The most obvious answer seems to be that the workforce keeps growing relative to the demand for that work. Wage stagnation began at the same time the number of women in the workplace started to grow. While a corresponding increase in demand with the supply of workers would have kept incomes moving upward, women were actually already consumers. They had to eat, be sheltered and clothed, etc. even when men made up the vast majority of the workforce.
The rate of the growing female workforce itself started to stagnant around the 90s and 2000s, but a new worker had fully emerged on the scene by that point: The robot. It's a slight misconception that robots eliminate jobs. In reality, they compete for them just like people do. They are another worker in the supply of workers. And while robots bring new demand, as they didn't exist before, it is not proportional to what they can create like with humans.
And so, increasing supply over the rate of what increases to demand exist, and you get downward price pressure.
I was on an airline that could not find enough pilots at a low enough rate to fly the planes. That was Spirit Airlines, an ultra-low cost carrier. I don't mind small, hard seats and no snacks for a quick flight, so I thought I'd save the money. Well, it turns out that Spirit has one of the highest profit margins [0] of any domestic U.S. airline, yet they decided they'd rather cancel flights than pay pilots enough to show up [1] -- they'd even rather hand out $100 vouchers to all the affected passengers than pay the pilots more. On a flight of 50 people, that's at least $5000 they lost, not to mention the staffers they had to pay (baggage handlers, gate agents, etc) that didn't actually wind up being able to complete their jobs.
>- Farmers in Alabama are fretting that crops may rot in the ground for a lack of workers to bring in the harvest.
The oil field boom in ND didn't have a problem getting skilled workers from across the country to live in tents because they paid them well.
They AL farmers are not worried about finding workers, they want to lowball American laborers so they can throw their hands the air and claim that they need a supply of immigrants laborers, which they can exploit.
There is also the fact that we have more than enough food to go around (at least among the nations producing the food). I expect the AL farmers don't have the resources to pay more for workers, but they cannot afford to pay more because the crop isn't really needed in the first place. Nobody in the US, that I am aware of, went hungry because of that failure. If that loss was going to be devastating to the consumer, they would have opened their wallets to ensure it got harvested.
The migrant farm laborers are actively avoiding Alabama as a result of anti-immigrant legislation that passed a few years ago. Even though it was subsequently voided by court order, the workers remember it, and are not stupid, so they will demand a premium for dealing with Alabama's racist, protectionist bullshit.
And even paying that is cheaper than offering the sort of labor standard that a citizen--even a high-school dropout or ex-con--would expect in America.
That's pretty much what they deserve for voting the same party in every election, without regard to their own economic self-interest.
Edit: The state raised the perceived cost of working for migrant laborers, to the point that the prevailing wage offered by the farmers is no longer sufficient to entice those workers to come to work. They aren't lowballing to preferentially employ migrants, they are just lowballing all labor, period, because as commodity producers, the labor expenses cut directly into their profit margin.
People are paid based on their productivity. If the farmer can get $10 of crop per hour, he will pay up to $10 an hour for the worker. If he can't find anyone for that price, he'll let the crops rot because he would be losing money. Sure, he could be letting them rot to make a point but it's costing him money and such ideological decisions are not very savvy business practices. Also a lone farmer making this point is unlikely to have a major impact so I doubt he would be willing to sacrifice money for practically nothing
I generally agree but there's a limit. If the cost of renovating my house becomes too high (e.g. labor too expensive) I simply won't do it and will put it off. In fact this just happened with a relative. There's certainly an equilibrium point.
This seems to be the mistake that the article makes. You saying that you want to renovate your home, or that a farmer wants to harvest his crop, or that an airline would like to fly somewhere, is not a real indication that work needs to be done. There is always a point where the cost makes it not worth doing anymore, and at that point, the jobs aren't really jobs. Trying to include them in the demand for labour violates what demand means.
Practically speaking, you're right, but only to a degree. Pay is not always a motivator for people past some point. Some jobs require a baseline intelligence to do effectively, and often times those people have other great employment opportunities. People capable of becoming skilled tradesman are also capable of getting high-paid jobs working in offices.
So companies looking for electricians or machinists are competing with companies looking for IT managers and the like. Not only is the pay much less than these people could otherwise get, the jobs are more physically demanding and often times, less flexible.
