Flat Wages for the middle and working class - what to do?

[Critter7r]

So sorry you're unable to do what I asked, but, alas, that's your burden to bear.

Your assurance that more profit in the pockets of owners doesn't equate to the ability to pay higher wages doesn't make it any less possible.

 

[Conaeolos]

Capital investment is already pretty flat. The additional profits are being hoarded.

https://www.google.com/search?q=cap...1IPVAhWpy4MKHb_ZDCYQ_AUICygC&biw=1049&bih=932

You’ll have to walk me though your thinking a little bit more.

USA Capital investment as percent of GDP has hovered about 20% for a long time. Okay. We haven’t had any major policy shifts in that time only creep.

How does that address global capital investment lowering?

How does it address killing the growing global consumer markets driving those profits by artificially holding down their investment?

My original point being that the higher profits are coming from demand growing around the world not just domestically driven by global capital investment. Wages are down because you are looking at US wages which are artificially high by global standards which require highly favourable conditions[a state which is changing]. And GDP vs household income divergence is thus explained by income source and many factors as we have been discussing have been affecting most people’s wages.

Global wages are still up - massively. Global wealth is increasing. We are lucky enough to be capitalizing on that growth in terms of higher profits which lifts our GDP and disperses which is why you see higher GDP per capita but still no big shifts in Capital investment as percent of GDP. In fact I’d expect if anything Capital investment as percent of GDP to fall as US conditions become unfavourable to growing markets elsewhere which may offer more security as time goes on. Capital investment globally is way up! It’s where those profits are being spent ~ not being horde en mass, which is very difficult in our economic system. The higher ROIs are much higher elsewhere which presents challenges.

Now in terms of increasing government spending. I think we obviously have higher margins then most in terms of our ability to raise taxes[especially on the wealthy where a lot of extra margins exist]; however, the point I try reinforce to everyone who suggest this approach is public debt to GDP is 120% and when you account for liabilities like how changing demographic is going to put higher and higher % of people on medicare/Medicaid social security in the coming years. We already have the spending demands for signifiant tax increases without adding more social policy. In fact, the more we delay balancing our books the more we’re adding. 
Once you account for this artificially low tax rate. We know things get really crazy quick. We already have extremely high tax burdens even if we no doubt have a margin. Why I currently favour accelerating growth over addressing inequality at least in the short term.

 

[Critter7r]

You’ll have to walk me though your thinking a little bit more.

USA Capital investment as percent of GDP has hovered about 20% for a long time. Okay. We haven’t had any major policy shifts in that time only creep.

How does that address global capital investment lowering?

That's not even a sentence.

How does it address killing the growing global consumer markets driving those profits by artificially holding down their investment?

Non-sentence #2.

Serious question that will come off sounding douchey, but really isn't intended to ... Is English your first language? Because I'm really not following what you're asking above. (And I see you spelled it "favourable" below .. so either Canadian, or at least American English is not your native tongue).

My original point being that the higher profits are coming from demand growing around the world not just domestically driven by global capital investment. Wages are down because you are looking at US wages which are artificially high by global standards which require highly favourable conditions [a state which is changing]. And GDP vs household income divergence is thus explained by income source and many factors as we have been discussing have been affecting most people’s wages.

Globalism affects US wages. Check.

I don't know how to make it any clearer. Corporations are hoarding profits that they could be using to pay higher wages. Domestically, Internationally, whatever.

Global wages are still up - massively. Global wealth is increasing. We are lucky enough to be capitalizing on that growth in terms of higher profits which lifts our GDP

ok, hold it right there ... Increased corporate profits do not "lift our GDP" any more than me increasing my daughter's allowance lifts my household income.

and disperses which is why you see higher GDP per capita but still no big shifts in Capital investment as percent of GDP. In fact I’d expect if anything Capital investment as percent of GDP to fall as US conditions become unfavourable to growing markets elsewhere which may offer more security as time goes on. Capital investment globally is way up! It’s where those profits are being spent ~ not being horde en mass, which is very difficult in our economic system. The higher ROIs are much higher elsewhere which presents challenges.

