis is right and the prescription will really pay the promised dividends that mill make the lift of implementing this prescription possible. For others to buy in, they need to believe in your confidence. The way this prescription is often presented, confidence in its effects often comes off as faith-based, especially given the extent to which the free market message has driven politics in the last thirty years, even though a free market reality hasn’t. And one way to fight that perception of a faith-based belief in the results of this approach is to be more concrete about how it will play out. If you think it’s an iron-clad lock that this approach will have the desired effect, explain why it’s such a sure thing. If things could get in they way, say what they might be and how they can be dealt with.
So: are you really offering a guarantee that this effect will take place? What (other than just not sticking with the policies) could derail its effectiveness? Why won’t it? Is there really just no other way things could go than that following this prescription will eventually result in higher wages for the developed world than not doing so would?Report
Thank you, @leeesqReport
If wishes were horses beggars would ride.Report
over the medium and long run
To what extent can we wave away problems with inequality by appealing to the medium and long run?Report
@jaybird
That depends on what you mean by medium or long-term.
I think people could learn to tighten there belts for 5-10 years but after that it gets dicey.
Above we were talking about the possibility of good jobs potentially not returning to the U.S. for 40-60 years. This basically means one or two generations are largely fucked and will be perma-temping for most of their careers and dealing with stretches of unemployment.
This is a lot harder if not impossible to make an appeal about. “Think of your grandchildren which you might not have because most of you will be too poor to marry or even have time to think about children…”Report
@jaybird, none. To paraquote FDR “people don’t eat in the future, they eat three times a day.” People aren’t going to accept a sucky life for themselves because things will be better for more people after they died.Report
@leeesq
I think that quote belongs to Harry Hopkins, not FDR.Report
Think of your grandchildren which you might not have because most of you will be too poor to marry or even have time to think about children…”
When in history was poverty a deterrent to coupling and breeding?Report
Doesn’t happen that often, so definitely need to take the opportunity to express my full agreement with Jaybird, specifically what he said at 4:38 pm.Report
If’n we’re looking at the same 4:38, that was Saul.Report
@ Murali
http://www.newleftproject.org/index.php/site/article_comments/a_short_history_of_neoliberalism_and_how_we_can_fix_it
Neoliberals, liberals, they both want to maintain the minimum wage.Report
@citizen
How is a leftist article about how the minimum wage has decreased under neoliberal policies showing that the minimum wage is supported by neoliberals? It might be supported by people who call themselves liberal, but that doesn’t make the minimum wage a neoliberal policy.Report
I am using neoliberalism as concept/group using a strategy, instead of a definition. Minimum wages is a facet in the strategy providing a level of protectionism to pacify the low level incumbents. (Rogers terminology of “incumbent” workers/locals)Report
Aargh, dammit!! Too good to be true!Report
@north Japan and South Korea were in China’s position when I was born and growing in the Eighties yes?
Japan was nowhere near China-poor in the ’80s. Since 1980, Japan’s per-capita GDP has ranged from about 70-85% of the US’s. South Korea or Taiwan, maybe.Report
I’ve been thinking about this since a discussion here a few days ago. The problems of economic inequality — of the soak-it-up as opposed to the trickle-down — seem obvious based on the evidence I’ve seen. But I agree, it is not a good meme to run on. And just bumping taxes on the rich, even to extreme levels like they were during WWII, won’t correct the income imbalance; either.
This is mostly because of the use and re-use of that money. Since approx. 1985; with what essentially amounts to flat wages even as families have worked more hours, the hole in their wealth springs from the dollars they didn’t earn. That money get’s cycled into the community and spent and re-spent many times over. When it move to uber-rich person, while it may ‘create jobs,’ (and FYI, I am a net job creator, I am describing myself here,) it doesn’t have the economic pull that that lack of dollars, over time, has. So simply robbing the rich to pay the poor — the Robin Hood scenario — won’t rebalance the economy and the income gap.
It takes time, and an inclination to focus economic policy on a strong middle class, and that’s what we’re talking about here.
Me? I’d let the rich keep what they have, encourage them to invest it in job creation, and work my ass off to improve the wages and safety net for a middle class that would grow. So yes, I pretty much agree with Marshall.
Some ideas: Child care tax credits or subsidies; stop fucking with ACA and let it work universally; better financial education and information for lower-wage workers so that they can better plan their financial lives; infrastructure repairs and rebuilding. More housing assistance for middle-class workers in high-income areas; better energy policy for rural areas dependent on cars and trucks for transportation. Keep promoting energy-efficient homes.Report
Focusing on the obscenely wealthy, and the left saying “soak the [mega-]rich” can be both a guide to governing and public policy. It just happens to be a more wealth redistribution minded public policy. But there’s a clear set of linkages between runaway inequality and the idea that the well-to-do are, all around, under-taxed in the US and have been for decades. Taking a greater share of GDP in taxes and spending those resources on the well-being of the populace is a pretty significant part of the raison d’être left.
Estate taxes, consumption taxes, wealth taxes, retaining (or increasing) corporate taxes, crackdowns on offshore tax havens, are all potential public policies that go along with an increased concern with inequality. Thomas Piketty’s Capital in the 21st Century touches on the disjuncture between the capital owning’s ever self-reinforcing benefits and the workaday laborers being unable to catch up (not that I’ve read it, only commentary on it). Confronting that challenge, capitalism’s tendency towards enriching the already rich, sounds like a direction for governance and public policy to me.Report
As I understand it Piketty’s conclusions (assuming for a moment that his analysis is correct) is pretty much unworkable. It requires a global government otherwise you get a prisoners dilemma where mobile capital would simply uproot and flee the region of control of sub-global wealth taxers. If you try and pursue them by other means then you just undercut globalization which leads us down that tired road to protectionism and most likely war.Report
@north
Depends on where you want to do the taxing. There are only so many free rider/tax haven places in the world. There are points of leverage to pressure the holdouts to cooperate. Also, there’s a distinction between global government and global governance. Global government I fully agree is extremely difficult and I don’t expect in the near future. Global governance already exists, in some policy areas more successfully than others. Recently the G20 has been making strides focusing on tax havens. It is pretty much in a lot of wealthy countries’ interest to prevent their elites from stashing money away and avoiding, by some estimates, trillions in taxes.
