There is a fantastic long form article that articulates this better than I can at:

https://highline.huffingtonpost.com/articles/en/poor-millenn...

The portion relevant to this discussion:

"Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies.

The effect of all this “domestic outsourcing”—and, let’s be honest, its actual purpose—is that workers get a lot less out of their jobs than they used to. One of Batt’s papers found that employees lose up to 40 percent of their salary when they’re “re-classified” as contractors. In 2013, the city of Memphis reportedly cut wages from $15 an hour to $10 after it fired its school bus drivers and forced them to reapply through a staffing agency. Some Walmart “lumpers,” the warehouse workers who carry boxes from trucks to shelves, have to show up every morning but only get paid if there’s enough work for them that day."

The degree to which both costs and risk are shifted onto workers is at times astonishing:

“After paying about $1,500 for home office equipment: a computer, two headsets and a phone line dedicated to Arise; after paying Arise to run a check on her background; after passing Arise’s voice-assessment test and signing Arise’s nondisclosure form; after paying for and passing Arise’s introductory training, to which she devoted three days, unpaid; after paying for and passing a certification course to provide customer service for Arise client AT&T, to which she devoted 44 unpaid days; after then being informed she had to get more training yet — an additional 10 days, for which she was told she would be paid, but wasn’t; and then, after finally getting a chance to sign up for hours and do work for which she would be paid (except for her time spent waiting for technical support, or researching customer issues, or huddling with supervisors), Tami Pendergraft spent three weeks fielding telephone calls from AT&T customers, after which she received a single paycheck.

For $96.12.”

Thankfully some law firms have taken the approach to overwhelm Arise with individual arbitration claims. Arise likely calculated in to their model as a cost of business expense, so the best that can be done is to make that expense grow.

If you feel strongly against arbitration clauses, activism to get people to use them is the fastest way to kill them as the cost benefit will quickly become a negative.

https://www.theverge.com/2020/2/12/21135474/doordash-workers...

Ok not really almost, but for a brief second.

In the meantime create a tool to allow for mass arbitration actions.

Or forbid it entirely.

What exactly is the problem with writing a law to stop an abusive practice?

I see mandatory arbitration as a trade-off, and would simply prefer that people take that kind of clause into account when they transact with others.

The root cause is the demand for that type of labor is dwarfed by supply for type of labor, and the long lasting solution would be to provide those people with better options.

Plus again scale shifts profits away from labor: https://economics.mit.edu/files/12979

AT&T and Arise are not people. People made these decisions and put Tami in this position. We should use their names.

But getting to the core of your point, how would you allocate blame? Is the CEO responsible for every mistake? Do you part it out to various levels of management, based on their involvement with this specific case? Do you think it's better if more corporations copy Google's approach, and outsource all the low-wage work to avoid bring blamed for problems?

To be clear, I am not sure who is to blame for what, but I think the real problem is a shortage of opportunities for people at the bottom of the corporate ladder (as well as for those struggling to get on it). The average HNer isn't protected from exploitation by laws, they are protected by their BATNA (best alternative to a negotiated agreement).

In general with larger corporations this feels like it makes the most sense. With resources like LinkedIn it should be a lot easier to determine the person or person(s) in charge of these decisions along with the CEO.

Here in Michigan we had a front row seat to this happening with manufacturing. Everything peaked in 1973 and has been on a slow decline ever since. Sure there have been booms but the long term trend has been down.

The Japanese started importing cheap motorcycles to the West coast, then cheap cars. We didn't see them in Michigan and if auto execs did they would have laughed. The Big 3 saw VW and their Beetle as the big import threat. Suddenly those Japanese cars became better in quality. Then the Koreans went through the same cycle and Japan introduced luxury cars as well.

Because wages were much less in Asia even after accounting for shipping this exerted downward pressure on wages. Give America back the monopoly it had in the fifties and sixties and minimum wage would be $24 an hour.

It would take a lot more than that. Remember that the gains labor made after world war II were built upon decades of struggle by labor, including frequently being targets of violence by armed militia hired by corporations [1]. Despite that, America desperately needed labor for world war II (where the alternative was defeat at the hands of the Nazis), so for that moment in history capital and labor found themselves in a obvious win-win scenario. Most of the gains made by labor in America were made during this period.

The minimum wage does not naturally rise - it is a policy decision, one implemented under pressure from labor. And as labor's political power has waned and capital's political power has increased, minimum wage has stagnated.

Under our current system that heavily favors returning productivity gains to capital instead of labor, returning America to that global monopoly (which would require the highly improbable destruction the industrial capacity of the rest of the world while leaving America's untouched) would just turn the hypothetical gains of that monopoly over to the owners of capital.

Realistically, any attempt to return to the prior American monopoly would result in a massive regression in the American standard of living, through the destruction of purchasing power abroad for American goods and services (remember, we have a lot more people today than we did back then, and many of them - especially farmers - work in occupations that sell to other countries).

1. https://en.wikipedia.org/wiki/Anti-union_violence_in_the_Uni...

Oh, what that it were so simple. There are far more factors governing "market wages", which you are describing, including labor supply at a given skill level, automation, political representation of laborers vs employers, and how that representation manifests as power in the local and global economic contexts.

The "minimum wage" specifically is a policy designed to put a floor under the standard of living of people whose market wages in the economy would provide a standard of living below what the society considers humane. Some societies have no such humanity based floor.

Maybe that's the intention, but what a minimum wage actually does is remove the possibility for anyone to work below an arbitrary number of dollars.

If that value is lower than the going market rate for low-skilled labor, minimum wage makes no difference.

Above that, it removes more and more people from the "eligible to work" pool. There's nothing humane about preventing people from being able to work, especially when you don't have a welfare system to pick up those who are now doomed to unemployment.