It's going to be hard to entice workers who already make 60+k a year doing a job with a lot of flexibility and downtime to take up a more demanding position. People love to talk about how much tradesman make, but the generosity of their salaries is often over-stated and ignores the seasonality and volatility of these jobs.
have one of your last jobs be exactly that same technology as what the company is working on, nevermind how many other similar technologies you've worked on and learned on the fly.
It's a combination, where the demand curve never meets the supply curve at an acceptable price for the consumer.
It could be due to being able to obtain a product cheaper from somewhere else due to lower labor costs (happens due to converging standards of living across the world), and it could also happen that there are alternatives, such as other jobs and/or social security disability or welfare that make doing undesirable jobs need an even higher price point to make it worthwhile.
Coloradan here who is having a home built currently, and oh yeah, I used to be a construction worker when I was in my early 20s:
The issue with the entire building industry is that they don't pay carpenters, electricians, etc enough. Period. They have been able to avoid paying enough by using what I refer to as "illegally imported labor" at below-market wages. (I like the term because the verbage puts responsibility on the hiring companies who are clearly exploiting un-documented workers)
Having worked in construction, I've seen what happened to the wages paid. Essentially the large home-building companies who build the bulk of homes in this country in single, large-scale subdivision builds have increasingly been able to lower the skill threshold for construction. This by itself would have lowered the barrier to entry for documented workers, and probably has a minor downward pressure on wages.
However, the lowering of the skill threshold also made hiring undocumented workers much more viable. I didn't have to speak Spanish to train guys to use a nail gun and a saw to do framing.
I usually worked on high-end, custom homes for the wealthy. These jobs paid well, required a lot of skill, and were pretty much exclusively staffed by legal workers. However, at times, I'd have to find work with the big builders doing the giant subdivisions.
They paid shit, and were largely staffed with undocumented workers. In North Carolina where I worked, the bulk of these folks came from central America. McDonald's wages were literally higher than what these folks were paid. McDonalds doesn't hire illegals, but construction companies do. So this creates a very weird situation: Why would an American work a dangerous, hot, back-breaking job for a lower wage than McDonalds?
The local construction companies in Colorado were decimated in 2009, and many never came back. Now, the bulk of building here is being executed by national builders who are used to paying low wages, and there aren't enough undocumented workers to fill the jobs at these artificially low rates. The worst part is that the low wages have caused documented workers to not even BEGIN to pursue construction, and therefore they aren't learning the skills (in certain markets), which creates a long-term labor supply issue.
There is a very easy solution to this:
Make all construction companies and their sub-contractors use E-verify. But that will never happen because congress has two parties who both have interests in not doing this:
The GOP loves cheap labor while simultaneously saying they want to crack down (using completely unrealistic plans by design) on illegal immigration to appeal to the bigots in their base as well as the "law and order" crowd.
The Democratic Party views illegals as a source of votes once their kids are old enough. They ignore the fact that illegal immigration helped to break the back of unions in the meatpacking and construction industries because they have long-since replaced alignment with labor with racial identity politics.
Because of this, I'm going to pay waaaay too much for my house, the workers will be paid too little, the house will take too long, will be built somewhat poorly, and the suits running the building company will make a ton.
Under the current enforcement mechanism, E-Verify isn't sufficient. A failure will simply trigger a resubmission (in practice). The employee will need to come up with a different SSN / name / birthday tuple, by producing another forged Social Security card.
The above information is anecdotal and I welcome correction.
E-verify is not mandatory at the Federal Level. It is only mandatory in certain states due to state law:
"In addition, some states have specific laws that require employers in the state to use E-Verify. This is currently the case in Alabama, Arizona, Georgia, Mississippi, North Carolina, South Carolina, and Utah (for employers with 15 or more employees). Louisiana and Tennessee require E-Verify unless an additional, alternate verification step is completed as outlined under state law. Other states have the E-Verify requirement limited to contractors or public employers. However, the list of states seems to be growing, and there is legislation afoot in both the U.S. Senate and the House of Representatives that may mandate E-Verify for all employers (depending on size)."
> Farmers in Alabama are fretting that crops may rot in the ground for a lack of workers to bring in the harvest.
