alt Hacker NewsThe labor share of income in the US is at its lowest post-war level
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FTA's conclusion:
"Is this decline a distinct change from the recent behavior of the labor share in the U.S.? Along the two key dimensions we investigate, our answer is no. <later> ... and they provide little evidence that it will evolve differently from past episodes."
This conclusion seems to be against "this time is different" arguments. Should we be generally encouraged by similarity to past declines pre-2000 or bearish and think that there is more drop to come like the 2000-2007 and 2007-2019 periods they graph out?
I guess there is no way to predict other than check back in after time passes.
The submitted title is a bit sensationalist given the article’s conclusion:
> Is this decline a distinct change from the recent behavior of the labor share in the U.S.? Along the two key dimensions we investigate, our answer is no. First, the labor share’s trajectory post-COVID broadly follows the cyclical patterns observed in earlier recessions, with a decline during the recovery phase that mirrors historical dynamics. Second, the decline in the labor share since COVID is driven primarily by within-industry changes rather than shifts in economic activity across sectors. Taken together, these results suggest that the post-COVID decline follows the same cyclical patterns as earlier recessions and is driven by the same within-industry forces, and they provide little evidence that it will evolve differently from past episodes.
What I find more interesting is the sharp drop around the early 2000s
Raise the minimum wage to ~$25-30/hr
Before anyone says inflation, there will be more consumer spending and thus more cash flow in the middle and lower class
it feels like every share of income is at its lowest except for the ultra wealthy.
That most-recent spike during/post-COVID really puts into perspective just how unreasonable low-wage employers were to be so hysterical.
For what its worth Ross Perot had an ominous take on the effects of free trade back in the 90s with his "giant sucking sound" observation.
Obviously the solution here is for workers to also become shareholders.
Interesting that most of the decline happened in the 2000s. The graph shows a large decline from ~2000 to ~2008 which continues after the GFC before going up a bit in the 2010s. The drop off since COVID is comparatively small.
I think this is part of a long term development where technology and globalization slowly erode workers bargaining power. Basically you only build a factory in the US if you can keep labour costs low enough and the manufacturing automated enough so that you can still compete with other manufacturing hubs.
Is there a reason to think this is anything more than increased productivity? And that therefore the case has to be made that labor, more than capital, should benefit from that increase? I’m not saying that argument can’t or shouldn’t be made, just saying that “it was different before!” Isn’t the best argument.
isn't this the expected/intended outcome of the economic policy we've held for a generation or two?
the capital/labor class gap increases when total returns on capital investment exceed total wages+redistribution to the labor class, and the gap shrinks when that's reversed. the market ~controls the capital gains and labor wages knobs, and society decides where to set the redistribution knob.
the article investigating the post-covid drop and concluding that it's normal is an interesting rhetorical device. on one hand, relief that nothing crazy is happening. on the other hand, disappointment that we've accepted a growing inequality gap as normal. the gap was already at a post-war max going into covid, the floor gave out 20 years earlier and covid was just gas on the fire.
advancements in automation and tax codes that benefit capex over payroll will continue to incentivize business to shift budgets from labor to robots.
I don't have time for a longer comment, but AIUI this is mostly a statistical illusion caused by changes to US tax law- previously income that was attributed to 'labor' shifted over to LLCs/S corps for more beneficial tax rates. The doctor, lawyer, financial advisor, CPA etc. that in past decades would have had his/her income run through a W2 arrangement shifted to becoming a one-person corporation
Okay, so say AI & MBAs are successful in replacing the labor spend of corporations on every level? What happens to "the economy"?
Yikes. Good to know that labor shares used to rebound after crises, but since the 2000s and the dotcom bubble it has basically been downhill only. So don't expect any of this to get better unless we roll back technology to the last millenium.
What happens if large cohort of Boomers retires and stop working, instead living on their savings? Labor share of income drops. If you remove this effect, the labor share of income is flat - confirmed by last week's analysis in The Economist.
According to the article, automation (including software) and other technology "advancements" are important factors.
I think it's becoming clear that we are reaching a point where UBI must be debated in Congress subsidized by something that doesn't wreck economic growth and probably doesn't target capital investment.
Are there hollistic analysis? I generate income with my labor, but I also save in retirement and investment accounts. On analysis like this that we typically see, are these two things competing? Are we really just seeing a rise in retirement savings?
right, so now more than ever... if you're not saving/investing you are falling behind.
Because labors in China are extremely cheap. And they are getting cheaper and cheaper in last decade, despite the GDP growth.
Could it be because the productivity is up?
Equity should be a normal part of compensation for non-executive employees in addition to their wage/salary and benefits.
There's nothing about being in the C-suite that magically endows one with motivation based upon stock price, but we pretend that there is.
The longer I participate in the economy the more it starts to feel like the end stages of a game of monopoly. There is nothing left to own unless you already are wealthy and the only way to get ahead is luck.
