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How can we match the growth in productivity with the median hourly compensation?

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Contrived _voice
Contrived _voice Apr 25, 2022
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How can we chanel the proceeds from increased productivity to ensure the average worker gets a higher wage for work done?

Over the past few decades, the average rate of production has seen a sharp rise contrasting greatly with the stagnated hourly compensation rate. This means that although more money is being made, the average worker gets a significantly lesser portion of it contributing to the increasing disparity in wealth.
Background information
Between 1979 and 2019, the net productivity grew 59.7% while a median worker’s compensation grew by 15.8%. A marked diference. The result is a 43.9 percentage point divergence driven by inequality. During this period, 90% of U.S. workers experienced wage growth (26%) far slower than the economywide average, while workers in the top 1% (mostly highly credentialed professionals and corporate managers) saw 160% wage growth
During the same period of time, the owners of capital made large rewards from the low wages of the bottom 90%. The causative agents for this trend were majorly in policy changes pushing for unemployment, reduced unionization, corporate globalization, lower labor standards and wages, noncompete imposed contract terms, and corporate structures changes that pushed down wages and profits in supply chains to benefit major players .
A great place to show this in action is the corporate sector where income is split clearly between worker compensation and profits going to the owners. The nominal wage tracker keeps track of how much money actualy belongs to the workers . In 2000, the laborers share was at 82.4% but in 2007 it had fallen to 77.9%. It may seem like a small difference but a 4.5% change is pretty significant when you factor in the sharp fall in interest rates

[1]http://www.csls.ca/ipm/23/IPM-23-Mishel-Gee.pdf

[2]https://www.epi.org/unequalpower/publications/wage-suppression-inequality/

[3]https://www.epi.org/blog/wages-for-the-top-1-skyrocketed-160-since-1979-while-the-share-of-wages-for-the-bottom-90-shrunk-time-to-remake-wage-pattern-with-economic-policies-that-generate-robust-wage-growth-for-vast-majority/

[4]https://www.epi.org/unequalpower/publications/wage-suppression-inequality/

[5]https://www.epi.org/nominal-wage-tracker/

[6]https://scholar.harvard.edu/farhi/publications/accounting-macro-finance-trends-market-power-intangibles-and-risk-premia-0

income inequalitylabor rates
2
Creative contributions

Giving bonuses could help

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jnikola
jnikola Apr 26, 2022
I must agree with Shubhankar Kulkarni. I sit on both sides, too, because looking generally at this data makes people worried, but not being able to see the picture of the whole market.
  • The problem of the dynamic change in the income rates over years
  • The legal problem of defining job types and conditions
Imagine this. Your company generates an enormous income raise from 1 to 10 million in 2022, but mine manages to generate only a jump from 1 to 2 million. Your company gives you a corresponding increase on your salary and it reaches 10 000 $. My company, for the same job, gives me 2000 $ (hypothetically). Seems a bit unfair when you take into consideration we both work the same jobs, but it's a positive change, right? But what if the profit dramatically falls from 10 million to 5 and half of your salary is cut down? Doesn't seem so fair, right? I am not into legal regulations, but the increase in salaries should be stable and not subject to dynamic changes that follow the company's financial situation.
The solution
Solution could be a bonus at the end of the year. My friend gets an annual bonus if the company works good. If not, no bonus is added. It would be nice to see if these calculations include bonuses. If yes, than we have to think it through again.
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Contrived _voice
Contrived _voice3 years ago
A bonus helps, but not everyone gets a bonus. I recently discovered that some restaurants make their waitstaff give back a portion of their daily tips while still offering a relatively low wage. Similarly, some restaurants enforce a tipping system that forces their customers to contribute to the pay of their employees via tips. I understand the need to pay waitstaff well, but if the restaurants are making thousands in profit per year, why couldn't they just provide the staff with better wages themselves?
That is the key problem. Businesses make money but the majority goes to the owners, not the workers. There may be other factors contributing to the unequal wealth distribution but this is a major one. Low-level workers don't have the opportunity for growth because despite how hard they work, the majority of the money they make doesn't go into their pockets.
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jnikola
jnikola3 years ago
Contrived _voice Well, in most of the cases, the majority of the money doesn't go into their pockets, because they didn't do the majority of legal, regulation, management, and the actual work, but their own portions of it. Lifting the wage up makes it harder (almost impossible) for the owners to reduce it when the times are rough. It's a measure of gradual and stable growth, which is currently supported by bonuses. But, in that sense, I must agree that bonuses aren't the current market standard, although they would help. My suggestion was to implement regular bonuses in markets as a measure to keep the employees happy, while still having control of your company's future finances.
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Contrived _voice
Contrived _voice3 years ago
J. Nikola Oh , that makes sense
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A massive systemic change can only solve this problem