My reading of the argument (maybe different from OP) is the choice to work a low wage job isn't a choice made completely by one's own volition due to a huge stack of societal factors.

Let's break your counterargument down a bit, preventing people from being able to work denies them sustenance yes, but also embedded (IMO) in your argument is the intrinsic value of a job as a part of someone's life. Here we agree and this is why I don't support cradle-to-grave welfare and think it would be a disaster if implemented. It is something welfare advocates tend to ignore, to the detriment of their credibility on other economic matters.

A retraining program coupled with a large hike in minimum wages and temporary retraining assistance could sustainably raise the minimum standard of living with no government takeover of the economy. The program itself can be a private one if designed the right way. Prior retraining programs didn't work due to 1) lack of accountability and 2) lack of demand for upskilled labor. A very high minimum wage fixes that on the cost side and also on the aggregate demand side. (Something approaching the median US wage today or possibly 1.5x-2x higher, phased in over several decades to give business a measure of predictability and planning capacity.)

Most low paying jobs can be automated, when they aren't it is because human labor is so cheap that the expense of capex to automate isn't worth it. By raising the floor cost of labor, government provides business an incentive to retool the economy around higher-wage paying activities. Any business that can't automate and relies on cheap human work to do drudgery isn't worth saving in my opinion. A bonus is that the resulting capex will generate second and third order effects that will catalyze economic growth and spare many otherwise impacted small businesses from failing.

We want to idealize the person who starts out in a fast food restaurant, learns discipline and organizational skills, and moves on to higher paying work. Several decades of data have shown us this is a nice theory that fails in practice in most cases. Those people remain stuck and that is bad for economic growth in addition to causing needless suffering. Keeping the minimum wage low hasn't solved this problem and won't solve it in the future.

It should be paired with a federal jobs guarantee and universal healthcare then.

It shouldn't be normalized to be a "lifelong" thing, in the same way we think it's unusual for someone to be a lifelong college student. At least one without milestones such as degrees, etc.

The last forty years has been redistributing profits from labour to capital.

There is nothing at all wrong with reversing that.

Society needs to find a way to have people gainfully employed keeping the minimum wage at poverty levels is not a good choice.

Unless you're saying that the problem is that the US doesn't make every new auto manufacturer a UAW shop with no opt-out?

The US specifically did not want this to happen, which is why it made unionization only valid on the basis of the adversarial, shop-vote model, but grandfathering in some unions that already functioned along similar, sectoral lines, such as the Hollywood unions.

Why do those other people get some automatic raise?

Because other people are constantly told how great Europe/Scandinavia is. So these 'other people' just want to have good life by moving there.

https://en.wikipedia.org/wiki/Scandinavia#Use_of_Nordic_coun...

Then it's often interesting to point to various places in the world where in fact, the thing is possible.

As you said, oil helps, but it’s not determinative. Norway is interesting in that they’ve used their oil money very wisely, but it seems pretty clear that other policies are necessary in order to ensure that economic prosperity is well distributed.

There were a few potential inflection points / events that happened around then.

1971 saw the perhaps ill-considered abandonment of Bretton Woods - arguably this ineluctably led to an ongoing boom / bust cycle.

(Can recommend John Ralston Saul's discussion around this in his book 'The Collapse of Globalism'.)

What are these other companies doing that we are not? What can we do to make ourselves more competitive such that each employee has enough productive capacity to easily receive $24/hr or equivalent? The peak of 1973 is gone and not coming back, we have to look to the future now.

And/or the fruits of globalism have not been fairly shared. Depending on whom you ask.

The surprising thing about the current era is just how little wealth is inherited and how much has been largely generated during the owner's lifetime, in many cases due to labor and receiving compensation in the form of stock. The vast inheritances we read about from the 19th century aren't there this time, barring a few exceptions. Thomas Piketty wrote about this in Capital.

What do you think about that? Did they make any errors?

I have an issue with this. By some definition, of course. But there is still something very different about the kind of labor which goes on there. Class, opportunity, connections, access to capital, and access to political influence further entrenching their position. It's almost like the nobility of yore.

I find pointing to the 1% labor as some kind of redeeming quality of the system, is instead a distraction from capital vs labor. For the regular labor to have a chance to enter the top 1% of labor, is just as much of a pipe dream as them falling into Big Capital.

We need to fix our relationship with work, especially for the sake of those currently unable to do "fun" jobs that pay well. I don't think working less or a redistribution scheme via the government is an honest solution.

Instead, a much higher minimum wage coupled with retraining and temporary economic assistance that can spur a mass automation of "drudgery"-type jobs is a better answer. This in turn would allow society to redesign work so that it is more humane and more valuable. I also don't buy the belief that only some are capable of creative work.

[1] https://www.theatlantic.com/business/archive/2016/09/the-fre...

I think that’s kind of what the OP you responded to was getting at. I know professors at large state universities making $100,000+ in medium to low cost of living locations. Some make even more. They aren’t 1% but they might be top 10%.

I guess what’s piqued my interest here is, at what point do we consider labor to be labor?

If you get a nice UAW job for 30 years and plow money into the market, are you not a capitalist?

Is a surgeon not labor since he or she may not own the hospital? Sure they may make $700,000/year, but... aren’t they working for a living?

The Meritocracy Trap is a great book I’d recommend that’s related to this question/issue. Wealth and the bourgeoisie used to just hang out all day and go for walks in the park. Now they work 120 hours/week.

https://www.theatlantic.com/business/archive/2016/09/the-fre...

A salient quote:

'Elite men in the U.S. are the world’s chief workaholics. They work longer hours than poorer men in the U.S. and rich men in other advanced countries. In the last generation, they have reduced their leisure time by more than any other demographic. As the economist Robert Frank wrote, “building wealth to them is a creative process, and the closest thing they have to fun.”'