The fact that coprorations spend their profits doesn't negate their ability to pay higher wages either.



None of the rest of this is really relevant to what we were discussing...

Now in terms of increasing government spending. I think we obviously have higher margins then most in terms of our ability to raise taxes[especially on the wealthy where a lot of extra margins exist]; however, the point I try reinforce to everyone who suggest this approach is public debt to GDP is 120% and when you account for liabilities like how changing demographic is going to put higher and higher % of people on medicare/Medicaid social security in the coming years.

But ....

There's going to be a lull in retirees over the next 25 years or so as the Boomers die off and the Gen X'ers come of retiring age. Then the numbers will likely ramp up again as we get the Millennials reaching retirement age.

We already have the spending demands for signifiant tax increases without adding more social policy. In fact, the more we delay balancing our books the more we’re adding. 
Once you account for this artificially low tax rate. We know things get really crazy quick. We already have extremely high tax burdens even if we no doubt have a margin. Why I currently favour accelerating growth over addressing inequality at least in the short term.

 

[Conaeolos]

Serious question that will come off sounding douchey, but really isn't intended to ... Is English your first language? Because I'm really not following what you're asking above. (And I see you spelled it "favourable" below .. so either Canadian, or at least American English is not your native tongue).

Not douchey, a fair question.

Yes. I have bad dyslexia and despite coming a long way over the years have an odd highly colloquial writing style. As an example, graduated high school with grade 6 reading and spelling level despite having grades that had me graduating early with honours and being accepted into university on scholarship. It’s certainly always been a point of confusion as my language can misrepresent my understanding and I not shocked by the observation in any way. Some people seem to struggle to understand it more than others.

Yes, I did grew up in Canada and leave my computer is on British English. I am however an American living here.

Increased corporate profits do not "lift our GDP" any more than me increasing my daughter's allowance lifts my household income.

In you don’t think our current American profit growth is based in selling more goods and services to foreign consumers?
OR
You don’t think that those return home?

Where is it being hoarded? In real estate? In cash? In foreign markets?

The fact that coprorations spend their profits doesn't negate their ability to pay higher wages

I never said they can’t pay higher wages. I simply said that it seems to me paying those higher wages when the market conditions don’t support them will kill overall growth which is allowing the margins in the first place which means those higher wages would be very temporary.

Why would we want temporary wage growth if it just going to hurt us down the line?

There's going to be a lull in retirees over the next 25 years or so as the Boomers die off and the Gen X'ers come of retiring age.

???
https://www.cia.gov/library/publications/the-world-factbook/graphics/population/US_popgraph 2016.bmp

How does this not show we have increased retiree liabilities coming?

 

[chuckiechan]

organizing labor would help, if only to make laborers a more effective lobbying group.

The democrats have "big data" now. All they want from labor now is it's money and votes.

"Card check" used to be the Holy Grail for democrats pitch to labor, but Silicon Valley told them they cannot live with unionization and attempts to curtail "H2b" visas. So now they have "big data" money and union leadership money.

 

[Critter7r]

Not douchey, a fair question.

Yes. I have bad dyslexia and despite coming a long way over the years have an odd highly colloquial writing style. As an example, graduated high school with grade 6 reading and spelling level despite having grades that had me graduating early with honours and being accepted into university on scholarship. It’s certainly always been a point of confusion as my language can misrepresent my understanding and I not shocked by the observation in any way. Some people seem to struggle to understand it more than others.

Yes, I did grew up in Canada and leave my computer is on British English. I am however an American living here.


In you don’t think our current American profit growth is based in selling more goods and services to foreign consumers?
OR ... You don’t think that those return home?

As in, Corporate profits are included in GDP, but so are wages (because most people spend all that they earn), so higher wages and lower profits wouldn't lessen GDP.

Where is it being hoarded? In real estate? In cash? In foreign markets?

Not in workers' pockets.

I never said they can’t pay higher wages. I simply said that it seems to me paying those higher wages when the market conditions don’t support them will kill overall growth which is allowing the margins in the first place which means those higher wages would be very temporary.

