Rounds VS ASE's Which To Buy

Aren't inflation adjusted wages expected to be flat absent some type of innovation?

 

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No, of course not. In your entire career, don't you want a couple of raises? If you
start at Kroger's as a stockboy for $7.88 per hour, don't you eventually want to be a manager (of some kind, 3 years later) at $17.40 per hour?

By the way, in 1913, the year the Federal Reserve was created, while Congress for all practical purposes wasn't watching, a dollar was worth a dollar. Today, 100 years later, a dollar is worth about 4.8 cents (in terms of 1913 purchasing power) -- now that's inflation. There are some arguments for mitigation via improved technology, such as for items like computers, telephones, automobiles, furnaces, tools, etc., but for items like fuel, land, basic foods, etc., the calculation's correct.

See http://www.usinflationcalculator.com/ , which uses monthly CPI data.

 

No

 

Moore's Law kind of makes comparing 1913 with today pointless. Innovation is what keeps the economy going.

 

Consumer SPENDING is what keeps the economy going, and it's a growing share; that isn't necessarily good, by the way. Source, St. Louis Fed.

US Personal Consumption Expenditures as % of GDP



Moore's Law has nothing to do with "driving" the economy. It actually says that the number of transistors in an integrated circuit doubles every two years, soon to be adjusted upward to three years.

There's a limit to how much technology (or anything else) households can buy. You might get better products for less money, and increase your productivity (or solitaire playing), but it certainly doesn't drive the economy, especially when the hardware's imported.

Increased spending also lowers the household savings rate, and puts the average household deeper into debt.

I see CT members bailing out of their coin collections, and their bullion, especially in the last six months, and I suspect debt's the primary reason.

///sorry for the bold font, it refuses to shut off.

 

You need to study Moore's law again. What happens when you can no longer double
This is a very common topic amongst futurist and there's a reason they call the end the Moorepocalypse. You know what will stop the Moorepocalypse?...Invitation!...Moore's law has and always will be about economics according to Gordon Moore.

 

Apples and oranges. Or at least apples and orchards.

If wages across the board are flat, that means average wages, not individual wages. It means positions at every level are paying the same when adjusted for inflation, not that people aren't progressing in their careers.

Don't hold your breath for a three year progression from $7.88 to $17.40 though.

 

Stockboy to supervisor -- depends if you know apples from oranges.

I suggest NorthKorea, Mr. Roots, and any other CT-er mesmerized by our voodoo economics of recent decades go back and (at least) read Wikipedia on the basics, which serves up brief but adequate explanations of economic principles.

By the way, "...It means positions at every level are paying the same...," this is nonsense, except for the GS and WB employees of the Federal workforce; even there, you see a multitude of bonus and adjustment plans. One size does not fit all, one of the wrenching characteristics of fascism.

As an aside, in 2014, the stockboy earning $7.88/hour is eligible for Medicaid.

Me = Economist, 1970-1977 and 1988-2002. You = ? Now back to coins!

 

All I said was Moore's law was about economics just as much as it is technology.....No need to pull it out and get into a pissing contest. I ate asparagus last night.

 

Maybe you can blame the economics department at my alma mater, but I was conferred a degree in environmental economics; my thesis was macro-economic modeling in South East Asia's developing markets from 1991-1997. The reason my degree was in environmental econ instead of macro econ was two senior level courses that I took to fulfill a writing intensive credit requirement.

Anyway, I will maintain my belief that average wages should always be (assuming zero innovation and constant output relative to population size) flat or downward trending (if we account for scarcity of goods) when adjusted for inflation.

There's no logical system under which average wages over the long-run would increase relative to inflation, without innovation.

 

The thing about innovation is it's to broad of a word in this case, some innovation is good for the economy and some is bad, but there always has to be innovation in our current monetary system.

I'm not an Economist but I did sleep at a Holiday Inn once.

 

Increasing wages requires no innovation. Like all prices, it's supply versus demand. So anything that increases demand or decreases supply will causes prices to change.

 

A good start. And where are the highest (McDonald's) wages in the nation? North Dakota, where the huge influx of oil workers has created a tight housing market, with astronomical rents, discouraging locals from taking entry-level jobs unless they live at home or drive 50 miles for cheaper housing. Fast food can't exist without a gang of entry-level jobs, so they pump up the wages and hope for the best. Supply and demand.

This whole "innovation" idea is screwy. A kid starts working at 17 to 19, you think he will settle for "flat" inflation-adjusted wages all his life? How's he going to buy a new car, or a house, or insurance, or afford a couple of babies? I repeat, the economy RUNS on, DEPENDS on, CENTERS on, personal consumption.

When unemployment goes up, or the quality of new jobs degrades, households cut spending, pay off debt (if possible), put off expensive purchases, and economic growth falters.