Also, the global wealthy like nice things and like to live in nice places. If that weren’t the case then 57th street in Manhattan wouldn’t be well on its way to becoming billionaires row. When you have 8 and 9 digit apartment price tags, there’s bound to be some hefty taxation that can be thrown that way without some of these people batting an eyelash. IIRC, there was a recent Adelson-Saban think tank discussion where they mention that $250 million was small change for the Washington Post, and that they should think of making a bid for the NYT.
All that to say, there’s plenty of scope for increasing taxes, and there’s plenty of scope for international cooperation to do so.Report
Yes to a degree @creon-critic remember that eliminating tax havens doesn’t do much. Unless you have one government then all states gain strong incentive to lure the wealthy by simply being more tax friendly than their peers. Leftists call this race to the bottom. Also when you start talking about wealth taxes you’re talking about -real- money and that’s gonna make the wealthy and influential actually sit up and take notice.Report
There are only so many free rider/tax haven places in the world.
It’s pretty rich for you to refer to low-tax countries as “free rider places,” when facilitating free riding is pretty much the cornerstone of your political philosophy.Report
I am not sure that we do. At least not absent some future technology shock that drastically alters the economic landscape. If we continue on the present trajectory, I expect more of the same.
If you look at the determinants of labor productivity:
-Physical capital per worker
-Human capital per worker
-Natural resources per worker
-Technological knowledge
it isn’t particularly obvious that productivity and wages ought to go up or down in lockstep. The one element of productivity that would necessarily translate to higher wages is human capital and I am guessing that returns to human capital have probably been increasing at much higher rates than returns to labor as a whole.Report
“How do we go about re-coupling productivity and wages? ”
There’s a school of thought which suggests that “re-coupling of productivity and wages” is exactly what is happening when a business replaces its first-level phone support with a pre-recorded message.Report
That probably won’t be a popular comment, but I’m going to +1 it.Report
I WOULDN’T NECESSARILY EVEN ARGUE AGAINST THAT IF ONLY BECAUSE IT PROMPTS THE NEXT QUESTION.
wHAT DO WE DO WITH ALL THOSE UNPRODUCTIVE PEOPLE?Report
Gah…caps lock fail.Report
And the longer question is-
How will the invisible hand of the marketplace, absent a coordinated top down centralized entity, retrain/relocate/reskill all these idle unproductive workers?
Or do we just glibly tell them to wait 40-60 years?Report
LWA,
I get your point, but let me add this. If the invisible hand needs assistance, how do we ensure the centralized entity actually assists its, and doesn’t interfere with the relocation that the invisible hand might accomplish on its own?Report
“What do we do with all the unproductive people?”
Maybe the lesson of Occupy Wall Street is that it’s just not that expensive to be alive (and in a reasonable degree of comfort) anymore. It’s not like unproductive people are starving in the street, and (given the ACA) we have a reasonable shot at getting them medical care so they don’t die of disease. What’s left?Report
Legalize pot.
We should probably do something about birth control as well.Report
I also like TMP, but Josh seems to be channeling some sort of West Wing fantasy here. He is assuming that the Tea party failed- it now is on the brink of total control of the government, at local, state and national levels- and he also assumes that the path to electoral success is to present the voters with an earnest bullet pointed diagram of economic advancement.
It overlooks the stranglehold grip that the 1% has on our elections. It overlooks the fact that we are awash in earnest economic programs from liberals- Obamacare is one such, and how is that turning out?
Does Josh think that “Hillary-Childcare” or “Warren-Banking” program would not be subject to the deafening screams of being an existential threat to America as we know it?
If there is one thing people care about less than the antics of the 1%, its wonkish proposals.
Did Obama become a star in 2008 due to his superior proposals for rescuing the economy? Is that what galvanized and electrified the young voters who turned out in droves?
“If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea.”
The democrats failed in the inspiration gap- we don’t have a message that electrifies and inspires people. Class warfare may not be that message, but it is the best one I have seen so far.Report
I disagree LWA. If you look at the last election one glaring thing that stands out is that the GOP leadership mostly locked the Tea Party in the attic. Several of the victories occurred because the GOP ran pretty decent candidates who took moderate positions on a lot of hot button issues. In previous cycles the TP would have hounded those candidates terribly and either punted them out of the primaries and/or depressed base turnout on the right. The GOP is getting hungry for victory and the TP has begun to see a decline in power.
Now granted, the GOP is just bonkers and delusional instead of barking chase the mailman crazy but that’s progress for them if you’re grading on the curve.Report
Yes, they locked the barking mad ones in the attic, while adopting the positions of the merely evil mad ones.
Point being, the Tea Party won by moving the ball towards their goal, even if they had to settle for a field goal.Report
Funny how they lost on almost all the policy issues, for such a dominating presence.Report
@james-hanley is right; person-hood lost, minimum wage won; and in places that most liberals would expect the opposite results.Report
What James and Zic say is correct here. A R senator won, but pot was made legal, the minimum wage was raised and there was a pro-union vote. Sometimes local things are local and people are all over the place on some issues.Report
I just wonder how many Republicans are looking at those results and thinking about what it means for their future.Report
I have this weird theory on the voter’s rejection of personhood might be related to the ongoing discussions of campus rape and consent. Back in the day; there are many of us, men and women both, who had drunken sex, bad sex, coerced sex that we’re looking back on and questioning.
I don’t know how one would measure this; but I can’t help but wonder if the electoral outcomes for personhood are somehow related to the consent discussions. But there’s always the failure of the personhood amendment in Missouri or Mississippi in 2010 to blow that thought out of the water.Report
If you look at the longer view, say 2000 to 2014, or even more, 1980 to present, its pretty clear that the GOP has only grown further and further to the right. Socially, economically, and in foreign affairs.
A few victories here and there by liberals doesn’t change that arc. And its true that the terrain is uneven- here in California the GOP is nearly extinct. But there are more areas where Dems are extinct, than the other way round.
The Tea Party was just the latest manifestation of the Birch Society- the arch conservative wing of the GOP that welded white resentment to economic populism and focused their rage on the ethnic minorities and urban intellectuals instead of the economic elite.
They have managed to open up new fronts, to push the dialog more and more to their view.
Charter schools, charter cities, union suppression, gun laws, abortion restrictions, voter suppression. They have won in Congress, the Senate, and SCOTUS.
Legal weed is a red herring, a distraction. Prohibition stopped being the focus of the right wing after the Depression. And while same sex marriage is a setback for them, they remain competitive in the war against feminism.
