tag:blogger.com,1999:blog-2546602206734889307.post2693932782013184612..comments2024-03-18T11:12:51.114+00:00Comments on mainly macro: Real wages are mainly a macro issueMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-2546602206734889307.post-59244865820430309992017-08-14T09:59:54.944+00:002017-08-14T09:59:54.944+00:00I agree with Richard Koo that we are in a balance-...I agree with Richard Koo that we are in a balance-sheet recession and business is not in profit-maximising mode any longer. Instead, it is trying to minimise debt, because the private sector is drowning in its own debt.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70238402703572155752017-08-12T12:54:08.295+00:002017-08-12T12:54:08.295+00:00I think you are making the mistake of seeing compe...I think you are making the mistake of seeing competition as a driving force for business. It is really a nuisance at best and the reality is that the main driver is profit. I like to illustrate it with this question: if a company makes a product for £1 and sells for £10, then when another company comes along and can also make the product for £1, then which of the following is more likely. a) that it sells the product for £2, or b) that it sells the product for £9? Modern business is all about maximising profit rather that outselling the competition.HomerJShttps://www.blogger.com/profile/02414390191063061432noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-73639271427141672642017-08-11T07:21:23.148+00:002017-08-11T07:21:23.148+00:00On 31 July Philip Hammond, seemingly allaying fear...On 31 July Philip Hammond, seemingly allaying fears that the UK was going to make its living post-Brexit by becoming a tax haven, said there would be no cuts to taxes and no cuts to regulations after March 2019. "Number 10" made no response to this, although that might have been because Theresa May was on holiday.<br /><br />For the lower-orders becoming a tax haven means low wages, weak unions/workers' rights and minimal public services. For the upper-class there are low taxes and lax financial regulation (which is code for "easy tax avoidance and money laundering").<br /><br />So why would Hammond make things harder for Tory donors? Has he been threatened by the EU that they will make life difficult for the UK if it goes down the tax haven route? <br />Or has he realised that if the Conservative policy is to cut regulations then people might ask: "What regulations are you going to cut? Would they include fire regulations on, say, the type of cladding that goes on tower blocks ?" <br />And would that policy be a vote-loser? And was the silence from "Number 10" an indication that they too had realised that ?<br />Pendragonhttps://www.blogger.com/profile/14601150248986844828noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-12455616269583620902017-08-10T22:46:17.742+00:002017-08-10T22:46:17.742+00:00From a pure macro view I would expect real wages t...From a pure macro view I would expect real wages to be at least somewhat affected by immigration.<br />- As migrants bring usually neither a lot of capital nor natural resources with them, migration leads to an on average lower capital intensity and correspondingly lower productivity. Lower productivity corresponds in first order with lower real wages.<br />- migrants usually have a skill set, which is less useful for the country they move to than the local population, which again reduces average productivity. This doesn't necessarily mean, that the real wages of the native populations shrink, but in the real wage estimate, the lower wages of the migrants themselves are used within the calculation, so the real wages of the total population can shrink, even if the native population sees wage increases - in a country with a very small wellfare state the real wage development might not be very relevant for any political argument.<br />- as you already noted, your arguments largely hold in a perfect market situation without any monopoly or oligopoly power. However, in the real world, there is some such power and indeed unions help and large migration is an impediment for any attempt by workers to get a share of the monopoly gains.<br /><br />Of course for the UK, as you demonstrated, the dominant source for the lousy real wages development are the terms of trade, but there are situations, where immigration and lack of unionisation can be the source for low real wage development. In a political context of course real wage development for individuals is imporant rather than for the population in total, where both unions and migration can have larger positive and negative impacts than on the total real wage/capita.Anonymoushttps://www.blogger.com/profile/05815050740175861383noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-39726129196739068702017-08-10T17:54:47.542+00:002017-08-10T17:54:47.542+00:00JW-Mason has a post (with lots of links) that goes...JW-Mason has a post (with lots of links) that goes into how and why a lack of union power and a slack labour market could be behind that lack of economic growth "Abundant labor and low wages discourage