This is a constant claim, but it's not really true.
Some of the crop will always rot in the field since all plants don't ripen at exactly the same time and it's only economical to do a certain number of harvests.
Farmers could always use cheaper labour, so they'll always complain about the price. But there's no real disaster.
The pilot problem is real, but it's entirely a result of airlines paying low salaries for the past 15 years or so.
The underpinning to this issue is that these jobs aren't actually necessary. If the population was going to starve if that crop wasn't harvested, or if the population was going to die without that flight, the money to find farmhands/pilots would appear pretty quickly. But luxuries are only desirable up to a certain price point.
We don't normally do work for the sake of working. We work to provide what people want, at a price that is agreeable to all parties. If an agreeable price isn't found, it means not that we need to find people, it means the work to be provided isn't really wanted by anyone in the first place.
I'd love to see how those demand areas line up with the high unemployment areas. I'd wager they're geographically far apart because other than the pilots, the rest don't take much training (days to weeks) to get up to speed.
In Austin, the unemployment rate is <3% and Texas as a whole is incredibly low. Since we're one of the largest population states with an unemployment rate well below average, I assume there are numerous smaller places with well above average unemployment.
But it is true that unemployment can vary widely even within state lines. Even from one town to the next. It is possible that localized unemployment is still quite low where the jobs are unable to be filled.
I'd expect those jobs to also have the feature that they are in underpopulated areas and have a high seasonality or high instability so that people can't move to take them.
>Farmers in Alabama are fretting that crops may rot in the ground for a lack of workers to bring in the harvest.
Aren't they just investing? Not exactly like normal investments, but if they let some crops rot, they can use it as a corner stone for an attempt to keep their normal cheap labor flowing, which ends up earning them more money than just paying Americans enough to harvest the crops.
The definition of demand in economics is a consumer's desire and willingness to pay a price for a specific good or service. A job with a wage low enough to not have anyone willing to fill the position cannot be counted as demand. As such, these jobs have no impact on price, which is driven by the supply and the demand, not the hope of hiring employees.
Labour is no different than any other product or service. The price is established through the same properties of supply and demand like every other product and service.
The parent is suggesting that the price of labour should be rising because the jobs he listed have increased the demand for labour. However, the jobs he listed haven't actually impacted demand at all. The employers are not willing (or, perhaps, able) to pay the price necessary to get the desired workers, thus are, by definition, not demand.
Since they are not part of the demand for labour, they cannot be considered in this discussion of labour price at all.
I completely disagree. They absolutely can and should be considered. You're assuming that the employers are acting perfectly rationally, which is a fallacy. And the fact that they offer these positions, and that they would hire someone who does agree with what they're offering, DOES mean that they are part of the demand for labor.
Reasoning the way you are, you can hand wave away anything, making it appear as if there not only is not a lack of labor, but a surplus, implying that wages are too high. This is clearly not true. It is far, far more plausible that employers have become accustom to lower labor prices, and thus are hesitant to raise wages.
Okay, and I would like someone to build and operate for me an exact Facebook clone for $5. Since I have made a real offer here, I should also be counted right?
You don't see the importance of taking price into consideration?
> You're assuming that the employers are acting perfectly rationally, which is a fallacy.
Demand is characterized by price, not people talking about what they want to do. If there is no transaction to be made, there is no demand. It makes absolutely no difference if the actors are acting rationally or not.
> Reasoning the way you are, you can hand wave away anything
These are generally accepted terms. Perhaps there is some other word that describes what you are talking about, but it certainly isn't demand. Desire, perhaps? I think it is fair to say that the farmer desires help on the farm, or that the airline desires pilots, or that I desire a developer to build a Facebook clone. That is not the same as demanding it.
> making it appear as if there not only is not a lack of labor, but a surplus
There is a surplus of labour with respect to the demand for that labour. We don't count the people looking for Facebook clones for $5 as demand. If you did, then yes, the demand would outstrip the supply by a huge margin. But I feel like this should be pretty obvious why these jobs don't count as demand.
> It is far, far more plausible that employers have become accustom to lower labor prices, and thus are hesitant to raise wages.
