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Post 04 Feb 2018, 9:00 am

Ray Jay wrote:
freeman3 wrote:High inflation sucks. But there has to be a way for our economy to allow for real (above inflation) wage increases for the average worker.


2.9% wage increases in an economy of 2% inflation is what we have and you are complaining about it.

Hang on, aren't you the one saying that the wage increases have led to a fall in stock prices? Seems that shareholders are complaining. And is that 0.9% gap just the current position or reflective of longer term trends. Inflation was low during the recovery, but has been creeping up. And overall, wages (especially when you look at median rather than mean averages) have not been rising as fast as GDP or productivity.
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Post 04 Feb 2018, 10:09 am

I am not complaining about the wage increases, RJ. I just was sort of fascinated by this statement you made: "As Ricky mentioned, the median income had not been increasing, and now it has. On the flip side, we may start having inflation and the fed may have to raise interest rates to chill us, especially if we restrict immigration."

If we get real median wage increases...then that likely only can happen in our current economic system when unemployment gets very low...and then we have to raise interest rates to stop the economy from overheating. So if that's true (and the above is my interpretation of the implications of your statement) then we really cannot have real median wage increases in the way our economy is structured.

And that sucks.
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Post 04 Feb 2018, 11:08 am

freeman3 wrote:I am not complaining about the wage increases, RJ. I just was sort of fascinated by this statement you made: "As Ricky mentioned, the median income had not been increasing, and now it has. On the flip side, we may start having inflation and the fed may have to raise interest rates to chill us, especially if we restrict immigration."

If we get real median wage increases...then that likely only can happen in our current economic system when unemployment gets very low...and then we have to raise interest rates to stop the economy from overheating. So if that's true (and the above is my interpretation of the implications of your statement) then we really cannot have real median wage increases in the way our economy is structured.

And that sucks.


Economies are really complicated. Trump's base wanted him to improve the situation of the working man. These are people who felt neglected by the Democrats who are often insulated from their own policies. (My Democratic friends in Mass. don't want to drill oil in Alaska because it will ruin the environment and cause global warming. Unemployed guys in Alaska may have different concerns. BTW, drilling for oil is part of the reason that Norway has a good economy.)

The regulatory relief has been a positive. But if the economy overheats we will have a problem. Personally my preference is that we open up trade and take in more legal immigrants based on merit. But I'm not a Trump supporter and I'm also insulated from these trade and immigration policies.

The market has been running with historically low interest rates. That's good for asset values, and good for companies trying to borrow money, but has dangers of its own. It also hurts retirees who can no longer earn any interest on bonds. That's starting to change for them. There are winners and losers surrounding all of these things. It's certainly too complicated for either political party to control.

However, we can have real median wage increases, and the only way to get there is via productivity. Companies have to be more productive, which is greatly assisted by both regulatory relief and tax relief. But individuals also have to be more productive. They have to take care of their own productivity. (training, education, working hard, trying to solve your own economic issues, etc.)
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Post 04 Feb 2018, 11:12 am

Danivon
Hang on, aren't you the one saying that the wage increases have led to a fall in stock prices?


A 4% fall after a 25% increase?

Danivon:
And overall, wages (especially when you look at median rather than mean averages) have not been rising as fast as GDP or productivity.


source for 2017?
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Post 04 Feb 2018, 11:28 am

I agree productivity is the key. It seems that the recent real wage increases are linked to the economy starting to overheat, which will mean interest rates will rise, and current dreams of 3.0% growth are out the window. I just don't see what we are doing to increase worker productivity. Are we investing enough in infrastructure? Are we (through extremely high educational costs) putting up impediments to workers being more educated/skilled? Are we encouraging companies to do R&D to develop new technologies/better more efficient ways of doing things? Are we encouraging business investment? Are we getting enough science graduates? Do we have a national plan for space development, improvements in transportation, and development of new technologies?

A significant jump in worker productivity is not going to just happen. Whatever we have been doing over the past 20 years...has not been working as far as increasing worker productivity. Cutting regulations and cutting corporate taxes seems unlikely to change things.
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Post 06 Feb 2018, 8:22 am

freeman3
I agree productivity is the key.


Its not. There has been no link between productivity increases and pay for the vast majority of workers since the 1970s.

This paper updates and explains the implications of the central component of the wage stagnation story: the growing gap between overall productivity growth and the pay of the vast majority of workers since the 1970s. A careful analysis of this gap between pay and productivity provides several important insights for the ongoing debate about how to address wage stagnation and rising inequality. First, wages did not stagnate for the vast majority because growth in productivity (or income and wealth creation) collapsed. Yes, the policy shifts that led to rising inequality were also associated with a slowdown in productivity growth, but even with this slowdown, productivity still managed to rise substantially in recent decades. But essentially none of this productivity growth flowed into the paychecks of typical American workers. Second, pay failed to track productivity primarily due to two key dynamics representing rising inequality: the rising inequality of compensation (more wage and salary income accumulating at the very top of the pay scale) and the shift in the share of overall national income going to owners of capital and away from the pay of employees. Third, although boosting productivity growth is an important long-run goal, this will not lead to broad-based wage gains unless we pursue policies that reconnect productivity growth and the pay of the vast majority.



https://www.epi.org/publication/underst ... -its-real/
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Post 06 Feb 2018, 8:28 am

Rayjay
BTW, drilling for oil is part of the reason that Norway has a good economy.)