How do we maintain it? An obvious factor is our military capacity. That means defense spending. Under a capitalist system that also requires a competitive commercial defense sector and also a strong economy capable of sustaining such a sector via tax revenue.

Most tax revenue comes from individuals. In an era of mobile capital, corporate taxation is sub-optimal. So the economy's health is linked to the prosperity of individuals, in aggregate. Prosperity can come from competition, but the most durable forms of prosperity are tied to increasing productivity.

Continuing on this first principles trajectory should lead to a stable structure. It's not one that is dominated by "print-and-export-dollars"-style industries.

I have two theories on this. One is that we simply have improved our management processes. The economy became more developed and you could realize real efficiency gains from outsourcing. From a pure GDP perspective - this was good.

The second is more messy and i'm still working on it but it ties into a lot of macro issues. It used to be much easier start out with no experience, say as a janitor, and work your way up to a higher position in the same company. This was possible because it was all the same company. Now with outsourcing this is impossible, if you start as a janitor, the only thing you can do is maybe run the janitor company, but you won't ever become the CEO of the company whose office you clean. At the same time, you've made entry-level positions at the company harder to attain. The floor is no longer janitor, it is now junior developer (to take a software example). This is one of the reasons why I think there is such a bifurcation in our labor market. A college degree is now the minimum requirement to get your foot into the door. Again, it used to possible to start at the very bottom and work your way up but now there is a hard cap on growth unless you go the college route.

I think this was a clever way for companies to also push costs onto employees. Training used to be a thing companies did but now it's basically been abandoned. Go spend your own money and get a degree before even talking to us is the attitude.

I remember when I wanted to sell in France, I had to find a French distributor, make a French version of the product, guess how many would sell there, ship a pile to the distributor, the distributor collects most of the money, and unsold merchandise is scrapped. If I didn't have a distributor, the merchandise was always getting hung up in customs, would disappear in the mail, would take 6 weeks to deliver, I'd get paid in dollary-doos that no bank would exchange, etc.

Rinse, repeat for every country.

Today, I ship all over the world via the internet for $0, have no stock, no scrap, no middlemen, get paid instantly, ship instantly, and the transaction cost is 1% for paypal and 3% for credit cards.

Still have to pay taxes, though :-)

This all true, and empowering for those who have the relevant know-how and opportunities. However, these apparent efficiencies are built on the back of the factors that GP points out. Empowerment for some relies on structures that disempower others. Agency staff live precariously; the companies that use them have ever tighter margins, they are increasingly hollow shells that serve only to generate cash not to provide the security of employment.

The convenience we appear to benefit from is an ever-thinner veneer that disguises deeper problems.

I've seen many guides to doing this in the form of blogs. This is not hard information to come by.

There's also an implication that it's simply okay to let job security rot away, that people in precarious work should simply read a few blogs and retrain. I'm not convinced that it's a good plan to ignore creepingly pervasive employment insecurity.

An interesting outcome is that is becomes more difficult to rise to high levels unless that is what you’re optimizing for early. Ironically, this creates the same pressure that makes high levels so competitive and potentially miserable

The productivity gains went to either things that got automated (e.g. speciality equipment operator - wages are higher but there are less jobs) or knowledge workers (software engineering salaries have skyrocketed).

The wages in lots of sectors without productivity gains have gone up because they must compete against sectors where productivity has gone up. This is known as Baumol's Cost Disease.[0]

[0] https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

It's not a coincidence that there is a rotating crew of Russian speaking janitors who clean my office building and Spanish speaking landscapers outside my apartment. I'm not discounting that many of them are legal immigrants, just lower skilled and working their way on up. More power to them.

I can also see though how this situation is easily taken advantage of. Contracting firm hires undocumented workers for below market rates and is able to under bid for contracts. Big company fires their in house workers to save money and hires the contracting firm. Big company then gets the advantage of undocumented labor wages without the liability.

Wages are a function of supply and demand. If the people cleaning hotels had better options, their wages would go up (or hotels would shut down, or ask people to clean their own room before they leave, etc.)

> Yet the biggest difference between their two experiences is in the opportunities they created. A manager learned that Evans was taking computer classes while she was working as a janitor and asked her to teach some other employees how to use spreadsheet software to track inventory. When she eventually finished her college degree in 1987, she was promoted to a professional-track job in information technology.

> Less than a decade later, Evans was chief technology officer of the whole company, and she has had a long career since as a senior executive at other top companies. Ramos sees the only advancement possibility as becoming a team leader keeping tabs on a few other janitors, which pays an extra 50 cents an hour.

The spreadsheet story is nice, but even having these skills back in the 80's was way less common than today. The article should also have looked at how much tuition was relative to the cost of living/salary Evans was making, and if Ramos could afford it today.

> Evans was a full-time employee of Kodak. She received more than four weeks of paid vacation per year, reimbursement of some tuition costs to go to college part time, and a bonus payment every March. When the facility she cleaned was shut down, the company found another job for her: cutting film.

She was able to bootstrap her career at least in part because Kodak offered tuition reimbursement and other benefits.

I did.

What I would be curious to read is an accountant taking a look at Ramos finances and figuring out how she could afford (or not) to get the same degree.

Oh, you all weren't paid for your overtime? Sorry, you don't work for Hilton. You work for Rent-a-Janitor. And they just filed for bankruptcy and closed shop. Hilton had previously dropped their contract with them due to their unscrupulous practices. We have now contracted with a totally different company, Rent-a-Janitor 2.

(This is a made up example. I have no idea if Hilton does anything like this, but most all huge companies do it.)

It doesn't, you're literally paying a middleman to take away the risk and hassle of hiring an employee. That's the added value here.

