Another Anton piece.
I don’t want to oversell Anton. I’ve met Anton a couple of times. We haven’t talked, because he’s the kind who talks so much that I don’t bother to try to talk with them. He’s a foppish dresser, proudly so. I don’t know how much we have in common. But look at this, where he gets the working man exactly right:
“After at least two decades of wage stagnation and even decline, now that we’ve finally reached the nirvana of full employment (and who knows how long it will last), why not take advantage of this tight labor market to raise wages across the board? Especially for the working and middle classes that got nowhere or even lost ground during the housing, finance and tech booms of recent years?”
Boy is right about that. He’s got a few other strong points too.
4 comments:
...now that we’ve finally reached the nirvana of full employment (and who knows how long it will last), why not take advantage of this tight labor market to raise wages across the board?
There's no logic in this, economic or otherwise. Full employment can apply pressure to raise wages, but even did it, it doesn't mean the money is there to pay the higher wages.
And the claim doesn't even address what "full employment" even means beyond being a cute headline claim. The labor participation rate remains at historic lows, and Boomer retirements remain, and will remain, only a fraction of that participation rate. That suggests there isn't any pressure for higher wages.
There may be money for pay for raises, but there's nothing in Anton's claims to suggest there is.
Eric Hines
Supply and Demand is a relevant economic law. Whatever demand there is for labor, increasing the supply will push down the wage at which that supply is available. That will be true for any demand whatsoever.
"Full employment can apply pressure to raise wages, but even did it, it doesn't mean the money is there to pay the higher wages."
Three things can happen: First, prices can rise in order to pay the higher demanded wages. If the people buying the products/services are mostly different people from those producing those products/services (say, people buying yachts or expensive restaurant meals vs people working in the boatyard or the restaurant), then the situation results in some transfer of income/wealth between those categories of people.
Secondly, persistent increases in wages will result in more automation: there are plenty of potential productivity projects that do not make economic sense if you can hire people for $13/hour that start making all kinds of sense if you have to pay $25/hour.
Thirdly, the wage-increase pressure can be short-circuited by offshoring of production to lower-wage countries...this certainly has much to do with the stagnation of wages in recent times. It is hard to see how this can be avoided other than either by stiff tariffs OR by productivity improvements so great as to negate the attraction of offshoring and make the higher US wages economically viable. Banning US companies from offshoring will simply lead to their replacement by non-US companies, absent high tariffs.
It's important to recognize that the *only* way for wages to increase across-the-board is through productivity improvements.
If capital can be substituted for labor, which is your second option, it often does result in higher wages for those who remain employed — though fewer workers are needed.
The first option is what I think Anton imagines, and it’s reasonable to think it is applicable. Many once-American jobs are already offshore; others can’t be because they require labor locally. Those who have benefitted most from recent economic trends may be able to import cars, but they need plumbers and electricians here to work on their houses.
Well, or even to build them at all. Unskilled labor is just as subject to supply and demand. People may forgo a house if the labor cost raises the price too high, but if they really want the house and labor is in high demand, they’ll have to offer high enough wages.
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