Unlike many liberals, I am more optimistic than my words might suggest. But only because I don’t buy the argument that dry wonkishness is our salvation, and I don’t underestimate our opponents.
Good populist rage is a worthy and useful tool. Its working now for the GOP; we need to make it work for the rest of us.
“Corporation cunning has developed faster than the law of nation or state. Corporations have found ways to steal long before we have found that they were susceptible to punishment for theft. But sooner or later, unless there is a season of readjustment, there will come a riotous, wicked, murderous day of atonement”
Mr. Dimon, your tumbrel cart awaits!Report
It’s kind of funny… the minimum wage went up in Arkansas as they tossed out their Democratic politicians, and Oregon stripped illegal immigrants of their ability to get drivers’ licenses while electing Democrats in large margins.
Our electorate is a lot more complicated than we sometimes make it out to be.Report
Legal weed is a red herring, a distraction.
That’s a pretty privileged statement. For the white middle class legalized weed may be a distraction, but they’re not the ones going to jail and having their lives ruined for it.
Prohibition stopped being the focus of the right wing after the Depression
How one square that with the war in drugs and the subsequent militarization of the police is beyond my comprehension.Report
@lwa
North is right. The GOP finally figured out how to get rid of Tea Party craziness largely except maybe Jodi Ernst. Cory Gardener came out for over the counter contraception and Tom Cotton came out for a minimum wage hike and said he would vote for it “as a citizen”.Report
I’m not convinced this is true at the local/state level.Report
@zic
That observation can very well be true.Report
Let’s not talk about the state and local level, it’s way too depressing for Dems, though somewhat bright for liberals.Report
@north
Like this:
http://www.newrepublic.com/article/120212/john-barrows-2014-midterm-loss-end-white-southern-democratsReport
/wristReport
Inequality happens in no small part because certain plutocrats are able to rig the game so that nobody else can get rich without their permission.
Obama took one step away from that with today’s announcement that he has directed the FCC to reclassify broadband as a “telecommunications service”.
I have no idea why this wasn’t a campaign issue.Report
Obama took one step away from that with today’s announcement that he has directed the FCC to reclassify broadband as a “telecommunications service”.
Oh, God, what a can of worms that could open up on the cable side. 20 years of distribution network design, tens of billions in investment, and every level of the architecture carrying a mix of information and (if this policy is established) telecommunications services. Even if they’re unsuccessful, Comcast will keep this tied up in FCC proceedings and court cases for a decade.Report
@doctor-jay
Inequality happens in no small part because certain plutocrats are able to rig the game so that nobody else can get rich without their permission.
And they do this by capturing the very government institutions that were set up to limit them. Yet people keep on wanting to give those captured institutions more power somehow hoping that more power would make it less captured. More power just makes capturing those institutions more lucrative.Report
I want to clarify a point which I think is in general poorly understood and underappreciated: Economic theory says that wages are equal to marginal productivity, not average productivity. What this chart shows is the average productivity of the entire labor force, and there’s no particular reason the median wage should track that.
(I don’t have time to explain marginal productivity right now, but it’s arguably the single most important concept in labor economics, and a lot of the silliness around this topic arises from failure to understand it.).
Claims that employers are systematically paying their employees less than the marginal product of their labor are inherently suspect, because this implies that employers are leaving money on the table. If they could make more money by hiring more workers (which is implied by compensation being less than marginal productivity), then why haven’t they? This is especially hard to swallow in a period of elevated unemployment, when there are literally more workers than employers know what to do with at prevailing wages. This isn’t an absolute proof, but anyone claiming otherwise has a lot of splain’ to do.
So what’s happening in the chart? It appears that the average productivity of labor has continued to grow while the marginal productivity of the median worker has not. As @james-hanley alludes to above, this is consistent with an expansion of the labor supply due to immigration and/or globalization, and also entry of women into the workforce en masse. Incomes in low-income countries are catching up, as this fascinating chart shows, but it will take a while.
It’s important to note that the last thirty years or so have been very, very good for humanity as a whole. As the chart I linked shows, real incomes are up quite a bit across most of the global income distribution, with the “losers” having seenly merely stagnation rather than reduction.Report
Whoops. Also, I think the chart in the OP may be mislabeled. It says “compensation,” but I think it just means wages. Spending on non-wage compensation has increased considerably during that time, and I don’t think median cash wages has fallen during that time. If I’m right, part of the wedge between those two lines is going to non-cash compensation, and therefore is making its way to the median worker, in a way.Report
This is basically an economic theory that suggests American wages and purchasing power has to decline, no? That, compared to the developing world, we all earn too much/spend too much/consume too much, and quality of life here has to decline to some equal shade of gray (that’s a Lathe of Heaven reference, for those so inclined.)
I find this thinking suspect; as if employers who produce goods and services for people don’t realize that having money in people’s pockets is how they make a profit. It seems incredibly short-sighted, and only considers global corporations as players at the table.Report
I don’t know about decline, but at the very least stagnate?
Locally of course it looks like crap but globally it’s great for humanity in general. The real question, though, is if it is sustainable. If the first world voting electorate suffers too much stagnation at what point will they decide to jettison globalization and turn to protectionism again?
On the other side of the ledger, though, it seems obvious to me that globalization has averted (so far) a war with China. Absent robust trade a developing China would simply have to attempt to seize the natural resouces of all her neighbors that are in reach to try and keep developing. So that is no small thing either.Report
North has the right of it. The theory is one of convergence. That could happen through decline, but there is nothing inevitable about it happening that way. It could happen through stagnation as well. It could even just happen through wage growth that’s slower than wage growth in the parts of the world that are catching up.
And to the extent that imports are less expensive than domestic production, any wage stagnation or decline is at least partially offset, so real wages will be affected less than nominal wages.Report
@north
Unless you jetison democracy and go straight oligarchy or somehow make Matt Y the ruler of the world, I bet we will see calls for protectionism in the Western World within 10-20 years. The first calls will be in the European Union and this will be followed by calls in the U.S.Report
Saul, I couldn’t agree more. I think that’s the big question of this century: will first world nations tolerate the very visible downsides (and not notice the very diffuse but very profound benefits) long enough for the developing world to catch up and the growth to become more evenly spread out. I’m optimistic though.Report
@north
See the Vox article below. The problem is that the people who can make the economic arguments about the good of globalization like raising wages and standards of living in Bangladesh and decreasing prices for some items at home are the ones with jobs least likely to be outsourced.