Otherwise, you could just hire the worker directly for what that middleman is paying them. Working as a contractor, you get a pretty good idea of what your "rights" are worth in pure dollar terms.

It's sometimes difficult to fire employees as a way of lowering wages. The people left behind who are expected to make up for that through raised workloads and losing the experienced for green new hires might complain.

But if the employee is via third party, there is no hiring or firing involved, limiting the liability of the first company.

In that regard the sales pitch is similar to how Microsoft can sell a company email and word processing so that the company doesn't have to figure out how to write business software.

* X is available more cheaply from a third party supplier (who presumably has achieved some kinds of economies of scale) than our fully-loaded cost to deliver the same

* X is a commodity product where we do not feel we can differentiate ourselves by doing it in-house

* X is ancillary, but important, to our core business and we lack the expertise to do it well, so we will buy in rather than build that expertise

Not many hotels are bothering to drill their own wells these days, bearing in mind that water is available from utility suppliers - why would room cleaning service be immune from the same forces?

* Purchasing X through a third party allows us to circumvent laws and regulations meant to protect workers and/or consumers

You can argue that such agencies are more likely to disregard laws and regulations, but how would you fix that? With laws and regulations?

I can think of a couple different legal metaphors for this:

1. Something similar to banking's Know-Your-Customer could work... maybe call it Know-Your-Suppliers.

2. People are criminally liable for possessing child pornography even if they had no participation in the direct crimes of its creation. In other words: in this case there is no immunity just because the crimes happened somewhere "upstream".

For instance, how likely are your Fly-by-night employee or sub-sub-contractor to rat out the Fly-by-night? They may get a beating, their checks withheld, the Fly-by-night go under.

If it still happens, Big Publicly Listed company pays for it to go away in a settlement.

If it goes to court, they Big Company can say "we work very diligently to avoid this situation in the future and what happened is in no way indicative of our values".

Etc.

Agency work is extremely common here, especially on the lower level of the job ladder. Gig economy and contractors are common even in higher settings, such as software development.

Do you really belive there is a collective of business owners who thought "yeah, let's outsource everything, because f..k employees"?

Obviously it's about specialization. Why a software house should hire a cleaning lady? They are not in the business of cleaning, they know nothing about it and they don't want to even think about how you go about hiring someone for cleaning.

Or the other way around. Should a cleaning company hire software developers? They would fail so hard at it. Not to mention the frustration.

World got more complex, business got too.

I honestly think that having people in house to do these kind of jobs can be a benefit. A good receptionist for example can be a real asset. But they are hard to find.

All the rest are contract. Desk clerks, cooks, nurses, doctors, therapists, janatorial....

The structural shift to contractors is part of a broad trend after 1970 suggesting American labour isn't, economically speaking, a growth engine.

https://www.cnn.com/interactive/2019/business/us-minimum-wag...

This is just wrong: the article is not talking about inflation; it is talking about indexing the minimum wage to productivity. Eyeballing the graph from the original article (and projecting productivity back to 1949), if indexed to productivity, then minimum wage would be at ~$15.

Your subsequent criticisms have more merit, but the article addresses them as well. You may disagree with the article's arguments, but you should at least acknowledge them.

> It would be claimed that the productivity of minimum wage workers has not kept pace with average productivity growth, so that it would not be feasible for minimum wage workers to earn pay that rises in step with average productivity growth.

> There is some truth to this claim, but only at a superficial level. The productivity of any individual worker is determined not just by their skills and technology, but also by the institutional structure we put in place.

Could you expand on this a bit?

For example, free trade has undoubtedly lowered the cost of commodities for Americans, but at the same time has also cost manufacturing jobs. From a monetary perspective, there is no contention that America as a whole is richer because of free trade. But where has that wealth gone? Not much to the now-jobless manufacturing workers.

The economics profession deserves some blame. When evaluating a policy, economists often ask whether there society would reap a net benefit in "utility." But chiefly, economists often ignore questions about distribution -- which groups should benefit from policy? One reason might be because answers to distribution questions could be seen as "political" -- if you think labor should receive compensation for lost wages due to free trade, then people will question whether "leftist" politics biased your thinking.

Indeed, economics has a special name for changes that benefit society on net at the expense of another group of people -- a "Kaldor-Hicks improvement." A change is a Kaldor-Hicks improvement if the people made better off could, in theory, fully compensate those made worse off and still come out ahead. In practice, that compensation usually never happens. Uwe Reinhardt, who was an economics professor at Princeton, writes an absurd satirization of policies justified by the Kaldor-Hicks criterion:

> To highlight the tenuous ethical foundation of Kaldor's criterion, one might call it the unrequited-punch-in-the-nose criterion of social welfare. Suppose, for example, that I feel very aggressive today and therefore would like to punch you in the nose. An honest referee (an economist) asks me what 1 would be willing to pay for that privilege. Suppose the maximum I'd be willing to pay were $1,000. Next, the honest referee asks you how much you would have to be paid to receive that punch in the nose without hitting me back. Because you are strapped for cash, you might accept the punch for $600. The referee (our economist) is ecstatic, for (s)he perceives here the opportunity to enhance social welfare. Consequently, the deal is struck, you kindly present your precious nose, I punch, you bleed and hold out your hand in anticipation of my payment of $1,000. Alas, I walk away happily, along with my $1,000, which I refuse to surrender. Not to worry. The honest referee (our economist) will soothe you with the expert assurance that, according to Nicholas Kaldor, and in principle, we just have witnessed a major enhancement in social welfare, to the tune of $400, even though the expected $1,000 bribe is not actually paid. It is to be hoped that you have enough respect for the referee to accept this verdict gracefully, and you probably will, if you accept the benefit-cost analyses typically sold by economists to policy makers.

