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[Jan 05, 2015] Lack of bargaining power due to de-unionization, off-shoring, automation and massive numbers of cheap - and frequently undocumented - immigrant labor has placed downward pressure on wages in many industries, including most of the ones with the greatest job growth. All the gains in productivity have been accruing to capital, almost none to labor.

Jan 05, 2015 | Economist's View

FRBSF Economic Letter Why Is Wage Growth So Slow


Despite considerable improvement in the labor market, growth in wages continues to be disappointing. One reason is that many firms were unable to reduce wages during the recession, and they must now work off a stockpile of pent-up wage cuts....

-- Mary Daly and Bart Hobijn

[ What offensive nonsense, as though real after-tax corporate profits per employee had exploded, simply exploded, since 2000. ]

drb48 -> anne:

Thank you Anne for introducing some sanity to what is the biggest bunch of hogwash I've read in a while.

drb48 -> anne:

Wage growth has been "disappointing" for decades. If employers have a problem reducing wages, it's because they're already so low. Lack of bargaining power due to de-unionization, off-shoring, automation and massive numbers of cheap - and frequently undocumented - immigrant labor has placed downward pressure on wages in many industries, including most of the ones with the greatest job growth. All the gains in productivity have been accruing to capital, almost none to labor. Trying to rationalize with some bullshit study this as anything other than the powerful exploiting the weak is - as you say - offensive nonsense.

Roger Gathmann -> anne:

Exactly. Since economists like to think of themselves as physicians, perhaps they should consider a powerful force pushing on a weak force - a gorilla, for instance, squeezing a marshmallow. The gorilla is corporate power, the marshmallow, labor. Now perhaps the gorilla is able to squeeze the marshmallow because that marshmallow was so damn sticky and refused to budge last time - or maybe the marshmallow has been squeezed low these past thirty years.

Obviously, the economists will jump for the sticky solution, since politics, the relative power of capital and labor, is an offense against all the wonderful models based on equilibrium and god's own free market.


January 15, 2014

Real After-Tax Corporate Profits Per Employee, 2000-2014

2000 01 ( 5,938) *
2000 04 ( 5,771)
2000 07 ( 5,618)
2000 10 ( 5,312)

2001 01 ( 5,655) Bush
2001 04 ( 5,930)
2001 07 ( 5,430)
2001 10 ( 5,289) (Low)

2002 01 ( 5,851)
2002 04 ( 6,475)
2002 07 ( 7,092)
2002 10 ( 7,898)

2003 01 ( 7,775)
2003 04 ( 7,827)
2003 07 ( 7,229)
2003 10 ( 8,776)

2004 01 ( 9,933)
2004 04 ( 10,207)
2004 07 ( 10,534)
2004 10 ( 10,319)

2005 01 ( 12,460)
2005 04 ( 12,510)
2005 07 ( 12,713)
2005 10 ( 13,228)

2006 01 ( 13,395)
2006 04 ( 13,600)
2006 07 ( 13,600)
2006 10 ( 13,133)

2007 01 ( 12,112)
2007 04 ( 12,613)
2007 07 ( 12,002)
2007 10 ( 12,105)

2008 01 ( 10,975)
2008 04 ( 11,121)
2008 07 ( 10,661)
2008 10 ( 6,249)

2009 01 ( 9,989) Obama
2009 04 ( 10,850)
2009 07 ( 12,319)
2009 10 ( 13,260)

2010 01 ( 13,988)
2010 04 ( 13,814)
2010 07 ( 14,324)
2010 10 ( 14,113)

2011 01 ( 12,572)
2011 04 ( 13,005)
2011 07 ( 12,919)
2011 10 ( 13,486)

2012 01 ( 14,756)
2012 04 ( 14,437)
2012 07 ( 14,926)
2012 10 ( 14,579)

2013 01 ( 14,447)
2013 04 ( 14,921)
2013 07 ( 15,129)
2013 10 ( 14,861)

2014 01 ( 14,303)
2014 04 ( 14,982)
2014 07 ( 15,274) (High)

* Without inventory valuation and capital consumption adjustments,
seasonally adjusted, 1982 - 1984 dollars

I think there is a strong correlation of wage growth and energy consumption per capita.

As the latter now is shrinking the wages are stagnant.

Neoliberal transformation of society since 1970th also suppresses wages by dramatically increasing the share of owners.

Those two tendencies work together.

Making Do With Less: Working Harder During Recessions

New paper:
Making Do With Less: Working Harder During Recessions, by Edward P. Lazear, Kathryn L. Shaw, Christopher Stanton, NBER Working Paper No. 19328 Issued in August 2013: There are two obvious possibilities that can account for the rise in productivity during recent recessions. The first is that the decline in the workforce was not random, and that the average worker was of higher quality during the recession than in the preceding period. The second is that each worker produced more while holding worker quality constant. We call the second effect, "making do with less," that is, getting more effort from fewer workers. Using data spanning June 2006 to May 2010 on individual worker productivity from a large firm, it is possible to measure the increase in productivity due to effort and sorting. For this firm, the second effect-that workers' effort increases-dominates the first effect-that the composition of the workforce differs over the business cycle.

Posted by Mark Thoma on Monday, August 19, 2013 at 12:24 PM in

Paul Krugman: One Reform, Indivisible

Republican leaders who promised that Obamacare wouldn't work, and that it would be reversed, are headed for a big disappointment:
One Reform, Indivisible, by Paul Krugman, Commentary, NY Times: Recent political reporting suggests that Republican leaders are in a state of high anxiety, trapped between an angry base that still views Obamacare as the moral equivalent of slavery and the reality that health reform is the law of the land and is going to happen.