Though this is changing with lawyers and some computer programming though. I think once the jobs of educated professionals are more easily outsourced, you are going to see more and more problems for the Matt Y mode of thought.Report
I think once the jobs of educated professionals are more easily outsourced
There was a pretty big movement towards this and a pretty big backlash once the pendulum swung too far. There are a lot of expectations out there and a lot of cultural differences and if they don’t line up…
But I don’t want to retell a story that I’m sure you’ve heard me tell a half-dozen times already.Report
@saul-degraw Software development is about as outsourceable as jobs get.Report
Brandon:
Doesn’t work very well. In general, it’s turns out to be about as expensive to outsource as it is to do here, even if you’re doing it in Silicon Valley.
One of the pitfalls of outsourcing is that it’s often penny wise, pound foolish. It saves you money immediately, but your savings are often eaten up on the back end — if you don’t end up worse off.
With software, the money you save on cheaper salaries is eaten up by the need for more management and a lot more back-and-forth on code — people half a world away from the managers and customers generally take several more iterations to get it right, especially if it involves a lot of initiative. The old ‘waterfall’ models of code design probably are cheaper to outsource (designing software like that is akin to building a structure from incredibly detailed blueprints) — but that’s not really a common model of design, for quite good reasons.
It’s not just software — Boeing tried to outsource the design and construction of it’s new planes — and it’s cost Boeing a lot more money than if they’d just done it in house. (And still costing them money). In fact, they had to hire back — as expensive contractors no doubt charging EVERY penny Boeing would pay — some of the people they had actually laid off as part of outsourcing.
Speaking for myself, if I got laid off in favor of jobs overseas (or even cheaper jobs in another state and told I could move and take a large pay cut) and then my company came back, hat in hand, bleeding and begging for help? They’d be lucky if I merely charged three times my regular rate. Assuming I’d be willing to work with them at all.
Given the field I’m in, I’m far more aware of the value of ‘institutional experience’ too. I know I work with guys that get three times more done than anyone without their specific experience with the stuff at hand — yet get paid peanuts compared to a contractor. Yeah, you might replace a guy making 80k with cheaper outsourced folks — but you’d have to replace him with three or four people to match his productivity, and I’d shudder to imagine how much longer (and problematic) the work would be.
For every dinosaur snoozing, there’s generally a guy doing more work than even his managers grasp — which they generally figure out right after he retires, quits, or gets laid off. And they can’t find anyone who can do even a third of his job half as well as he did.Report
@morat20 You don’t have to split up teams. You can just develop the entire product overseas. Even if no American company ever does any development overseas, they still have to compete with software companies in low-wage countries. Anyway, the fact is that there many more software developers working outside of the United States than inside, and that’s exerting downward pressure on US salaries.Report
Brandon,
I work in the field. Outsourcing was really hot for awhile, but it petered out. There’s a reason the tech industry prefers to abuse visas instead.
You can’t outsource the entire job — bluntly, customers or upper management or the company (whomever is commissioning the software or the target of the software) don’t like the results when people from a foreign culture (often speaking a foreign language as their native tongue) do the work.
It comes out taking too long, over budget, and rarely works as desired. Not through lack of skill, but through a whole bunch of cultural stuff coupled with the fact that it simply works BETTER when your developers and your customers share a culture. (Which is why, say, engineering software is easier to design globally — engineers often speak the same language, as it were. The Japan/American game crossover is a bit of a exception, but even then the really ‘Japanese’ style games have only a niche following. And then there’s the Germans — ever wonder who plays all those weird simulator games, like ‘Truck Driver simulator’? Germans).
So again — outsourcing software more or less died, replaced instead with abusing the visa system to bring workers HERE to do the work. Because you get better, cheaper, and more consistent results.
As Boeing is painfully learning, this apparently also applies to airplanes.Report
@brandon-berg
That’s what I was going to say – wages track the marginal product of labour, not the average product. While there is a mathematical relationship between MPL and APL, the exact nature of that relationship depends on the specific “recipe” different industries use to produce things, and also how much capital and labour are being consumed in the production process.
Also, I agree the issue of non-wage compensation is important. I have previously postulated that the wage stagnation since the 1970s is in part a product of the US’s malfunctioning health insurance system.Report
Also, I agree the issue of non-wage compensation is important. I have previously postulated that the wage stagnation since the 1970s is in part a product of the US’s malfunctioning health insurance system.
That should be easy enough to check: are wages are up among people who don’t get health benefits?Report
@mike-schilling
Yes, it would be a good idea to check that.Report
@james-k, can you tell us how we can make all the people who support our malfunctioning healthcare system see the light than? There isn’t going to be any compromise between the Medicare for All people, the Magic Market people, and the Insurance companies anytime soon. The ACA was about as a close as you can politically get to universal healthcare while leaving the existing system kind of intake and its still too radical for many Americans.Report
@james-k
Is it possible that health care compensation has been a large net addition to American compensation over the last fifty years compared to what compensation would have been without this set-up? I.e., if there had just been an individual market for health insurance, is there good reason to expect that total compensation would be very near what it is today, just all cash? (I realize the counterfactual is complicated by the fact that there is a variety of possible alternative societal health care arrangements, and the varying value and costs of these to consumers would have an impact on calculating the situation people would end up in in various scenarios).Report
@michael-drew
Think of it this way, your employer gets a certain amount of benefit from your work and outlays some amount of money to secure your services. Why would your employer care what the specific form of that outlay was?Report
@jamesk
They wouldn’t but what if an environment in which they weren’t expected to compete for your services by providing you with health insurance was one in which they could secure your services (people’s services in general) by outlaying less overall for them than this one in which they do have to do that is? Or, actually, not what if, but just is it possible that the alternate universe in which they didn’t come to have to do that (in America) has that characteristic?Report
Certainly. If you’re underpaying your janitors you could afford to hire more of them and profit by having an even cleaner office. Likewise, with accountants and the profit from having even better-kept books. If you’re underpaying your programmers, you should be able to hire more of them and have your software projects finish later. (Note: that was not a typo.) If you’re underpaying factory workers, you could hire more of them and produce more product, because there’s always a market for more of everything sold at the same price. And it’s especially true in a time of high unemployment, because demand is so low.Report
You’ll notice that the decoupling happens to follow another trend line: a precipitous decline in self-employment. When you own the business, you keep all of the gains. When you merely work for someone else, they skim some off the top. Now try and figure out what keeps people from starting their own business and you just might solve the problem.Report
I disagree. There are plenty of people who make really good money without working for themselves like lawyers, doctors (who are more and more becoming employees instead of having their own practices), engineers, finance people, etc. We have a large number of income-weatlhy professionals who don’t own their own businesses.