Then why are employees also hesitant to increase labour prices? Is it simply because they too have gotten used to lower labour prices and don't want more? That sounds a little difficult to believe. Everyone I know would be ecstatic to make more money. There is always too sides to the transaction, so you cannot pin this on one side.
The more logical explanation is that if one labourer tried to raise their price, another labourer would swoop in and do the job for less. This can only happen when supply exceeds demand, not when people are already a struggle to find.
"Okay, and I would like someone to build and operate for me an exact Facebook clone for $5. Since I have made a real offer here, I should also be counted right?"
Now you're being ridiculous. We're not talking about people acting like that. We're talking about people who do desire labor, but aren't willing to raise their price. Someone who is offering $12 when the prevailing wage is $14 is clearly in the market.
Since you had to be that ridiculous in your opening, I can't imagine the rest of your post is in good faith.
> We're talking about people who do desire labor, but aren't willing to raise their price.
No, we're talking about demand. People who have the willingness and ability to pay what it takes to acquire the product or service they seek. Desire alone has no impact on price, and thus has no relevance to this particular thread.
> Someone who is offering $12 when the prevailing wage is $14 is clearly in the market.
Where are you gathering data that says someone will do the job for $14/hr? Just because someone doing a similar job for $14/hr does not mean someone else is willing to do this particular job for $14/hr, let alone $12/hr.
> Since you had to be that ridiculous in your opening, I can't imagine the rest of your post is in good faith.
Also known as my example taken to the logical extreme has helped you better understand the situation and the terminology used in economics. Glad that we're on the same page now.
Wage stagnation began at the same time the number of women in the workplace started to grow ... The rate of the growing female workforce itself started to stagnant around the 90s and 2000s...
The US ratio of female/male employment experienced a strong long-term upward trend during and after WWII (1940s), and the absolute number of women working jobs in the US has climbed steadily right to the present day.
The modern era of wage stagnation relative to productivity started in the 1970s, somewhat before the strongest growth in the female/male employment ratio, and continuing even after that ratio flattened out.
But what about extra discretionary income which would stimulate extra demand (another car, another vacation, another gadget, home services now that both partners are working)?
It appears that the additional income coming into the household largely went into the existing costs that the household already had. For instance, shelter. If every home only has one earner, shelter costs can only rise to the maximum a single earner can pay. But once households started having two incomes, the the second income helped place higher bids on securing a place to live and eventually you get to the point where you cannot live somewhere without having two incomes. In some cities today, we are reaching the point where you need three incomes (see: the robot).
How does this answer the question the author brings up in the first paragraph?
>An airline canceled flights because it couldn’t find enough pilots to steer them. Despite high demand, homebuilders in Colorado are throttling back activity because they can’t find the workers to erect frames. Farmers in Alabama are fretting that crops may rot in the ground for a lack of workers to bring in the harvest.
Robots can't do all those jobs, and yet the wages for those jobs haven't increased enough.
Economics says that demand is a consumer's desire and willingness to pay a price for a specific good or service. Offering a job at a price below what someone is willing to do it for is not demand at all. It has no impact on price, which is a function of supply and demand.
The mistake the article makes is counting these jobs as demand, when they really are not demanding labour. They are no more jobs than me asking you to come clean my house for free. It's a serious offer: I will be quite happy to come have you clean my house for free. But, for all meaningful purposes of the phrase, I don't think anyone considers that a real job.
Lets not forget that most companies have improved their cost savings to the point where they are trying to keep wages down. Executives are immune though. I wouldn't be surprised to discover that most companies spend 90% of their payroll on 10% of their workforce.
i think a large part is that companies are hoarding money and wealth goes there to die. if we stepped up pressure on companies to spend their money (one way or another), i think more jobs and higher wages would follow.
It seems oversimplifying to say that robots are "just another worker." When women entered the workforce, they came with similar costs to their male counterparts; wanted breaks, expected time off, lunch break, commuting time, various facilities. Robots require...well, power. They don't need breaks or bathrooms, they don't even need to go home. Hell, if you really wanted to, you could run an entire auto plant with little/no climate control in complete darkness and the robots wouldn't mind one bit.
There's simply no competition between robots and humans, that's why I'm a firm believer that automation will take all the jobs and we need to figure out how to handle a post-work future before we start riots.