But those leaders don't deserve any sympathy. For one thing, that irrational base is a Frankenstein monster of their own creation. Beyond that, everything I've seen indicates that members of the Republican elite still don't get the basics of health reform - and that this lack of understanding is in the process of turning into a major political liability. ...

So let me help out by explaining, one more time, why Obamacare looks the way it does.

Start with the goal that almost everyone at least pretends to support: giving Americans with pre-existing medical conditions access to health insurance. Governments can ... require that insurance companies issue policies without regard to an individual's medical history... But we know what happens next: many healthy people don't buy insurance, leaving a relatively bad risk pool, leading to high premiums that drive out even more healthy people.

To avoid this downward spiral, you need to induce healthy Americans to buy in; hence, the individual mandate, with a penalty for those who don't purchase insurance. Finally, since buying insurance could be a hardship for lower-income Americans, you need subsidies to make insurance affordable for all.

So there you have it: health reform is a three-legged stool resting on community rating, individual mandates and subsidies. It requires all three legs. ...

You see, this thing isn't going to be the often-predicted "train wreck." On the contrary, it's going to work.

Oh, there will be problems... But the basic thrust of Obamacare is, as I've just explained, coherent and even fairly simple. Moreover, all the early indications are that the law will, in fact, give millions of Americans who currently lack access to health insurance the coverage they need, while giving millions more a big break in their health care costs. And because so many people will see clear benefits, health reform will prove irreversible.

This achievement will represent a huge defeat for the conservative agenda of weakening the safety net. And Republicans who deluded their supporters into believing that none of this would happen will probably pay a large personal price. But as I said, they have nobody but themselves to blame.

The Mystery of Low Wage Growth By Michael Mandel

August 06, 2006

Perhaps the oddest and most depressing fact about the U.S. economy these days is the lack of real wage growth. The unemployment rate has been below 5% since December, and productivity growth is still looking strong. Yet wages and salaries, adjusted for inflation, are down for virtually every broad occupational category.

According to the latest numbers from the Bureau of Labor Statistics, average hourly earnings for production and nonsupervisory workers are up by 3.8% over the past year. That may sound halfway decent, but it still lags the 4.3% increase in consumer prices over the same period (see, 8/4/06, "July Jobs: Pretext for a Fed Pause?"). Even managers and professionals are taking the hit: Figures from the BLS show that their real wages have fallen by 1.8% and 1.1%, respectively, over the past year.

This is not what I expected. Historically, real wages rise along with productivity once labor markets are tight enough. Based on the experiences of the 1990s, I was confident that wage growth was going to accelerate once the unemployment rate dropped conclusively below 5%. Still, the wage picture remains bleak.

KEY DIFFERENCES. True, there are some hopeful signs of life. According to the National Association of Colleges & Employers (NACE), "starting salary offers to new college graduates continue to climb." For example, the starting salary for accounting graduates is up 5.5% over the previous year. That's more than the 4.3% rise in consumer prices and well ahead of the 2.6% increase in all prices except food and energy.

But in a lot of fields that NACE tracks, the gains are not enough to keep up with inflation. Initial salary offers for computer science majors are up 1%, marketing majors saw an increase of 0.9%, and liberal arts majors a meager 0.2%, with these teeny increases obliterated by inflation.

But if the phenomenon of falling real wages is clear, the explanation is not. In the 1980s and 1990s, there was a sense that education and the ability to make use of new technology were the key differences between those who did well and those who didn't. Workers who could adapt to the new world of information technology prospered; those who could not saw their wages fall or their jobs disappear.

LOW-WAGE COMPETITION. Today, neither a college education nor computer literacy is enough to guarantee rising real wages. Some people are obviously doing better than others. Workers in the financial and health-care industries, for example, have seen their real wages drop by less over the past two years than those in retailing. But in no part of the economy are real wages doing well.

There are two alternative explanations for this broad-based problem. The first one has to do with globalization. Competition with low-cost workers in China, India, Eastern Europe, and the rest of the developing world may finally be taking its toll on American workers. With a surplus of labor around the world, real wages will stagnate, while returns to capital will rise.

Now, that's not bad news for everyone. If you own a home, you own a capital asset whose value has soared in recent years. If you have a 401(k) retirement account invested in the stock market, its value, too, has likely gone up since 2003. And if you are a taxpayer-as most of us are-it's a plus that state and local pension fund reserves have gone up more than 9%, or $245 billion, over the past year alone, in large part because of stock market gains. This makes it less likely that taxes will have to be hiked in the future to pay for government employee retirement benefits.

If the globalization answer is correct, then in general it's the young who are going to be hit the hardest. They don't have homes or other financial investments, and they have their whole working lives stretching in front of them, so weak real wages hurt them badly. For middle-class Americans aged 50 and higher, the math may be much different, since they likely own their own homes, which have greatly appreciated.

OVERESTIMATED? The other explanation for weak real wages is much more gloomy. Remember that wages usually track along with productivity. I hate to even say it, but what if the productivity gains of recent years have been overestimated? The latest revision of gross domestic product, released on July 28, seems to have cut productivity growth in 2004 and 2005 by almost half a percentage point. Further revisions of the statistics could push the number down even more.

No, I haven't swung from my usual optimism into the doom-and-gloom camp. But whatever way you cut it, the stagnation of real wages is not a good thing.

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