> Although this illustration may seem beastly and absurd, it can easily be adapted, with only minor modifications, to the context of environmental pollution, to health care or to many other situations in which public policy bestows benefits upon one group of people at the expense of others. One is struck by how readily and how uncritically many economists apply the Kaldorian criterion to their analyses of such policies -- particularly younger economists, many of whom no longer seem to explore very carefully the philosophical and ethical underpinnings of their profession and instead concentrate on mere analytic technique. [1]

(The whole paper is worth reading.)

So this is what the author might be criticising -- that policies have been evaluated mostly with consideration to whether society as a "whole" would benefit, with not much thought about who exactly benefits. Add to that the marginal utility of money -- that poorer people see a greater increase in happiness per dollar than the richer people -- and you could argue that those policies have caused a group of people, namely menial laborers, to experience significantly increased hardship than those nearer to the top of the economic ladder. The author's goal, then is to justify the "compensation" portion of a Kaldor-Hicks improvement -- according to them, wealth, wages, and healthcare should be redistributed to these workers who were made worse off -- at the benefit of everyone else.

[1] https://www.jstor.org/stable/40239382?seq=1

The most durable way to build middle class wealth is entrepreneurship. And not the SV kind. Family-owned business have something very few publicly traded ones do... long time horizons. We've destroyed the ability for the middle class to do that outside a select coterie of sectors.

Small businesses are rare because the government has abdicated its antitrust responsibilities, ignoring companies that use anticompetitive practices like labor violations and price fixing that lock competitors out of the market.

Small businesses are also rare because of zoning codes and infrastructure policies that promote the use of cars. It used to be that commercial spaces and housing were evenly mixed, now businesses often need to be a mile or more away from anywhere people live, thus needing to be able to support very large customer bases, and the locations need enough land to fit empty parking lots big enough to support double or triple the actual capacity of the building itself, creating enormous artificial up-front capital costs for business ownership.

Try cutting hair in Florida if you think so.

> Small businesses are also rare because of zoning codes and infrastructure policies that promote the use of cars

Zoning codes and infrastructure policies are a form of regulation.

> government has abdicated its antitrust responsibilities

I agree with this part. A minimal regulatory regime along with a strong antitrust regime is pretty much ideal IMO.

> The US regulatory structure is extremely friendly to small businesses.

You can also see the quantity of regulations on this tracker. [1] I don't think you can describe this amount of regulatory complexity as "friendly" to small businesses.

[1] https://www.quantgov.org/federal-us-tracker

In the food service industry, the most common type of small business, there are only 2400 federal regulations, and most of them concern common sense things, like "wipe tables after customers use them" and "cook chicken to 180°" and "don't let rats live under the oven". Take every type of food served in the US, every appliance, tool, utensil, or technique used by any commercial kitchen, and 2400 seems like a laughably small number of regulations.

That's an incorrect understanding of how laws and regulations work. Ignorantia juris non excusat.

> 2400 seems like a laughably small number of regulations.

I'd love to hear a food service operator's perspective. It may differ from yours.

I worked in the restaurant business, I know how thoelse regulations work. Not every one applies to every business. We didn't serve eggs, so we didn't need to Cara about all of the special rules for cooking eggs to temperature, maintaining separate tools and workstations, refrigerator temperatures, etc just for eggs. 5he same is true of all the other thousands of ingredients and food items we did not serve.

One might have one agency in charge of one thing and another one in charge of another, with no rhyme or reason to it. There is no way to find out all the regulations that apply to your specific business unless you 1) consult a very expensive lawyer or 2) read an authoritative, current reference specific to your field of endeavor. 2) is usually not an option if you're doing something uncommon or brand new.

In the end one's best bet as a business owner is consulting an experienced lawyer for everything that you do. They're usually pricy and charge down to the minute. Everything you don't check, is a potential compliance risk. Today some classes of severe violations, for example improperly withholding employee taxes, can even result in the corporate veil being pierced where you as the business owner now become personally liable for your business. And I'm not even getting into things like tech that have no legal certainty whatsoever.

All these legal and compliance costs are deadweight on the economy, they could have been used to invest in better equipment or to pay employees more, instead they are spent on lawyers. Some laws & regs are no doubt necessary, but anything beyond that is a net loss for everyone. The balance always seems to only land one way these days.

This is not completely fair. There are countless innovations that have allowed these low skill jobs to have an increase in efficiency and productivity.

One example, when I was a teen and worked retail I remember we would all have to spend hours going around the store counting every product on the shelves in order to do our routine inventory checks because there was no other reasonable way to track that information. Now many stores have intelligent inventory tracking that requires little to no work from employees. The end result is that these employees are more efficient, stores need less workers, and stores can carry less inventory. Why isn't the benefit of that efficiency passed on to those employees who are now more efficient? How is that any different than a software developer receiving a higher salary because they are more efficient due to computers being more powerful?

What makes you feel that Software developer salary is linked to computing power? In fact, even if we were to consider it a fair comparison, computing power, if measured by Moore's law has doubled every 2 years. Software Engineer salaries have lagged far far behind.

Honestly, I don't think there is any relation between developer salary and computational power. I was just reaching for a possible explanation for this[1] that fits with the theory that people are paid based on their productivity. It is my belief that people are paid based off the supply and demand for their labor. Productivity only serves as a ceiling for compensation and even then, that is only in the long term. Plenty of people are paid more than their production either over the short term or when productivity is difficult to measure. An employer's natural inclination is to pay people as far below their level of production as possible while still filling the job.

It is my belief that the reason that low skill wages have stagnated is not because their efficiency has stagnated. It is because their supply is outpacing their demand. The supply of software developers is not keeping up with demand so their wages are increasing. Neither has anything to do with productivity in my opinion.