Like any other form of capital equipment, robots have other costs besides initial purchase and electricity such as maintenance and reprogramming.
Various forms of farm machinery such as combines automated farm jobs for the better. So true with robots in factories and artificial intelligence that replaces lawyers for standard contracts.
Widespread robots mean that the entire economy runs with the SaaS accounting. High investment, relatively low maintenance, incredibly high productivity.
Not really. Demand, by definition, is the willingness and ability to pay the price to acquire what you are looking for. A job that doesn't pay sufficiently to attract people into the role is a job that was never part of the demand in the first place. Since the demand is not real in these cases, there is no additional demand pressure on the price.
Anyone can say they want to buy a new Ferrari for $10,000, but that does not mean Ferrari should get excited about a new customer. It's all imaginary.
But by that same definition then, is not a worker who wants more than what the employer is willing to pay then no longer part of the supply? By saying that it's just a system at an economic equilibrium, it feels like we remove any ability to make any comment on the system as a whole. It becomes just being what it is.
I wonder if you can't pull in some other evidence, such as, well, if you actually did raise your pay rate to a point where there would exist a worker willing to work for that amount, and you could further prove that worker would still be able to create enough value to the employer s.t. he or she was worth hiring in the first place, and that it then only boils down to the short-sightedness of the employer for not being willing enough to offer a higher wage?
(For example, something like the absurd valuations of some SV tech companies, and the millionaire they make, compared to the salary of an engineer. I personally think most places I've worked could move faster — generate more value — with better engineers, but that can't happen if you're paying "market rate" instead of paying competitively. But "enough" value is being generated, at least, people think, I guess.)
> is not a worker who wants more than what the employer is willing to pay then no longer part of the supply?
I think that is a fair assertion. If demand disappears, the supply also disappears (why supply something that nobody is going to buy?). However, the people who would have made up that supply of labour tend to not die. They find something new to supply to the market with instead, thus putting downward pressure on the jobs that do pay sufficiently to attract people, but not to the point where nobody is willing to do the job. Thus why incomes aren't increasing (but also not heading towards $0).
> if you actually did raise your pay rate to a point where there would exist a worker willing to work for that amount, and you could further prove that worker would still be able to create enough value to the employer s.t. he or she was worth hiring in the first place
This is the issue though. The farmer in the article didn't get his crop off because the consumers didn't care enough about the product to justify its harvest. The airline had to cancel the flight because the consumers didn't care enough about making that trip to justify finding a pilot. If people were starving, they would be willing to pay more for food, and the farmer could have then afforded the necessary labour. If people had to make that trip, they would have paid more for the flight, and the airline could have afforded the necessary pilot. You have to actually have a reason to pay these people sufficiently, which is not always the case. Not all jobs are actually needed.
Price is a function of supply and demand, but just saying you want something is not actually demand. There has to be the willingness and ability to pay the price that is necessary, by the very definition of demand.
In the realm of software, there is a limited number of "better engineers" in a given region and in the entire world.
Paying more will have a zero-sum effect in the short term, simply attracting workers away from other software companies. In the longer term, it will encourage more newcomers to enter the field and spur the "less better" engineers to improve or update their skills.
I'm still not clear about what you meant by "better engineers"; I'm in doubt about the theory of the 10x engineer. If you meant engineers with updated skills, then I might agree with you.
> I'm still not clear about what you meant by "better engineers"; I'm in doubt about the theory of the 10x engineer. If you meant engineers with updated skills, then I might agree with you.
I simply meant more skilled engineers. (I'll readily admit that discerning which candidates are actually more skilled during an interview is a fairly challenging problem.) My personal opinion is that "10x" is a flat-out myth, and significant culture problem in our field. Engineering anything of moderate complexity requires >1 mind, and stockpiling all your knowledge into a single person — even if he or she is a great engineer — is foolhardy. I don't think that not believing that "10x" is a thing or a good idea means that there isn't a range of skill, however.