It is also simply impossible to have the amount of wealth and comfort we have and have everyone be a self-employed yeoman. You can have the technological gains and items produced by companies like Apple, Microsoft, Google, Merck, Genentech, etc (aka economies of scale) or you can have everyone be a self-sufficient yeoman. You can’t be both. I think the U.S. would be a much poorer nation if everyone was a self-employed yeoman, we would also be much less technologically advanced.Report
“Too much regulation” fits on a bumper sticker, though.Report
@morat20
Unfortunately you have a point.Report
@morat20 and @saul-degraw
Regulatory uncertainty is also a huge problem for citizens; not just businesses. For instance. Millions of people will lose their health-insurance subsidy if a certain court case prevails in the SC and those people’s states do not set up an exchange. Those people have already made economic decisions based on that subsidy. That’s a lot of uncertainty to introduce into people’s lives. How many folks have hung out their own shingle; perhaps as a skilled trades worker or a freelance consultant, will have to shut down their businesses because of the increase in their health care costs? Those are small business owners; some few might even be entrepreneurs at some point down the line, and create the kind of growing businesses that create jobs and promote innovation.
So there’s a flip side to that regulation coin.
How many of those people are nearing retirement age, and have their pensions invested in the stock market, depending on good regulation to prevent oil rigs and trains hauling oil from blowing up? Those disasters that stem for shoddy regulation cost people a lot; and good regulation protects their investment interests.
I’m sick and tired of the continued failure to recognize the benefits, not just the costs, of regulation. Good regulation. Missing or incompetent regulation also creates regulatory uncertainty for everyday joes.Report
@zic
I think @morat20 was being sarcastic and we are both recognizing the good sides to regulation.Report
“Too much regulation” fits on a bumper sticker, though.
“Inequality” fits even better.Report
A liberal recognizing the good side of regulation is one thing.
Pointing out the good side of regulation — how it protects small people (despite the concern trolling that always happens about how it’s the little guy screwed) is another.
And a third thing I rarely hear liberals discuss is, you know, actually repealing bad regulation and lightening the regulatory burden were appropriate. We should be looking for those opportunities.Report
Living in Texas, I have seen how cutting taxes and less regulation works out in practice.
Basically, stuff blows up and the economy doesn’t get any better. Now, higher gas prices made the economy get better, but I’m pretty sure neither tax cuts nor de-regulation had anything to do with the price per barrel of oil.
The Texas miracle was based on two things — increasing cost of oil plus the one part of Texas regulation nobody bothered removing (the stringent rules on taking out a second mortgage or home loan. Strangely the regulation that most straight-jacketed the average citizen was never even considered for removal). We avoided the housing boom because of one old regulation (and possibly the homestead laws we’ve never repealed) and our economy is growing because of high oil prices and the boost it gives to refineries.
An accident of history. And I count myself lucky. Kansas fared worse, no?Report
@zic
The whole of neo-liberalism is about getting rid of bad regulations allegedly. Of course when you talk about regulation you are really talking about what is the purpose of regulation and who is it meant to protect.
I’ve said this before but balancing the needs of small business owners with employee rights and worker safety is probably the hardest thing to do in the world. It might be close to impossible. I choose to go for employee rights and worker safety. The GOP will always be the party of business because there are historical reasons the right is the party of small business.Report
@morat20
Ayn Rand, Rand Paul and Paul Ryan walk into a bar. The bartender serves them tainted alcohol because there are no regulations. They die.Report
Now do it with liberals, Saul. I’m sure you can come up with one just as good.Report
@james-hanley
So does r > gReport
@dave,
But it lacks emotional punch. People will rear-end you as they get distracted trying to puzzle it out.Report
This is purely anecdotal, but when I was starting out, the dream was to start a software company that would become big and successful. Among the young people I know, it’s to start a company that will get bought by someone that’s already big and successful.Report
@mike-schilling
I don’t think it’s purely anecdotal and it’s a much more lucrative way to cash out than trying to take a company public and hope the value of the stock stays out long enough to cash out.Report
https://www.jacobinmag.com/2014/11/six-points-on-the-midterm-elections/
This point is worthy of standing out on its own:
“3. The base of the Republican Party remains white evangelical Christians.”
A really big problem for the Democratic Party is that they are a much more heterogeneous party in terms of the make-up of the base. The Democratic base is a weird mix of women, the young, LGBT people, Latinos, Blacks, a good chunk of the Asian-American population, Jews, and also upper-middle class professionals who might or might not have another designation which makes them lean Democratic. The only white men who go Democratic more than not are either high-school drop outs or people with advanced degrees.
There are big disagreements in the Democratic base between economic populism vs. neo-liberalism. I know North would claim otherwise but this is a debate between Warren and Franken and Clinton wings of the Democratic Party. One of the things that eventually sunk Christine Quinn in her bid to be the Democratic candidate for mayor is that she did not want to alienate her business allies by coming out for things like paid-sick leave.
Other debates include those between Michelle Rhee vs. Anti-Rhee people on educational issues. A good chunk of the Democratic base is anti-Common Core and anti-Rhee.
It is very hard to come up with a set of policies that would please all of these groups. The GOP base seems easier to please because they are more homogeneous and have more united goals.
I always come back to the Teachout-Cuomo primary. My friends who were very pro-Teachout were well-educated Brooklynites or suburbanites with advanced degrees. Teachout did very well in the Northern suburbs. Cuomo outpaced her seriously in the City. I think some parts of the progressive movement have always been about purity/goodness and are appalled at the idea of campaigning on bread and butter issues. The urban ethnic/minority vote generally always stuck with the Machine Politicians.
I think income inequality and wealthy inequality are problems. The big issue though is that many on the left who speak about these issues are kind of hippie medium chillers who misread the tea leaves seriously. There solution is for people to just drop out and not care about materialism. Most people like nice things and want them. Suppose you were to give people two options:
1. Live in a place like Mill Valley, CA.
2. Have places like Mill Valley, CA not exist.
I think most people would pick #1. There is a sizeable minority that would pick #2 and this is the group that seems most concerned and always talking about income and wealth inequality.Report
I guess you’re right; I would disagree. I mean the GOP has a divide too between their libertarian wing and their neocon/socialcon wings though I’ll concede they seem to have squared that circle temporarily by parading their libertarianism up and down the street like painted whores while embracing their neocon wings and locking their socialcons in the basement. That said their socialcons also have a HUGE divide with their business wing and that’s a painful one because the socialcons deliver lots of voters but the business wing delivers the $$$ and you can’t really run a party without both.