[1] - https://lh6.googleusercontent.com/5n4R_Osks_fVsVmedxJKsp9zPu...

The SWE line in that graph grows by ~74%, and all other occupations by ~57%. So, the title seems probably correct, plus or minus the accuracy of my eyeball in reading those. But that's not how to present that…

(And also, the sin of not putting the Y axis min at 0, to exaggerate the effect.)

As a SWE myself, looking at the potential cost of housing if I ever decide to start a family, I'd mostly say SWE's wage growth hasn't kept pace. All other occupations are just getting hosed even harder. (My opinion here is that it's somewhat housing cost/supply: too little supply is driving the cost up, and wage increases are likely to just push that further. What is needed there is increases in the supply, moreso than wages, for housing specifically. For wages, I do think the minimum wage is too low, and has not kept pace. See also this graph: https://www.washingtonpost.com/business/2019/12/03/precariou... )

In regards to the cost of housing, I came across an adage a while back that has stuck with me, "Housing can either be affordable, or a great investment, not both". I think the real solution is a change in policy for housing to no longer be treated as a great investment. Not that I have high hopes of this ever coming about.

https://www.forbes.com/sites/scottbeyer/2016/08/12/tokyos-af...

> Like so many other global first-world cities, Tokyo is experiencing explosive population growth, increasing by 1.6 million people since 2000. And unlike practically every U.S. city, it has almost no empty land. So it has responded through vertical growth, tearing down old structures and replacing them with high rises at a pace light-years ahead of anywhere in modern America. As FT’s Tokyo bureau chief Robin Harding wrote in the article, the city had 142,417 housing starts in 2014, which was “more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).” Compare this, also, with the roughly 20,000 new residential units approved annually in New York City, the 23,500 units started in Los Angeles County, and the measly 5,000 homes constructed in 2015 throughout the entire Bay Area. > This has stabilized Tokyo’s housing prices, wrote Harding, and has kept them far lower than in many U.S. cities.

It is not a contradiction to say the presentation doesn't help show the conclusion, and that the conclusion is (nonetheless) correct.

We in the US once had a number of tax policies that were designed to disincentivize this kind of payout, and encourage companies to maintain full-time workforces with decent benefits, invest in R&D and facilities improvements etc. Other countries still have those policies. But we here in the US got rid of a lot of them. The result is that excess productivity benefits have been distributed in exactly the way you’d expect - with frankly alarming effects on our political stability.

Though the disparity is somewhat justified in that the efficiency of software (neither in its running nor production) haw kept up with Moore's Law. In any case, owners and executives are funneling up the excess value created. It's there, you're just not getting it.

If by "hosed" you mean getting $120K salary right out of school, then I guess that's true. I'm just not sure I'd call that "getting hosed" though.

If you want to see what "getting hosed" means, go work as an SWE in Europe.

Yes, SWE's only get a piece of the pie but it's a pretty nice piece (Especially compared to everyone else). If you want more, go and bake your own pie.

If that’s “getting hosed”, I hope they never run out of water!!

It is, though, right? It is passed on to the employees who were responsible for the efficiency gains. Those employees who built those innovations — could be employees of retailer, or employees of the companies, say tech companies, for whom the retailer is a customer.

I think the parent commenter’s point is still valid that:

>>Someone stocking shelves in 2020 is about productive as someone stocking shelves in 1968.

I would phrase it slightly differently: “the skill of stocking shelves in 2020 has been as efficient as it has been in 1968”. It’s the skill of creating innovations in inventory tracking , better statistical modeling and predictions/estimates, and probably the advent of tracking all this in digital systems that has multiplied the efficiency at the macro level.

Employees who are stocking shelves have not been able to participate in those contributions.

Or take the programmers who worked on Walmart.com. They didn't invent the transistor, Linux, or Java. They just used them to build a crud app.

Likewise, the shelf stockers who work at Walmart didn't invent pasteurization, the tin can, or the grocery cart. They just move the cans around.

What does that have to do with the fact that programmers contribute (on an ongoing basis) to improved productivity, while shelf stockers do not?

Assume the app was developed in the past five years. Replay the last five years twice, with different circumstances: Once without the shelf stocker, and once without the programmer. In one case, the increased productivity still appears, in the other, it does not.

It seems to me that the person who is required for the addition of the increased productivity caused the increased productivity, while the person who is not required for it did not.

It certainly seems like the shelf stockers are more important to this process than the programmers. They still provide value without the programmers but the programmers are entirely dependent on the shelf stockers to provide value.

Why do the programmers therefore get to claim the entire surplus in productivity if they are dependent on the shelf stockers for that productivity boost to actually materialize?

I don’t know. That’s a really difficult problem to solve through legislation.

Ultimately though stocking shelves in 1968 Walmart is about as efficient as stocking shelves in 2020.

Like I mentioned in a comment above, who we consider made it happen is arbitrary. Walmart cannot exist without a functioning society. The daughter of Sam Walton never worked at Walmart, yet she gets more of that gain than any other individual.

For other products, it is even more arbitrary who gets the benefits. If facebook disappeared, another company would quickly take the role of social media leader. Likely not much would change from a productivity standpoint. Yet whoever happens to get the role of dominant social media ceo makes billions.

>How is that any different than a software developer receiving a higher salary because they are more efficient due to computers being more powerful?

I'll admit software developers might be a bad example for that given question since they are responsible for some downstream efficiency, but the overall point still stands. Why do high skill jobs get to capture the value of their increased efficiency but low skills jobs don't?

Because any teenager would be more efficient with automated inventory control. Teenager X didn't have to learn how to do something more complicated. The labor is interchangeable. It is a victory of capital.

Labor specialization and labor skills are what allow labor to collect more of the spoils. Otherwise, labor is interchangeable. The job must need you more than you need the job. Supply and demand.