Why would we want temporary wage growth if it just going to hurt us down the line?

The labor market doesn't support higher wages because of the glut of unskilled labor and the fact that unskilled labor will take what it can get. Right now, business has the upper hand in the labor market. Which is why gov't needs to encourage higher wages by supporting unions and reducing illegal immigration.

Higher wages would spur more production and lead to increased revenues. The current climate of increased productivity doesn't compensate those remaining employees proportionally.

???
https://www.cia.gov/library/publications/the-world-factbook/graphics/population/US_popgraph 2016.bmp

How does this not show we have increased retiree liabilities coming?

Your graph shows that 55-59 is the largest population group right now. So in 5 years, that peak will be hitting retirement, and then it begins to decline for 15 years before starting to climb again when millennials start retiring. Hence, the "lull" I mentioned.

 

[Kushinator]

Just to add:

As in, Corporate profits are included in GDP, but so are wages (because most people spend all that they earn), so higher wages and lower profits wouldn't lessen GDP.

While this seems true on the surface, the economic result of aggregate production is also dependent upon private domestic investment, such that the labor market follows said trajectory:

Not in workers' pockets.

A growing concern regarding our current economic model.

The labor market doesn't support higher wages because of the glut of unskilled labor and the fact that unskilled labor will take what it can get. Right now, business has the upper hand in the labor market. Which is why gov't needs to encourage higher wages by supporting unions and reducing illegal immigration.

Government also could encourage a more dynamic education model... one that distances itself from the current standardized testing format.

Higher wages would spur more production and lead to increased revenues. The current climate of increased productivity doesn't compensate those remaining employees proportionally.

The problem is that wages also include benefits, which highlights the issue of surging health care costs. Wage earners with health care benefits are forced to take health care inflation on the chin, as it eats up more and more of their wage gains. Of course, there is a simple solution to this problem.

 

[Mac77]

Wrong. You can't negotiate higher wages without power. Unions give you an equal playing field. CEO pay has gone up dramatically. Time for more strikes.

Without American jobs what wages can unions negociate?

When bill clinton and the republican congress passed nafta and free trade with china millions of good factory jobs left the country

Now union bosses are fighting over the crumbs that free trade leaves behind

 

[Critter7r]

Without American jobs what wages can unions negociate?

When bill clinton and the republican congress passed nafta and free trade with china millions of good factory jobs left the country

Now union bosses are fighting over the crumbs that free trade leaves behind

We aren't competing for jobs with a global market so much as we are competing with a robotic market.


"The U.S. has lost 5 million factory jobs since 2000. And trade has indeed claimed production jobs - in particular when China joined the World Trade Organization in 2001. Nevertheless, there was no downturn in U.S. manufacturing output. As a matter of fact, U.S. production has been growing over the last decades. From 2006 to 2013, “manufacturing grew by 17.6%, or at roughly 2.2% per year,” according to a report from Ball State University. The study reports as well that trade accounted for 13% of the lost U.S. factory jobs, but 88% of the jobs were taken by robots and other factors at home."

Don?t Blame China For Taking U.S. Jobs | Fortune.com

 

[vegas giants]

Without American jobs what wages can unions negociate?

When bill clinton and the republican congress passed nafta and free trade with china millions of good factory jobs left the country

Now union bosses are fighting over the crumbs that free trade leaves behind

Trump has not ended NAFTA. Why?

 

[Mac77]

We aren't competing for jobs with a global market so much as we are competing with a robotic market.


"The U.S. has lost 5 million factory jobs since 2000. And trade has indeed claimed production jobs - in particular when China joined the World Trade Organization in 2001. Nevertheless, there was no downturn in U.S. manufacturing output. As a matter of fact, U.S. production has been growing over the last decades. From 2006 to 2013, “manufacturing grew by 17.6%, or at roughly 2.2% per year,” according to a report from Ball State University. The study reports as well that trade accounted for 13% of the lost U.S. factory jobs, but 88% of the jobs were taken by robots and other factors at home."