But the basic point is that both parties have competing arguing factions. Pretty much inevitable in a country this size with only two ruling parties.
Now I agree that the granola fruitcake wing of the Dems is locked in an endless war with the business shill wing of the party. That’s kindof inevitable. That said I think Tod is correct in pointing out that the big question is a gaping hole in the chest of the Democratic Party: how do you both embrace globalization and the enormous benefits it brings while also ameliorating the fact that globalization is going to disempower labor to an enormous degree and create stagnating wage conditions? I don’t have a pithy short answer to that one; no one does.Report
@north
I think the libertarian wing of the Republican Party has as much control over the GOP as the hippie wing of the Democratic Party has over the Democratic Party. In short, not that much. Conor F is never going to be the voice of the GOP on social issues and neither is Rand Paul. The socialcons are not quite being locked in the basement yet.
It is still easier to come up with a social policy and a foreign policy to appease most of the Republican Party. There are more dividing points when it comes to social policy and the Democratic Party like between the civil liberties and crim defense wing and the Prosecutor wing. Lots of Prosecutors are Democratic. I can’t think of any Public Defender type that goes for the GOP. There is a small base of the Democratic Party that is very strongly against the Death Penalty (like me) while many Democratic Party members either support it or are indifferent to criminal justice issues and their abolition.
Unions especially public sector unions are a big issue among Democratic Party types and whether to support them or not. You can see this during public transit strikes.
There are probably people who vote Democratic only for social issues and otherwise more open to the GOP on economics. A friend of mine is Democratic but also a worker’s comp defense attorney and thinks like one. She calls me a true believer when it comes to worker’s rights stuff while her view is more cynical.Report
Well one thing is definite Saul ol’ buddy: you are a true believer. I find it refreshing and exasperating at the same time but then most neoliberalish peeps do. But at least we’re both rabid partisans so we have that in common.Report
Hey, the libertarians are legalizing weed.
Elections mean little. Politicians less so. Ending Prohibition 2.0? *THAT* will echo through eternity.Report
Most liberals are on the libertarians side on that one JayReport
@north Shhhhh….let him have this one….Report
Dude, I remember getting shouted down at the 2008 Caucuses (I caucused for Gravel) after I suggested we end the War on Drugs. While “liberals” and “folks who showed up at the 2008 Democratic caucuses” are not co-extensive, there’s enough overlap to wonder if it’s fair to say that liberals support ending the war on drugs.
If anything, they’re a “mend it, don’t end it” group. Though, perhaps, much changed since 2008.Report
@north, we are usually in deep agreement but I got to disagree with you on this one. Not only are the factions within the Republican Party fewer than the ones in the Democratic Party but that they usually manage to square the circle between them. In the past, I’ve encounter arguments from the anti-tax Republicans that marriage equality means more taxes and thats why anti-tax Republicans most fight against same-sex marriage. Its a completely ludicrous argument but it was made for the sake of getting everybody in lockstep. The different Democratic Party groups fight more openly between each other.
I also agree with @saul-degraw, that the social conservative faction is still plenty strong. Most of the Republicans in elected positions belong to the social conservative faction in one way or another even if they tried to keep their mouths shut on social issues this year.Report
Let legal weed do its job on the social conservatives. With just a little bit of time and cultural pressure, we can turn Mississippi into Alaska South.Report
The GOP also has a chamber-of-commerce wing and a hawkish wing.Report
I think some parts of the progressive movement have always been about purity/goodness and are appalled at the idea of campaigning on bread and butter issues.
Preach, brother.Report
Assuming globailztion is part of the reason for the stagnation of wages for most of the populace that doesn’t answer a bunch of questions for both parties.
It isn’t like either party is pushing globailzation FOR the purpose of helping people in other countries do better. The common refrain from anti-immigration conservatives it that allowing more immigrants is bad for US workers. If globailzaion is good for people in third world countries no politician on any side is actively using that argument and they certainly aren’t winning election based on that. So the mass of people in the US haven’t bought into that.
The top .1% is certainly doing well. If globalization is the cause of that, and probably partially is, that doesn’t answer if that is a good thing to have massive wealth, and the power that goes with it to capture regulators and mold laws for their own benefit, is a good thing. Or is there a way for those gains to be spread out differently. Or if those gains are concentrated in the top .1% because they have used their power to have laws written to benefit themselves.
At what point does one country run itself to benefit people outside of the country at the expense of those in country. I know that leads to all sorts of questions but it certainly isn’t part of the wider public debate.Report
@greginak
Only the most blind and hippie anti-Capitalist/anti-West/Fanon-loving activist can argue globalization has not helped raise the standards of living in the developing world. Standards are living are being raised in places like Bangladesh where the hours are brutal and the pay is also but workers can now purchase enough meat for the year from their bonus/holiday pay alone and send their siblings to school.
The big issue in the U.S. is the decline of relatively unskilled manufacturing jobs which actually had recent wages and productivity. The growth industries in the U.S. seem to be horrible service jobs with low pay and benefits.
http://www.theatlantic.com/business/archive/2014/11/no-wage-growthbut-why/382519/Report
Oh i don’t doubt globalization is part of the reason for stagnation/inequality here. I doubt it’s the entire reason and still doesn’t answer my other questions.Report
Okay I will try to answer.
“If globailzaion is good for people in third world countries no politician on any side is actively using that argument and they certainly aren’t winning election based on that. So the mass of people in the US haven’t bought into that.”
There is a subtext here that no politician on either side will say. The subtext being “Globalization does increase living standards in the developing world but yeah it means that these jobs are leaving the U.S. and maybe Americans are going to deal with lower economic expectations for a generation or two.”
There is no way for a liberal or conservative politician to get away with saying this in a Western Democracy. It almost sunk David Perdue in Georgia when he said he was proud of his outsourcing. An argument like this can be made by wonky types like Matty Y who hold economics as holy above all but Matt Y couldn’t get himself elected dog-catcher yet alone any position of power. He will merely be a very serious person in the media writing his very serious things.
