Beyond Twinkies: Why More Workers Are Striking
- Thread starter nutmeg
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Maybe I am speaking a little more colloquially, but my point is that, if you accept the premise of a housing bubble, which nearly everyone does, you almost have to accept the premise of a wage bubble. Otherwise, where were people getting the income to pay the inflated mortgages on those houses?
Yes, some of the mortgage payments were artificially low due to financial chicanery like ARMs or interest-only loans, but those were not the case for every mortgage, nor is it necessarily the case that even those financial products didn't result in higher payments than would have been the case without the housing bubble itself, i.e. the interest-only payments on a house bought during a housing bubble would have been bigger than the interest-only payments on a house not bought during a housing bubble. So, you still need an artificially-inflated income to make that payment.
Also, you could probably look at corporate profit margins during the housing bubble as indirect proof of a wage bubble. As I recall, much of the growth in the market since the 2009 bottom came from margin expansion. One way for that to be true is if employers were gradually clawing back wage gains made by employees during the housing bubble.
One of the typical characteristics of bubbles is mania, where rising prices themselves lead to higher demand, fueling further higher prices. <i>That's</i> a bubble.
The housing market was a bubble. A marginal 1% increase in wages every year was not.
Employers managed to extract more productivity out of workers per every man-hour over the decades without compensation keeping track with the value of that labor. While financial assets appreciated in value and many people at the top got wealthy, consumers, who typically do not have assets aside from home equity, increasingly turned to only way they could "keep up" in an environment of stagnant wages: going into debt for their homes. Everyone thought the housing market would rise to infinity, including those who built structured products out of the debt itself, leading to irrational exuberance on both sides of the market. People bought homes they couldn't afford in the expectation that prices would continue to rise and they could finance another purchase. Same expectation from investors in high-risk CDOs derived from that debt.
The reason why housing was a bubble was precisely due to why wages were not: there was no way to pay for all of it.
Yes, housing was in a larger bubble than wages. That's why housing prices fell 30-40% and wages have fallen less than that.
A "marginal 1% increase in wages" can still be a bubble if, in point of fact, wages should have been flat or down. It's not quantity per se, it's the delta between the amount of the rise that actually happens and the amount that "should" happen.
Like I said, I don't think "labor", isolated from capital investments, has shown increased productivity at all. Do people type faster? Can people move their limbs faster on an assembly line? Can drivers drive better? No, it's investments in capital that have increased productivity and those investments were not made by workers, they were made by management on behalf of shareholders. That they paid off for those shareholders, where they did pay off (how many companies sunk a ton of money into botched ERP implementations, for example, costing their shareholders millions in lost sales?), is appropriate and the fact that the workers were not able to capture much of those gains is, too, since it was not the workers who made them possible.
As for the "mania" aspect of it, remember "The War for Talent"? Guys who could code a little HTML getting stock options? People quitting their jobs to become real estate agents?
Wait a second, your argument has changed. First it was there was an unsustainable bidding war for the price of labor (i.e., a bubble) due to labor's ability to demand higher wages... somehow. Even though unions have declined rapidly, workers must be collaborating across the economy or using universal threats of violence to inflate that bubble, with nothing to show for the value of that labor (i.e., productivity).
In the face of the productivity-wage divergence, you now agree with me that workers were not able to leverage their skills to capture those gains in productivity. These are mutually exclusive.
You're correct that capital investment is part of the productivity equation. It's incorrect to imply that it's the entire equation. Capital does not develop and deploy itself. There's a reason why wages have historically tracked productivity in the developed world:companies hire people for skills. Databases do not design themselves, the makers of your trading software were not robots, advances of technology require new skill sets to deploy. No different from when the automobile was mass-produced or the loom went into production. We do not live in a robotic economy now, and we certainly have not lived in one since 1974. Structural unemployment is associated with those changes in a dynamic economy, but incentives then track to new skill sets.
I think there are a few solid theories that might explain that divergence. The idea that labor has undue market power to engineer a bidding war is not one of them. Your stock option example pertains not to wages but equity compensation -- how the majority of that "1%" red line in the chart there gets paid.
I've said all along that the wage bubble tracked the housing bubble, not that labor somehow gained additional power due to unionization or other forms of market power. Employers had no choice but to "give away" some of the gains of capital investment-based increased productivity to workers during the housing bubble in order to maintain necessary staffing levels. In a non-housing-bubble world, firms would have kept those gains to themselves. Well, they had a choice, but there would have been costs associated with exercising that choice, i.e. it would have taken longer to fill the necessary positions at lower cost. Labor gained power because of the housing bubble. That's my contention.
One way to test my hypothesis would be to look at wages at firms which predominantly employed renters during the housing bubble vs. firms which predominantly employed mortgage-payers (calling them "home owners" is just stupid). My hypothesis would be that the firms which employed renters would have lower labor costs (controlling for skills) than those which employed mortgage-payers, since rents were flat to down during the period of the housing bubble. If my hypothesis didn't pan out in that empirical experiment, then it's inaccurate.
Just from an anecdotal perspective, at one point in the housing bubble era, I worked at a firm ranked #1 in its industry for employee compensation (not a place any firm wants to be, but they were) and I was renting at the time. The ratio of my compensation to my rent was insane. I wasn't out in the boondocks, either, I was about a mile away from downtown Chicago, where the office I worked out of was. Most of my co-workers were not renters, but were paying mortgages instead.
Logic man, you sound like alan Greenspan.
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"Workers are getting more confident because the capitalist boom has increased the bosses' demand for labor power. This is slowly bringing the workers out of the totally defensive position they have been in since the epidemic of downsizing and restructuring spread like wildfire and traumatized the whole class.
It is giving them a new, although cautious, confidence. Real wages have risen slightly-about .5 percent-in the past year.
The only way to counteract this tendency is to slow down the boom and raise unemployment. Greenspan would like to be able to engineer a soft landing. But to slow down the boom means to reduce the volume of profit."
http://www.workers.org/ww/1997/greenspan2.html
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"Workers are getting more confident because the capitalist boom has increased the bosses' demand for labor power. This is slowly bringing the workers out of the totally defensive position they have been in since the epidemic of downsizing and restructuring spread like wildfire and traumatized the whole class.
It is giving them a new, although cautious, confidence. Real wages have risen slightly-about .5 percent-in the past year.
The only way to counteract this tendency is to slow down the boom and raise unemployment. Greenspan would like to be able to engineer a soft landing. But to slow down the boom means to reduce the volume of profit."
http://www.workers.org/ww/1997/greenspan2.html
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The "singularity" is a fantasy. Entropy is always left out of the equation when geeks begin extrapolating their cyber world into the physical....