Don?t Blame China For Taking U.S. Jobs | Fortune.com

Thats interesting

And I don't have a counter study in my pocket to dispute the liberals at ball state

But an enormous percentage of the products on US retailer shelves were made in China and not by robots so the issue is not as simple as ball state would have us believe

 

[Mac77]

Trump has not ended NAFTA. Why?

Are you serious?

I hope you are just pretending to not know that trump cannot end NAFTA by executive order

 

[Critter7r]

Thats interesting

And I don't have a counter study in my pocket to dispute the liberals at ball state

But an enormous percentage of the products on US retailer shelves were made in China and not by robots so the issue is not as simple as ball state would have us believe

Well ... a couple things. 1) Is it more than the percentage of items that were made in China than "before"? 2) There is no doubt in my mind that a great number of mfg jobs that used to be done by humans are now done by robots, or some form of mechanization that has reduced the number of humans needed to perform the job in automobile manufacturing, assembly of pretty much anything in general, growing crops, steel mfg, etc.

 

[Mac77]

Well ... a couple things. 1) Is it more than the percentage of items that were made in China than "before"?

2) There is no doubt in my mind that a great number of mfg jobs that used to be done by humans are now done by robots, or some form of mechanization that has reduced the number of humans needed to perform the job in automobile manufacturing, assembly of pretty much anything in general, growing crops, steel mfg, etc.

Yes

Prior to 2000 we imported very little from China and many more things were made in America

Its possible that if the jobs were not taken from America and sent to china they would have been automated in America instead

And I can accept that

My position is that if robots take over I want the robots to be designed, made and operated in America not some foreign country

 

[vegas giants]

Are you serious?

I hope you are just pretending to not know that trump cannot end NAFTA by executive order

The republicans control all of congress and the presidency. What is the holdup?

 

[Mac77]

The republicans control all of congress and the presidency. What is the holdup?

That is not a serious question

 

[vegas giants]

That is not a serious question

And that is not a serious answer

 

[Mac77]

And that is not a serious answer

I don't waste my time answering nonsense questions like yours

 

[vegas giants]

I don't waste my time answering nonsense questions like yours

I accept your concession

 

[vash1012]

The problem is that wages also include benefits, which highlights the issue of surging health care costs. Wage earners with health care benefits are forced to take health care inflation on the chin, as it eats up more and more of their wage gains. Of course, there is a simple solution to this problem.

I wonder what our labor market would look like if we decoupled healthcare insurance, the main expense in full time benefits, from employment, likely by instituting a single payer health care system. We wouldn't likely need such clear distinctions on full time vs part time labor rights. People could be more flexible in how many hours they wanted to work. More women would likely enter the work force thanks to flexible schedules. Not sure how that helps wages, but I think we can work on that labor participation rate.

 

[Conaeolos]

I wonder what our labor market would look like if we decoupled healthcare insurance, the main expense in full time benefits, from employment, likely by instituting a single payer health care system. We wouldn't likely need such clear distinctions on full time vs part time labor rights. People could be more flexible in how many hours they wanted to work. More women would likely enter the work force thanks to flexible schedules. Not sure how that helps wages, but I think we can work on that labor participation rate.

My prediction would be there be boost in wages, more full-time position and the increased flexibility; but due to balancing forces of participation of employment for health benefits you’d see little change in labor participation.The problems come from my point of view with increased income/corporate/consumption/tariff taxes that have shown to put downward pressure on other key factors in wage: growth, buying power, mobility, etc. Also the lose of jobs in the “administrative” of private health is also going to pull down some of those big internal gains as there is a cost to get them reabsorbed by other sectors.

Overall…

I’d guess 2% gain in real wage growth over 5 year and a compounding loss probably of about -3% after the swell. Being full abosrbed in probably 10-12 years. Making for about a 1-2% negative pressure in win comparison 10 year down the pipe and assuming private health benefits costs stayed not increase/decreased.

Not to say I dismiss it could have a positive affect, if one paid for single payer with split cost with states, set payroll tax, distributed tax along similar lines to current health benefit etc one could certainly be more likely to see a 10-20% extra positive pressure instead over those ten years. Good implementation goes a long way.