On the computer power point: scaling has changed as Moore's law has died. It takes something more subtle to make modern systems sing. Something inaccessible to most teenagers without both aptitude and training.

Let's not get started on discussing the interpersonal communication skills needed to survive Thanksgiving/Black Friday.

And for all this, you're getting paid less than Joe W. Cash Register got way back when.

And cashiers still have to do math. Most places don't have automatic change dispensers, nor can a machinr account for a customer suddenly switching which bills they're going to give you. I understand that never having had to work one of those jobs is a source of pride in a lot of places, but in this thread, it just outs you as ignorant.

There’s a much higher barrier to entry as a software engineer than a shelf stacker. The breakdown of returns to labor vs capital will always favour capital (absent regulatory intervention or shortage of unskilled labor) for commodity-type work.

I throw this number out there not for it to be taken seriously on its own purely because it’s “in the middle”, but to hopefully put into perspective how large this gap is, again naively assuming the “correct” number is somewhere between the two extremes.

I personally find it harder to imagine that the “correct” minimum wage is closer to $4.22 than it is to $14.11 or even $24, but that’s just me.

https://fred.stlouisfed.org/graph/fredgraph.png?g=rKwm

Even here there is a definitive and deliberate bump right during the beginning of the COVID times. I don't believe that's an artifact. Somehow this analysis is saying people are vastly better in August than they were in February.

I think that "average" in most of the different versions is useless. The millionaire and billionaire classes can be so over-represented they can draw the rest up. It doesn't answer if all of society is actually becoming more well off or just the cream continuing to rise.

Here is a more complete picture, with words and discussion and multiple graphs too: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

There’s a story to tell here, but you’re not showing it.

Roughly, the way it "should" work is that if Company A and Company B are in the same industry, and Company A is more productive than Company B, free market forces cause Company A to pay more than Company B, thus improving their ability to compete for workers. Generalize this to an entire industry of competing companies, and then to an entire economy.

https://en.wikipedia.org/wiki/Brandolini%27s_law

If I could go to my landlord and trade them a months' worth of health insurance benefits for rent, then you'd be on to something. If you could find a way to separate out the part of "total compensation" that actually contributes to income, such as stock grants & such, then we could talk. But, just "total compensation" doesn't cut it.

If you really want to get a true picture of how screwed the American worker is, take a look at housing and education costs over time, as well. Both have increased faster than inflation, and vastly outpaced wage growth; yet everyone needs a home, and a college degree is practically a requirement for any vaguely middle-class career.

If you want to look at the "value" of, say, an employer's group health insurance plan to me, what you really need to look at is the difference between buying the exact same coverage as an individual versus participating in the group plan. This is not an analysis that can typically be performed, because insurance companies don't want you to be able to compare on price like that. But, assuming you could, if I got, say, a $100 discount per month, and I was going to buy that coverage anyway, then, sure, you'd have a good case for calling that +$100 on my balance sheet.

Over time, which is what we are talking about here, the choice of the employer to put money into benefits in order to create an attractive compensation package means they are not putting money into wages (assuming for simplicity that those are the only two buckets to consider). So wages can stagnate while total compensation goes up.

Yes you can conclude from this that your take home pay is stagnant, what you can't conclude is that there hasn't been an increase in compensation. And if you are trying to determine if compensation is correlated with productivity gains (i.e. the original article) then you can't just pretend those benefits aren't part of the compensation equation.

Again, I literally don't care what my employer spends its money on in this calculation, other than my paycheck, and discounts on things I would use anyway such as health insurance they pass along from bulk buying. So, you can't say, "well, if they didn't offer insurance, and instead passed along savings in your paycheck, then your income would increase." Yes, I still need to buy insurance, so only the discount I get from obtaining it via my employer is relevant -- my literal bottom line does not change. (Actually, my bottom line is worse in this scenario because I don't get the tax break, but let's just ignore that). And, if a benefit isn't something I would use (let's say a childcare allowance, if I don't have children), that also goes on the company balance sheet and could potentially increase my "total compensation," but literally does nothing for me, hence its value to me is $0.

You seem to be talking past my point, which is that the American worker is getting screwed from all sides by stagnating wages and skyrocketing healthcare, housing, and education costs. In America, for most employees, those expenses come out of wages, so wages are what we ought to be concerned with.

It was the first thing I thought when opening this, and as so often, it was the case.

Similarly I do not understand your assertion that the author is "cherrypicking troughs and peaks". from tfa:

> Until 1968, the minimum wage not only kept pace with inflation, it rose in step with productivity growth. The logic is straightforward; we expect that wages in general will rise in step with productivity growth. For workers at the bottom to share in the overall improvement in society’s living standards, the minimum wage should also rise with productivity.

Is their assertion regarding 1968 and minimum wage factually incorrect?

Total compensation includes the value of benefits and the (so-called) employer contribution to taxes. Total compensation can be up to 40% more than salary.

Which is to say, insurance these days might be worth vastly more than it was in 1968, since Healthcare costs have skyrocketed for the uninsured.

Note there was an article on the HN front page just in the past week or so about how Amazon warehouse workers were getting more repetitive stress injuries because partial warehouse automation allowed them to fulfill 3x the number of items per hour than before these systems were put in place.

But isn't this logic applied to average CEO pay, which has gone up many times faster than productivity? CEOs work isn't any more demanding than it used to be, either.

Microsoft’s market capitalization has more than doubled during Satya Nadella’s tenure as CEO. When Steve Ballmet quit as CEO the market cap jumped over $100 million. That kind of difference is why companies pay extremely well for top CEO talent. Management is a skill, some people are really great at managing large, complex, profitable organizations and they’re worth a lot of money.