Economics wonks tend to be interesting because they are absolutely gob-smacked when people disagree with them. Most people are not Market Anarchists and the Market Anarchists jump up and down at this. People care about falling wages and the Market Anarchist jumps up and down and says “Why do you care about wages falling ten percent when prices are falling 20 percent?” Once someone has become a true believer in market anarchy, nothing seems to stop them.
There are just simply things politicians cannot say in Democracy like “Based on history and economics, things are going to suck here for a lot of people for about 40-60 years and then better jobs and wages will return.” Basically you might be telling one or two generations that their economic prospects are fucked.
I’d personally like to see someone try and run on this because I just want to know how badly this message will fail.
There is a common refrain from wonks that public desire can’t be the basis for public policy. The problem is that you need a better sort of person (read: Mr. Spook combined with the Buddha). Economists wonks can talk all they want about “impersonal market forces” but people are emotional creatures and are going to take it personally. But once a person believes in the market as the great thing, they are going to cease to understand how people take downsizing personally.
http://www.vox.com/2014/11/10/7157997/everyone-is-selfish-when-it-comes-to-politics
Sample:
“2) The better people are at meritocracy, the more they tend to want meritocracy
Some readers might start feeling satisfied at this point because they’re liberal on school prayer even though they’re Christian, or liberal on immigration even though they’re native-born. But such people are reading an article by academic researchers on Vox.com, which probably means they’re nerds.
The thing about nerds — well, the thing about people who test well and have lots of education — is that they’re routinely pretty opposed to group-based discrimination. Why? Because they prefer meritocracy. Why do they prefer meritocracy? Because meritocracy sets ground rules that allow good test-takers and highly educated people to obtain disproportionate success and social influence, regardless of their race, religion, and so on.”
So perhaps market anarchists and globalization advocates benefit from it more and merely phrase it in ways that justify their benefit.Report
Philosophical differences over whether it’s bad that $1 is transferred from a middle class American to a dirt poor Indian, it seems to me that this one particular point should be completely uncontroversial. Is there actually a legitimate argument for being sad that your wages are down 10% if prices are down 20%? Maybe their counterfactual is that they’d live in a world where their purchasing power goes up more than 12.5%?Report
This whole ‘wages are down, but prices are down more’ argument really bugs me.
Yes, on the one hand, it’s true. I can purchase many things for dirt cheap that used to be not-dirt-cheap.
But that particular basket of goods are not the backbone of spending for typical families; and those things are not down 20%. Housing is not down in places where there’s work, for instance. Where it is down, it’s often a loss for families; a serious economic hit. Likewise, education costs are not down. Day care costs are not down. Health care costs are not down; (and they’ll increase for many, particularly absent the premium subsidies in ACA.)
So while I might be able to go purchase a new hand mixer* for 20% less than I did a decade ago, I also have to worry that the new hand mixer will not last the decade the previous one did; and I’ll have to replace it in two years instead of ten. That is not a 20% savings to me.
*this is a real example; the mixer I replaced lasted for about 20 years; the replacement lasted less than two years. And while it was about 20% less, I did not save 20%, I had to spend 80% more, and will probably have to do so at least two or three more times to cover that same 20 years.Report
What @zic said.
Wages have been stagnant over the past 20-30 years, but the cost of food, utilities, rent/mortgage payment, insurance, healthcare and transportation have all increased steadily.
Noting that you can buy a plasma screen TV or a cell phone for way less now than you could a decade ago is nice and all, but it doesn’t really address or even recognize the problem. It just means that when you see people struggling to make ends meet even when they work full time (or more), you can go full-John Stossel and pretend their problems don’t exist because they own TVs and cell phones.Report
@troublesome-frog
I think Zic raises a good point. The prices of consumer items are down and that is great but what goes up are the costs of things that are necessary for social mobility like day care, education (especially college), healthcare, and housing.
So people get shiny things which is good but I am not sure that a new Iphone or Home Entertainment System should be solace for rising daycare costs.Report
@saul-degraw
People say that when they poo-poo price indexes, but a good price index takes that sort of thing into account. Economists aren’t saying, “Well, iPads are cheaper. Our job is finished.” They actually try to tease out what people are buying and weight their metrics accordingly. The fact that some items come out above the weighted average is just a property of averages. It’s the weighting that matters.
To hear the average person talk about inflation, you’d think that all they do all day is buy gasoline and burn it in big bonfires or pound down loaf after loaf of bread. People seem to forget that they pay for *lots* of goods and services over the course of a year. I think the big problem is when people say “inflation” they don’t mean, “the numbers calculated by BLS.” They mean, “how I feel in my tummy about the economy in general.” Those discussions are usually dominated by vague feelings of unease rather than actual data.Report
Wages have been stagnant over the past 20-30 years, but the cost of food, utilities, rent/mortgage payment, insurance, healthcare and transportation have all increased steadily.
Real wages have been stagnant, not nominal wages. Saying that “wages” have been stagnant and prices have increased is double-counting, because the increase in prices is the reason real wages have stagnated while nominal wages rose. Actually, triple-counting, since the funneling of compensation increases into more expensive health insurance is part of the reason real wages have been stagnating.
If you want to say that the way the inflation adjustments are calculated is wrong, and that the median real wage is not merely stagnating but declining, then that’s an argument you can make, but pointing to the fact that certain prices have increased faster than the overall inflation rate doesn’t cut it, because other prices have increased more slowly.
There’s also the fact that “health care” and “housing” are not goods of fixed quality and quantity. “Housing” has gotten more expensive in part because it’s gotten bigger. “Health care” has gotten more expensive in large part because people are consuming new types of health care that are better than the old kinds. I strongly suspect that this is illegal, but hypothetically, if an insurance company were to offer a health insurance plan offering coverage equivalent in quality to what was available in 1990, it would likely be quite a bit cheaper than a typical insurance plan today. All of which is to say that only part of the increases in a typical family’s expenditures on housing are due to inflation as such, the rest is due to buying more of those things.
By the way, here are two puzzles that occurred to me: If wages are stagnant, then why are child care costs rising? And who exactly are all those crappy service jobs to which Saul alluded serving, if we’re all broke? It’s not like everyone’s going to work as personal servants for the rich.Report
Economists aren’t saying, “Well, iPads are cheaper. Our job is finished.”