And perhaps the above is part of the problem. I've interacted with a number of engineers writing a lot of … crap … because they don't know what they're doing, and won't take the time to learn what they're doing¹. I spend an awful lot of my own time untangling the tech debt left by the "10x"ers that came before me. While I do get paid for it, I'd usually rather be doing something else. Yet, I don't really think I could reliably pick these people out in an interview, and simply interviewing is such an endurance task of wading through the seemingly endless masses of "engineers" that can't write a for loop that can't be singled out by tech recruiters who have no tech background b/c the recruiters can't recognize a BS résumé from a non-BS one (because they have no background in tech, but are really just LinkedIn scrapers AFAICT). Lastly, I don't know that SWE is a great field for get-rich-quick: I'm not paid all that competitively if you compare SWE in the Bay Area to say, investors, doctors, lawyers, …)
¹I once interacted with someone trying to send emails. Instead of using a library, he was rolling his own serializer for emails. But he also refused to read the RFC — despite repeated attempts to show him that it contained the information he needed, and testing it repeatedly broke it. (And this is but one example out of many. I'm currently working somewhere where we have multiple broken serializers that attempt to emit data for PostgreSQL, broken for the same reasons: refusal to understand the required output format prior to writing an emitter for it. "It's just CSV/TSV"
> The most obvious answer seems to be that the workforce keeps growing relative to the demand for that work.
Interesting, and very plausible as well. Please don't get me wrong, but you happen to have any source that supports that hypothesis? I don't doubt any of what you've said and I do believe you're on to something, but I would like to read more on the subject.
It's a very interesting book, but I think it is more about changes that happened in the 1950-2000 time frame more than later than that.
The core idea is that a two income family is less financially resilient than a one income family because (a) the extra money goes to bid up housing prices (education, healthcare, etc.), and (b) if either partner has a setback, the family is at risk of bankruptcy.
Impacts of "women entering the workforce" have been relatively unexamined; one of them is that it frees up employers to practice other kinds of discrimination. For instance, many believe that black men held service jobs that got taken over by white women. You will get a woman on the Supreme Court but she will have been educated at Harvard. Pointedly, the supply of "people from high-class families" is doubled, so any bias towards hiring them can be indulged more freely.
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Some of these ideas have gotten traction in unexpected places. I was talking to a conservative friend the other day and he told me that "the gains of paying workers more would be eaten up by cost increases in housing, education and health care", which he didn't know was classic Elizabeth Warren!
It's not like Warren discovered it. Conservatives have been whining about the destruction of the family for ages. It's just that since they say that about everything, people did not take them seriously when they were right. Broken clocks and all that.
One crazy old book along those lines is "Sexual Suicide" by George Gilder which was strident, I almost want to say hysterical, to an extent it could have been career ending if he hadn't pivoted away from it so completely.
Also, I think of Daniel Patrick Moynihan, the one liberal who worked for Nixon, who caught hell for diagnosing the breakdown of black families but who laid the foundation for how people think about the breakdown of all sorts of families under economic and social pressures.
It is what it is. It has many benefits and it is not going to be reversed, but it has negative effects on social and racial inequality.
If a person educates their own child, or cooks their own meals, or provides other domestic services, that labor does not get taxed, does not contribute to making distant investors rich, and does not employ union labor.
(I am male and I have done those all of those things at times.)
Liz Warren points out that an "at home" family member can often get a job to supplement or replace the wages of a primary wage earner; long-term changes could be weathered by the secondary wage earner becoming the primary, or it could be a temporary job to save some money or pay off some debt.
It is not a subject we have good conversations on because it is so inflammatory.
Not for me. Even if wages don't go up, productivity does, and that makes things cheaper. I don't think we would be able to produce and consume so much with only half the workforce.
As for the destruction of families, that's going to happen under capitalism anyway. Free markets don't like nepotism and families don't like mobility of labor.
For the people who don't benefit from capitalism, it's a very bad deal to them because they gave up the safety nets of familial bonds in exchange for nothing. It's why conservatives aren't enthusiastic about capitalism and free markets (anymore?).
The rate of the growing female workforce itself started to stagnant around the 90s and 2000s, but a new worker had fully emerged on the scene by that point: The robot. It's a slight misconception that robots eliminate jobs. In reality, they compete for them just like people do. They are another worker in the supply of workers. And while robots bring new demand, as they didn't exist before, it is not proportional to what they can create like with humans.
And so, increasing supply over the rate of what increases to demand exist, and you get downward price pressure.