When they get removed, they often receive golden parachutes even if they seriously effed up the company.

This can't be explained by return on equity. I guess it can be explained by bargaining power or cronyism, or perhaps other things I'm not thinking of.

True often the golden parachutes are way too high compared to realistic performance bonuses. But if you think of that as insurance - the board and the CEO both know this is risky, so they negotiate a fixed golden parachute just in case it doesn't work out - otherwise why would someone who wouldn't get fired take the job, since they wouldn't want to risk the downside?

So a big reason CEO wages grew is that companies became massive.

I think it has, actually. The CEO's job became more complicated as a result of the increased complexity in the world. There used to be only brick-and-mortar and mail order, now there is internet. They used to advertise on tv, radio, and newspaper. Now they can advertise tv, radio, newspaper, online ads, and social media influencers. They didn't have to worry about ransomware, now they do. And so on.

If we measure a CEO’s job difficulty based on how many years a typical company in their industry can safely operate while stagnating, then the job has become many times more difficult in the last 40 years in some industries. In others, perhaps only twice as difficult.

That is not to say that salaries should stay high, but we would look for reduction to come from systemic productivity gains in management that have come to other white collar professions: software, more efficient management hierarchies, cultural changes in communication, etc.

I’m certain that they delegate those issues to subordinates; do you feel that there is skill involved in managing and supervising subordinates, and melding their disparate opinions into a coherent and profitable direction for the company?

Completely anecdotally, improvements in labor productivity due to automation (etc) are less likely to be impactful in jobs like waiting tables, delivering newspapers or flipping hamburgers.

That anecdotal evidence is backed by research that shows that service sector productivity tends to lag other sectors significantly.

When I was a teenager, food service proved to be a much more complicated job than I anticipated it to be. My first tech jobs paid better (even though an internship would have paid more), and felt simpler. If only because I'd spread out the effort of learning the skills over 8 years instead of 3 months.

That will mean they get paid less than an entry level but skilled tech job.

I sometimes miss the mindless simplicity of the work. I miss knowing exactly what I need to be doing every day.

But I certainly don't miss with dealing with the general public, where a very vocal minority has decided that it is socially acceptable to yell at service workers. It's even worse when it's their own mistake, like they ask for mustard when they meant honey mustard, and somehow I'M the idiot for not knowing which one they meant.

Or they ask for "light mayo" and I ask them to clarify if they meant a small amount of mayo, or the low-fat mayo, and they snap an answer back at me as if I was being a smart-ass. The answers were close to 50/50 by the way.

Damn maybe I don't miss it after all. I could go on for hours about how shitty some customers can be.

yeah I don't really miss stuff like that. although as I've gotten older, I've started to appreciate people who are overtly hostile. at least you know where they stand. I find it much harder to gauge people's intentions in white-collar land.

Given an example of warehouse workers, and how companies are enacting more and more automated "anti-slacking" restrictions, yeah, I think we are.

The on-campus tech job paid about 10% more, day 1, than any of my friends were making. So I used the higher pay and all the tricks my roommates taught be for frugal living and cut back my hours about 25%.

I tried not to brag about it. I even felt a little guilty about how hard they were busting their asses, while I had a job where I could automate the tedious bits myself, and once I was not low man on the totempole I could delegate other parts.

PSA: Be nice to your food service staff. And your janitors. Instead of thanking god it's them instead of you, be grateful someone else took that shit job so you don't have to cook and clean up after yourself.

Why would we tie minimum wage to worker productivity OR inflation?

What is the minimum wage trying to accomplish in the first place?

It seems obvious to me that we have to index it to the living wage instead.

A full-time job needs to cover: one half of a 2-bedroom apartment in the outskirts of town, plus food, bills, and basic medical expenses. If it doesn't cover this, then this person is going to rely on government programs.

And if the government programs aren't there, they'll be coming home each night after a full day of work and watching their kid get skinnier, seeing their CEO collect multimillion dollar bonuses in the news, and you can be damn sure they won't stand for it. They'd unionize, protest, and demand higher compensation.

Our social safety nets are an important part of our society, but when they're required and used by full-time employees, it's something of a taxpayer subsidy for the corporations who can now pay their employees less than what's required to live.

And if a job can't be done profitably for a living wage, we need to let that job go. Automate it, outsource it, let the companies that depend on this exploitative labor pivot to new business models, or let them wither and die. The jobs are going to leave eventually anyway - we might as well accelerate the push toward a modern labor economy that's already underway. We can funnel the productivity gains from automation into education, to allow the displaced a chance to retool and learn a new skill, and to bulk up our social safety nets for those who are too old to do so.

I'd argue the whole point of productivity gains is that they do outpace pay. The idea is the same work generates more value. Some of that extra value can be passed back to the employee, but if all of it is passed back to the employee, then the goods produced don't actually get cheaper. If nothing gets cheaper, there's no incentive for a business to invest in tech that makes employees more productive.

The data in the piece has a lot of problems with it too, but I think the core assumption is fundamentally off-base.

When people say that "wages kept pace with productivity growth" that's what they're saying - that a 10% increase in productivity resulted ina 10% increase in pay, not a $10 increase in productivity resulted ina $10 increase in pay.

That's because those people are sadly wrong. Salaries have never been based on value created. They have always been based on the minimum a company could pay for the talent they desire.

There's a spectrum between none and all.

Also, why wouldn't goods get cheaper? Scaling up production is easy so it's not a supply issue. There would be two outcomes: people would buy more goods overall (as has happened over time) or they would work less and enjoy more leisure time.

My point is just that I don't think "wages should keep pace with productivity" is true. If wages always rose with productivity, we'd be focusing all the gains on the people in the sectors where productivity is growing, and not lowering the cost of goods for everybody else.