Ironically, this is exactly what the inflation conspiracy theorists are doing. “Health care is expensive. Real wages must be declining.”Report
@brandon-berg
This occurred to me as well. It shouldn’t be surprising that childcare prices go up faster than other prices because childcare is basically pure human labor (at least until we can just strap them into chairs with iPads in front of them), but that only works if you think that pure low-skill human labor is increasing in value. If you think it’s stagnating or decreasing in value, child care should get cheaper every year barring some onerous new regulations or a boom in demand for it.
Human care seems to be a real potential growth industry as we outsource manufacturing labor to lower cost countries and build robots to replace people here. With an aging populating and an ever increasing number of working parent households, taking care of people who need a human to give them a hand seems like a job that will be in ever increasing demand and that won’t be replaced by robots or people in Bangladesh any time soon.Report
Housing is not down in places where there’s work, for instance. Where it is down, it’s often a loss for families;
Maybe housing should never change price.
You’re trying to have it high ways here, by focusing in each case just on the negatively affected. That’s not really an appropriate way to analyze a situation because all it leads to is a claim of crisis no matter which trend occurs.
One might as well analyze human health by noticing with great alarm that if we all became as healthy as we’re encouraged to to, doctors would be out of work!!Report
“Maybe housing should never change price.”
Well, that’s the theory behind rent control…Report
Human care seems to be a real potential growth industry as we outsource manufacturing labor to lower cost countries and build robots to replace people here. With an aging populating and an ever increasing number of working parent households, taking care of people who need a human to give them a hand seems like a job that will be in ever increasing demand and that won’t be replaced by robots or people in Bangladesh any time soon.
According to the BLS projections I mentioned earlier, personal home care or whatever they call it is expected to be one of, if not the fastest growing employment sectors. Unfortunately, it doesn’t pay very well.
Every morning I wait for the bus with a couple women who do it for a living. Not only does it not pay well, but man does it strike me as unpleasant. They seem to have become immune to its… less pleasant aspects, but the stories they tell are just awful. If we were paid by the relative unpleasantness of our jobs, those two women would be millionaires. As it is, I consider them saints.Report
At what point does one country run itself to benefit people outside of the country at the expense of those in country.
If the world’s richest and most powerful country doesn’t, who will? 😉Report
Well i will admit we are just great at redistributing our supply of bombs and missiles. ( pats self on back)Report
(“Arizona Local 933 Ratifies New Contract with Raytheon”)Report
I would say we should attempt to recouple income and productivity (on the broadest level: “workers’ productivity” in general; “working & middle-class incomes” in general) through a basic income that gets sent to everyone on top of their wages (I’d prefer separate transfers rather than direct additions to payroll/tax credits so that people actually had a sense of what’s going on), or in lieu of ages in the case of those who can’t find work.
The money can be printed (just have to pass a law telling the Fed to do it) & the Fed can handle the effects on prices.Report
Why not focus on income mobility? As others have pointed out, wages are effected by a lot of external forces that we don’t/can’t have control over. But greater income mobility means people have more opportunities to get out of jobs that are no longer marketable. And – not to channel David Brooks – but the dream that you can make it rich if you put your nose to the grindstone seems more in line with where American society is today than the idea that you can live a comfortable life full of financial growth while stuck in a dead-end job. The fact that countries as different as South Korea, Britain, German, USA, Japan, and Mexico all have the same downward trend in labor costs would also indicate that no one has a magic bullet yet.
On the other hand, the US ranks pretty low in income mobility compared to the OECD. And while it’s hard to draw causation, there is a significant correlation between strong safety-nets and overall mobility; something that will sit comfortably with Democrats. Off the top of my head, one area to focus on would be access to affordable education (it’s also the case that high-skilled/advanced-degree workers are the the least effected by the wage gap). Getting more people a degree and making sure that degree doesn’t saddle them with lifelong debts would put them into positions where their productivity can be compensated. Of course, Democratic nominees have been talking about this a lot (including loan forgiveness programs that depend on community service, etc.) but it’s mostly been implemented at the executive level with insignificant changes, not with a monolithic Obamacare-style education overhaul. This would also mean making some decisions that are painful for Democrats, like loosening union protectionism or the minimum wage, in exchange for things that they like but never do, like increasing the estate tax. Tangentially, this list could also include continuing efforts to cut the employer/health-care relationship, so that there’s less job-lock due to insurance. I’m actually unsure whether the ACA is a step forward or backward on this, but I would be happy to see Democrats try to move away from the employer mandate (which is already unpopular) while keeping the rest of the ACA stable.
Unfortunately, this means hurting a lot of core labor constituencies while giving most of the goodies to the youth – a voting bloc that doesn’t actually vote. On the other hand, the optics on “mobility” are much better than on anything else the Democrats have proposed recently; such programs inherently benefit immigrants and minorities with less of a built-in support network; and there are real bargaining chips that can be traded to the GOP on taxes and unions.Report
This is a very good comment, triz.Report
It can be really trying to attempt to understand a complicated problem like this. Geeting to the bottom of it takes a lot of work, but here’s a general outline
The first step to to check to see whether your phenomenon really exists (you’d be surprised how often people get tripped up by this). To my mind that means checking two things that @brandon-berg noted, what marginal labour productivity is doing (as that is the productivity that matters in this context) and looking at non-wage compensation.
Assuming you still have something to explain, the next step is to start to find the “edges” of the phenomenon. Are there any sharp turning points in the data (it looks like something happened in the early ’70s), what was happening in similar countries at the same time? If this is a US-specific phenomenon that implies a country-specific cause, but if similar countries experienced something similar, then it’s probably not something the US did in particular. Conversely, globalisation would probably be affecting more countries than just the US.
Then you start cutting the data as many ways as you can think of – how does it look by state, by age cohort, by ethnicity, by household composition, by industry. Not only will this help you figure out if composition is partially to blame, but it will hopefully show something interesting. Then the real work begins – you start formulating hypotheses and try to work out if you’ve found something real, or just a random anomaly in the data.Report
I’ve done all that, formulated the hypothesis, presented it here, and had you shoot it down because the implications were uncomfortable to your ideological priors. Of course, it’s not as if you could supply a better hypothesis, one that actually accounts for the data across multiple lines of evidence.
To be perfectly honest I just don’t have the energy to do it all again in a combox with a phone.Report
@road-scholar
This is your first comment on this post. What are you talking about?Report
@road-scholar
Is this your Georgist idea? Use land taxes?Report
Why do you assume that wages and productivity were ever coupled in the first place?Report
A Marshall follow-up:
http://talkingpointsmemo.com/edblog/what-if-theres-nothing-we-can-doReport