Very true. Norway also leads the way in regulation for both safety and environmental safeguards .
And all Norwegians are benefiting from wealth created with a sovereign wealth fund. The fund is the world's largest sovereign wealth fund. It invests Norway's revenues from oil and gas production for future generations in stocks, bonds and real estate abroad.
Ironically they have just decided to lose all their oil stocks in the fund...

http://www.cbc.ca/news/business/norway- ... -1.4405071
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Post 06 Feb 2018, 11:05 am

Ricky,

There was a big jump in productivity during and shortly after the Clinton years and that resulted in a jump in economic growth and higher wages. Your paper cites this as the only period where wages grew. Certainly, I agree that we should also be taking other steps beyond worker productivity to ensure workers get a fairer share of the wealth they produce.
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Post 07 Feb 2018, 7:43 am

Here's an interesting chart that goes beyond the headline unemployment rate. That headline rate doesn't differentiate between full time and part time workers. In addition to lowering the unemployment rate, the Obama / Trump recovery has increased the ratio of full time to part time employment. It seems to me that the change has accelerated with Trump.

https://www.advisorperspectives.com/dsh ... nuary-2018
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Post 07 Feb 2018, 7:57 am

Ray Jay wrote:Here's an interesting chart that goes beyond the headline unemployment rate. That headline rate doesn't differentiate between full time and part time workers. In addition to lowering the unemployment rate, the Obama / Trump recovery has increased the ratio of full time to part time employment. It seems to me that the change has accelerated with Trump.

https://www.advisorperspectives.com/dsh ... nuary-2018


That’s something the government should seek to address, says me, a conservative. Are there policies which have made this inviting for businesses?
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Post 07 Feb 2018, 9:29 am

rayjay
In addition to lowering the unemployment rate, the Obama / Trump recovery has increased the ratio of full time to part time employment. It seems to me that the change has accelerated with Trump
.

from your source:
Many have speculated that the Affordable Care Act (aka Obamacare) has played a role in company decisions about full-time versus part-time employment. The $2,000 per employee penalty for companies that do not comply with regulations has influenced some to rethink their employment policies. In July 2013 the government pushed the start of the penalty from January 2014 to January 2015. But the anticipation of the penalty, even though delayed a year, no doubt influenced the decisions of private employers.
With regard to Obamacare and part-time employment, the surge in part-time employment was triggered by the recession, not by the Affordable Care Act, as the next chart clearly illustrates
.

Tying health insurance provision to employers is a uniquely American approach in today's world. It creates enormous complications for both the employer and the employee. Eliminating freedom of movement for many employees as well.
And when looking at the shape of the labor market it adds a distortion.

freeman3
Your paper cites this as the only period where wages grew

So what specifically, in those few years, occurred for this to have happened?
And what would have to occur for this to be sustained?
Short bursts do not make a trend and do not discount the long term trend either,

The dotcom boom occurred about then... Perhaps it was just the over caffeinated economy at the time? A situation that could not, and did not last, as it was based upon speculation with a less than solid underpinning?
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Post 08 Feb 2018, 7:34 am

Ricky:
Tying health insurance provision to employers is a uniquely American approach in today's world. It creates enormous complications for both the employer and the employee. Eliminating freedom of movement for many employees as well.
And when looking at the shape of the labor market it adds a distortion.


Agreed. You do realize that where previously these ties were voluntary and tax motivated, that all changed when the ACA added compulsory components enforcing mandatory and stepped up health insurance for many employers.
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Post 08 Feb 2018, 10:07 am

rayjay
Agreed. You do realize that where previously these ties were voluntary and tax motivated, that all changed when the ACA added compulsory components enforcing mandatory and stepped up health insurance for many employers


I do. The ACA is crappy.
Its just incrementally better than what it replaced.
That is if you wish to achieve universal coverage as a goal. (And why not?)
If you wish to regulate insurance policies to avoid poorly informed consumers purchasing nearly worthless policies. (and why not?)
if you wish to reduce, or even eliminate personal bankruptcies due to medical calamities. (and why not?)
If you wish to provide consumers the ability to move jobs freely without regard to access to health insurance being restricted by pre-existing conditions. (and why not?)
The ACA should not be judged by comparing it to perfection. Only by comparing it to conditions that existed prior to its inception.
The fact that the ACA did not abandon the provision of health insurance primarily through employment is simply because the political will didn't exist to follow the proven best practices established in other countries.
Perhaps this political will cannot ever be achieved. Or perhaps the fact that health cost inflation runs ahead of general inflation and is a growing and largely unmanaged factor in the economy that increasingly affects international competitiveness for US industry will see industry push for the required change.
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Post 08 Feb 2018, 10:45 am

The dot com boom might have contributed to stocks going up ...Dont think it explains growth in worker productivity.

The most likely explanation was new technology: computers.

Here is an interesting article from The NY Times from 1993 where they could see it coming:

http://www.nytimes.com/1993/02/17/busin ... wanted=all

Another couple of articles analyzing the causes of more productivity:


http://www.epi.org/publication/webfeatu ... h_lessons/
https://www.mckinsey.com/global-themes/ ... t-com-bust
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Post 08 Feb 2018, 11:00 am

I don't even know why I needed to look that up: the growth in productivity among lawyers due to computers and the internet was stratospheric during the 90s (my early years as a lawyer). I still feel like getting access to the information you need is not where it should be. In other words, I think there is still room for improvement in productivity by workers getting instant access to information they need.