Moore's Law, in some industries, tends to drive people OUT of the workforce, and/or compel retraining. Is that beneficial innovation? Not by the nervous workers' standards. But CEO's love it. Anything to get rid of those pesky, demanding, unpredictable, irrational real people.

Before they know it, sixteen employees can run the IT department instead of forty. Result? Layoffs, wage caps, fewer promotions.

 

The problem as I see it is you're looking at the wage progression of a specific individual. The discussion is regarding average wages. In your example, your teenager would be replaced by a different teenager who is willing to work for the flat inflation-adjusted wage. If the oldest employees in the workforce retire willingly, they are replaced by someone else at their wage level. If they are unwilling (or unable) to retire, eventually, they'll be forced into lower earning jobs.

It's essentially a bell curve where desirability (due to age, experience, knowledge, education, etc) is on the X-axis and wages are on the Y-axis. The area under the bell curve represents the aggregated wages earned in the economic system you're observing. Inflation will push the curve up the Y-axis, naturally. Since we're observing average inflation-adjusted wages, the area under the curve would then need to be indexed for inflation and divided by the total workforce.

Yes, Johnny might go to college, get his PhD and suddenly be earning $340k a year as a chemist, but Rachel would be trying to earn some money to buy her first used car, a dress for prom or her schoolbooks. Rachel would gladly take Johnny's old job at whatever wages he earned before moving along the X-axis through increased demand for his services.

Now, the only way for the curve to change shape (direction or actual formulaic shape) when inflation-indexed is through innovation. I don't understand why you're so quick to dismiss this concept. Either there's a great disconnect on what I learned or a great-disconnect in what you learned, since we likely have somewhat similar educational backgrounds.

 

Despite your economics background, I still don't think you understand the concept of flat wages. It does not indicate any failure of individuals to progress upwards through their careers, but rather an across the board comparison of people working similar jobs.

For example, you take snapshots of all entry level manufacturing jobs at two different points in time, adjust for inflation, and compare. The results do not mean that the people in those entry level positions did not progress to middle or upper management, it only shows the difference in pay for the people working in those positions at those particular points in time.

If you took a snapshot at 1990 and 2014, I earn a dramatically higher salary now than I did then, even after taking inflation into consideration. Then again, I also didn't stay in the same position waiting for a raise. If you do stay in the same position, and refuse to better yourself or seek positions of increasing responsibility, then maybe your wages will remain flat. Should it be otherwise?

 

That is one way, but not the only way, and perhaps not the most influential since increases in productivity due to innovation do not necessarily increase wages.

Morale, motivation, distraction, apathy, and depression are but a few factors that can have huge impacts on productivity and wages. All of these can be national trends as well, influenced by leadership (or lack thereof), the media, technological innovations (Facebook in the workplace), national and world events, etc..

 

For Blaubart, my own example followed a beginning Kroger stockboy, progressing to a lower-level management position in 3 years. And you are correct, I am discussing individuals, because you and your descendants are all individuals, and national statistics don't mean a thing in the short term, all depends on externalities and elements beyond our control.

Anyhow, I retired to get away from all this, including Washington's surveillance and micro-management of our entire lives, cradle to grave, so good luck.

 

I'm aware that everyone is an individual and that individuals matter. However, the statistic that "wages have remained flat" refers not to individuals not getting promoted, but to wages on average. i.e. Stock boy wages in 2004 compared to stock boy wages in 2014. Manager wages in 2004 compared to manager wages in 2014. Not Joe Snuffy the stock boy's wages in 2004 compared to his wages in 2014, whether he is still a stock boy or if he is a manager.

When you mix "wages have remained flat" to the individual example of a stock boy moving up the ranks to management, you are then comparing apples to oranges.

Wages have indeed remained flat, especially when adjusted for inflation. (Often they decline when adjusted for inflation) I won't argue that at all.

It may also be possible that people are not getting promoted as quickly as they used to, especially if the people above them are retiring later. I won't argue that either, but that's not what "wages have remained flat" usually refers to.

A wise man once told me: "Now back to coins!"

I'll take his advice now...

 

There are things other than innovation that change the supply and demand for labor. One big one is an increase in capital stock. More capital results in more productivity results in higher wages. ANYTHING that results in a change in supply or demand for labor results in changed wages.

 

This used to be true, but no more. The above chart from BLS.gov shows that households are no better off (in 2011) than they were two decades before, despite substantial growth in GDP.

Part of this is due to growing income inequality, the so-called 1%. The "pie" is still there, but they have much more of it. A household, by the way, is defined as one or more persons occupying a housing unit; it excludes occupants of "group quarters" like nursing homes or institutions. The old definition described persons affiliated by blood, marriage, or act of law (adoption, etc.), but the current working definition is simply family or non-family.

And, as is painfully obvious, more capital does NOT necessarily produce higher wages; also, since the end of World War II, there has been an ample supply of labor in the United States.