The most interesting takeaway I see in the labor share percentage graph is the trend that labor share increases into the recession. Post recession share trends down for a bit.
How much of the trend is due to employment trends vs. printing money for the wealthy to get their hands on it first(and profit) post recession?
I wonder if labor itself will become an anachronism in the age of AI. Perhaps the future economic landscape will be dominated by capital because everyone will own capital. You will command a small army of agents to do whatever you want. You will no longer need to work for someone. You own small businesses far more than you could possibly operate in the pre-AI era and they will mostly operate autonomously with minimal direction and some guidance from you.
And yet for some reason all the algorithmic pricing targets the laborers, when apps hunt for whales they target teenagers. Ridiculous.
There is a need for proper pricing for the rich, i.e. Elon can pay a million dollars per meal. Someone is leaving money on the table.
We should break up monopolies, revoke the vast majority of work visas, end free trade, and unionize.
Thank you for coming to my Ted Talk, please leave a downvote to indicate I caused you emotional distress.
this is relatively unremarkable for those with an understanding of wage, labor, profit, price and capital.
capitalism will always seek to reduce labor cost. during the epoch of neoliberalism it achieved great strides in this by reducing labor power through union busting by both thatcher and reagan in the UK and US respectively. it has also effectively curtailed any increase in the minimum wage for nearly 20 years as well as reduced protections, regulation and prosecution for wage theft and overtime pay violations which it maintains as exclusively as civil matters while ensuring theft itself from a merchant in turn is always a criminal matter through the primacy of private property.
to learn more i recommend reading Marx's "Das Kapital," albeit its rather academic. Engels "wage labor" is also a good read to understand why housing is so persistently unaffortable but helps to understand why any other good or service slowly becomes so as well.
This is clearly heading in a direction where the USA is going to elect a huge number of socialists, who in turn are going to enact massive taxes on billionaires and break up the monopolies.[1]
This is why I think the billionaire oligarchs are literally mentally ill. They've won the entire game. They control everything. They live like gods, they twitch a pinky and millions dance.
But their response to all of this power is to seek even more of it, destabilizing the very system that has them on top. You would think self-preservation would kick in. The fact that it is not and that their greed knows apparently no bounds is going to lead to their extinction.
For a long time I thought it was hyperbolic to say so, but no longer -- the billionaires are mentally ill.
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Well yeah. This is why we're calling end-stage capitalism. What's coming looks like technofeudalism.
All companies are rent-seeking. Selling something is no longer a goal.
Prices go up up up up up.
Oligopolies and price fixing is normal.
Monopolies are normal with little/no controls.
People are getting paid a pittance to the work done.
Unions are their weakest in a century.
NLRB is basically frozen due to no quorum on the head board.
Companies routinely scam and lie at multiple places in hiring pipeline. FTC does nothing.
Neither party (Republicans or Democrats), save the DSA, fights for the American people.
Its all coming to a head, and baskets, and guillotines. Anybody who studies history knows what kind of powderkeg this situation is. Its also the reason the Ancient Romans made panem et circunses (bread and circus) cheap or free. You get riots and revolts otherwise.
I find this metric misleading. Where is the extra money going? To whom? Turns out most of it is not going to billionaires. Bulk of it is going to future investments. If we choose not to do that, we lose out on future gains.
buy shares of companies with any excess money you have and your share will grow
Now consider this against the rising productivity-pay gap that has been widening since teh 1970s [1].
The big picture here is increasing wealth inequality and that has been on steroids since the pandemic.
The only shocking part to me is how people continually and intentionally don't see it or, worse, think they'll be unaffected by it so don't care. You see this on HN where so many people seem to think they'll be Jeff Bezos one day.
But even if that's true, don't you want to live in a society where you don't need armed guards at your house and you don't need armed escorts to go anywhere? Because that's what we're heading towards. One of the problems with American society (in particular) being so car-centric is that it lets people insulate themselves from the rest of society more easily. In cities like NYC you're forced to see and deal with the less fortunate. You can't hide from it so easily.
We don't need trillionaires. We need to raise basic living standards so people have food and shelter and we don't need to separate society into slums and armored compounds.
And the Republic response to this is "soc1lism bad!!"
The actual labor share of income is significantly higher when you include employer contributions to employee health insurance premiums. Healthcare costs have been rising faster than overall inflation for decades, and while many of those costs are passed on to employees the employers have also absorbed a significant chunk. If we want to increase the labor share then we'll drive down healthcare spending.
And no, there's no simple solution to this problem. The notion that something like "Medicare for All" would solve the problem is a total fantasy, disconnected from actual US healthcare economics. Any real solution will have to work on multiple angles including preventive care, PBMs, provider wages, rationing, drug prices, fraud, malpractice insurance, interoperability technology, etc.
People are misreading the conclusion - the Covid related drop is normal and matches previous episodes, but the massive overall drop since 2000 is not.
The situation on the ground is unchanged - the amount of labor being generated per person has not really changed, but the overall pie has grown massively around us.