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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 744757  
Subject: Re: The expendible employee Date: 2/10/2014 3:02 AM
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The miracle of industrialization was that real wages grew roughly in line with productivity – meaning that the returns to labor and the returns to capital were fairly evenly distributed. As workers produced more output in less time and with less effort, they also received higher pay. This relationship held until the mid-1970s, when real wages suddenly flat-lined in the face of rising productivity.

Thus far, the gains of the Information Economy have been unevenly distributed, and the past 40 years have not been kind to the American worker.


I take it that this is a quote from Mauldin. And there is a bit of a problem: he's wrong.

Industrialization did NOT see real wages growing roughly in line with productivity. Sure, over time it averaged out roughly the same - but he's talking about a period of over 200 years.

At the beginning of industrialization, productivity surged ahead of wages by quite a bit. This was because a weaving-machine with one mildly-skilled operator could replace ten or twenty (or more?) highly-skilled weavers, and the same across many other sorts of labor. When they started mechanizing time-consuming agricultural chores (or eliminating them, as tenant farmers were displaced to make room for more sheep-herding to produce wool for the textile mills), they made a HUGE labor pool available... and those laborers were used to the relatively laid-back schedules of agriculture, not the punctuality and steadiness of factory work. With the huge quantity of workers available, as compared to the number needed for the then-current level of productivity with the new techniques... wages were crap, hours were long, and factory work conditions were often abusive, and people were glad to get those jobs because the alternative involved not eating.

But eventually production grew sufficiently to keep the entire workforce busy, and the new school system copied from the Germans helped produce workers who would work steadily from one bell to the next - and wages pretty much caught up with productivity, with conditions improving as well.

Major wars, most conspicuously WWII, also helped, because they caused a shortage of labor - driving wages up, even if that had to be disguised to avoid government regulations (see: employer-provided medical-care insurance).

Now we're at a turning point vaguely similar to the beginning of the industrial revolution. We don't need nearly as many factory drones - or back-office drones - as we used to for the same level of production, and more is happening to reduce the number of workers we need for existing production than to start new production for workers to work at.

In addition, as with the beginning of industrialization, we are putting different demands on workers in new jobs than the workers in old eliminated jobs were accustomed to: we need a lot fewer factory drones putting identical nuts on identical bolts 250 times a day, similarly fewer office drones doing the same calculation and putting the results in their "out" box and grabbing the next set of inputs from their "in" box, and more people who can diagnose how the nut-attaching robot broke and determine the best way to fix it... or for that matter designing a better nut-attaching robot, or imagining a new product for said robot to help build, or creating the computerized spreadsheets that replaced the office drones.

So yes, we are now, and for some time in the future, going through a period where wages will not rise as fast as production.

But that production can only be sold to rich people for so long; eventually a substantial share of it has to be sold to middle-class and poor people too. ("God must love poor people - He made so many of them!" - attributed to several people including Abraham Lincoln and Mahatma Gandhi.) And for that to happen, wages and return on capital have to move closer together again.
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