 

[MTAtech]

The republicans control all of congress and the presidency. What is the holdup?

That is not a serious question

It's not only a serious question but something the Republicans said would be a solution.

We Americans have been told by Republicans that Obama and the Democrats were the problem and all voters had to do was give the reigns of government to the Republicans to make meaningful changes. Well, the voters handed the Reps the WH and both houses of Congress. So, it is very serious to ask if the GOP campaigned on ending NAFTA, why haven't they done it? They haven't even drafted a bill to end it.

What's more telling is the response, which is a deflection.

To recap, we have Republicans reneging on their campaign pledges while Conservative complaining that GDP was lack-luster under Obama, while the CBO's new assessment of Trump's budget says the GDP growth will only be 1.9% with that conservative budget.

 

[Critter7r]

I wonder what our labor market would look like if we decoupled healthcare insurance, the main expense in full time benefits, from employment, likely by instituting a single payer health care system. We wouldn't likely need such clear distinctions on full time vs part time labor rights. People could be more flexible in how many hours they wanted to work. More women would likely enter the work force thanks to flexible schedules. Not sure how that helps wages, but I think we can work on that labor participation rate.

A big problem that I see coming for myself in that decoupling scenario is convincing my employer to pay me the $600 per month that they currently pay toward my health insurance. I pay 25% of my health insurance costs, and I could totally see my employer (and many other employers that pay, or pay some portion of, employee's health insurance), pitching the change as, "Hey, look, we aren't taking ANY money out of your check for insurance anymore. You just got a $250/month raise!" and keeping that $7k/year for themselves, while the gov't takes an additional $6k out of my check each year (assuming single-payer).

 

[MTAtech]

A big problem that I see coming for myself in that decoupling scenario is convincing my employer to pay me the $600 per month that they currently pay toward my health insurance. I pay 25% of my health insurance costs, and I could totally see my employer (and many other employers that pay, or pay some portion of, employee's health insurance), pitching the change as, "Hey, look, we aren't taking ANY money out of your check for insurance anymore. You just got a $250/month raise!" and keeping that $7k/year for themselves, while the gov't takes an additional $6k out of my check each year (assuming single-payer).

That's likely to happen.

Where this all came from was when taxes on high income was 91%. Executives would complain that each additional raise of $1,000 they'd pay $910 in additional taxes. As an alternative, companies offered perks like health insurance, company car, etc., that would benefit the executive but also was tax-deductible to the company. One of those perks that filtered down to mere mortal workers was health insurance. Unionized employees usually had health insurance benefits as a perk of being a member of the union.

 

[Conaeolos]

It's not only a serious question but something the Republicans said would be a solution.

It does not follow.

We Americans have been told by Republicans that Obama and the Democrats were the problem and all voters had to do was give the reigns of government to the Republicans to make meaningful changes.

True

Well, the voters handed the Reps the WH and both houses of Congress. So, it is very serious to ask if the GOP campaigned on ending NAFTA, why haven't they done it?

Well first, when did the GOP run on ending NAFTA?

I actually don’t think there is one republican who did, but I could be wrong. I can tell you with certainty though the majority did not.

Trump said renegotiate but that's not a party wide sentiment or even popular.

To recap, we have Republicans reneging on their campaign pledges while Conservative complaining that GDP was lack-luster under Obama, while the CBO's new assessment of Trump's budget says the GDP growth will only be 1.9% with that conservative budget.

Educated predictions are very helpful and good to cite, I don't mind you bringing this up but just to clarify we do both understand predictions are not the same as the reported data for a reason, right?

Where this all came from was when taxes on high income was 91%. Executives would complain that each additional raise of $1,000 they'd pay $910 in additional taxes. As an alternative, companies offered perks like health insurance, company car, etc., that would benefit the executive but also was tax-deductible to the company. One of those perks that filtered down to mere mortal workers was health insurance. Unionized employees usually had health insurance benefits as a perk of being a member of the union.

I also find that an extremely interesting factoid. I myself see it as the root of the issue: tying health care financing with employment; but, it’s nicely put.