investment in productivity-raising technologies. As Avent notes, early British and even more American industrialization owe a lot to scarce labor and high wages." http://jwmason.org/slackwire/what-recovery-the-conversation-continues/ - I'm also thinking that a knock-on effect could be that less capital intensive work could further erode worker's bargaining power. If say a warehouse is largely automated with very expensive machines sorting the goods and a few highly trained workers installing and maintaining the system, then those workers will be in a strong position to bargain for good pay and conditions (since so much has been invested both in their training and in the machines). By contrast, if the system is run as the Sports Direct warehouse, with thousands of untrained workers running about, man-handling the goods, then they have no bargaining power at all. They are readily replaceable; even if the warehouse was brought to a standstill by a strike, little has been invested in it and another one could spring up with a new set of workers.stonehttps://www.blogger.com/profile/16420341212847543229noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70137050087896088012017-08-10T16:37:35.653+00:002017-08-10T16:37:35.653+00:00Real wages aren't as much a macro issue as the...Real wages aren't as much a macro issue as they are a government policy issue. I.e., real wages go nowhere because government changes the relative power of the buyers and sellers of labour.<br />I Will Never Accept The Terms of Servicehttps://www.blogger.com/profile/09422355923256894207noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-25985301472750822462017-08-10T07:44:54.522+00:002017-08-10T07:44:54.522+00:00One thing I can't fathom about macro economics...One thing I can't fathom about macro economics is when GDP or average wages are used to explain the state of a nation where inequalities are a given. <br />What would happen to these figures of the top 5% of GDP or wages (or anything) were removed? <br />I understand you're introducing bias, but is there another way to allow for mean incomes being distorted by London pay, or for financial conglomerates (who contribute less to the national economy, due to their location and product) from distorting GDP.<br /><br />Thanks though. Anonymoushttps://www.blogger.com/profile/18341068609179413869noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-13765105588415252972017-08-10T07:43:31.365+00:002017-08-10T07:43:31.365+00:00One thing I can't fathom about macro economics...One thing I can't fathom about macro economics is when GDP or average wages are used to explain the state of a nation where inequalities are a given. <br />What would happen to these figures of the top 5% of GDP or wages (or anything) were removed? <br />I understand you're introducing bias, but is there another way to allow for mean incomes being distorted by London pay, or for financial conglomerates (who contribute less to the national economy, due to their location and product) from distorting GDP.<br /><br />Thanks though. Anonymoushttps://www.blogger.com/profile/18341068609179413869noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-13295698058595071582017-08-09T13:55:42.882+00:002017-08-09T13:55:42.882+00:00I would echo the comment above: I found this a ver...I would echo the comment above: I found this a very interesting and thought provoking post.<br /><br />There is one or two other factor that may be relevant: the relative decline of the manufacturing sector versus the service sector and whether service pay generally is less than that in manufacturing and also the shift into self employment, increasingly important economically but very under reported statistically.<br />Robert Joneshttps://www.blogger.com/profile/03593742130088640939noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-48532183621727856222017-08-09T12:57:13.084+00:002017-08-09T12:57:13.084+00:00I thought a supply of cheap labour (from weak unio...I thought a supply of cheap labour (from weak unions and plenty of migrants) meant that firms don't need to innovate with new automation and more efficient use of labour. That lack of innovation and progress lies behind the phenomenon you describe:- "economic growth (properly measured) has been stagnant". If a firm has no choice but to use scarce and expensive workers, then they will be forced into investing in ever more efficient machines and working practices and economic growth follows on from that. stonehttps://www.blogger.com/profile/16420341212847543229noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57617794508166764162017-08-09T08:57:41.851+00:002017-08-09T08:57:41.851+00:00Man, I always enjoy your posts and find them thoug...Man, I always enjoy your posts and find them thought-provoking and informative, but this one in particular has turned my crank. I'm not trying to fluff you, but there is so much negative crap being slung around the internet these days, I simply wish to express positive energy when I feel it. Thanks for your work!John Wheelerhttps://www.blogger.com/profile/05193689335879721801noreply@blogger.com