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Subash Chapagain
Subash Chapagain Apr 26, 2022
Income and wealth follow a strict Pareto distribution . It means the more wealth you have, the more likely you are to earn even more!
Only a systemic change can mitigate this problem. For example, when the unemployment rate became the highest after COVID hit in 2019, the billionaires like Bezos made even more money during that period. If you look at the hunger data, the world has made massive progress in reducing famines and hunger-related death, there seems to be a chronic logistical problem for the fact that obesity and over-eating is a more prominent public health concern rather than hunger. It is not that we have less, it is just that we don't know how to redistribute wealth in an equitable manner. This suggests that the world at present has the wealth and resources to bring down the discrepancy in income. What the world lacks is a system for wealth redistribution. Only when we can rethink the concept of economics beyond the sheer notions of 'growth', we can tackle it. The problem is complicated, and perhaps it will need a co-ordianted political and economic reshaping of the world.

[1]https://en.wikipedia.org/wiki/Pareto_distribution

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Contrived _voice
Contrived _voice3 years ago
well said, There are so many layers to the root causes of the wealth inequality problem. I also concur that we need a major systemic change and that is near impossible. With that in mind, we can start at the lowest level possible and ask "What is the most doable thing we can do at this present time?"
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Subash Chapagain
Subash Chapagain3 years ago
Contrived _voice One thing that I can think of comes from the idea of Professor Richard Wolff. He voices for a kind of 'democratisation of work' where the corporates have to give off proportionate equity to each individual that makes the business exist, even the customers. He (and the likes of Yanis Varoufakis) envision a system where corporations must provide some percentage of the equity to each and everyone involved in the production and consumption of the goods/services. In the case of service and IT sectors, 'data democratisation' is proposed. This means that as a customer when you are allowing amazon to use your data (your location, preference, purchase history, bank details etc.) amazon (or any other company) must pay you back with a certain proportionate fraction of the company equity itself because they cannot just use your data forever free. Data is the new oil, as said, and it makes sense to put a price on the data we give off to these companies as users and consumers. This can be one starting point toward a more evened out wealth redistribution.
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Shubhankar Kulkarni
Shubhankar Kulkarni3 years ago
I think what you are hinting at may not be possible in a capitalist or a democratic economy.
Also, the thing about rich becoming richer, which is although true, has a developing other side to it. Anyone with a great idea can make money without much investment in the internet age. I agree that the thought that a great idea can make you money or the sheer state of mind of developing an idea into something big needs to be inculcated in the less privileged and is served on a platter to the privileged, but that is something that needs to be worked on. In short, capacity building may be the answer that wealth redistribution.
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General comments

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Shubhankar Kulkarni
Shubhankar Kulkarni3 years ago
I am not defending the corporate management but laying out both sides. Don't you think they give a lot via taxes and corporate social responsibility that helps create the infrastructure and drive more money into the country/ organization? Also, profits mean more clients equals more work equals more employment.
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Contrived _voice
Contrived _voice3 years ago
Shubhankar Kulkarni That's a fair angle too but I think It's too big picture. You're right, more money going to the owners does mean more investment, growth, and development. It also creates more opportunities for employment so I agree with you wholly. But here is the catch, the money still belongs to the 1%. The outcome of all the growth and development primarily favors the already rich. New jobs may be created but the wages are so small you have to take two or three jobs just to make ends meet because although the economy is growing, your stake in it is not.
It's one of those cases where development doesn't actually mean growth for everyone.
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Shubhankar Kulkarni
Shubhankar Kulkarni3 years ago
Contrived _voice Development may mean growth for everyone in terms of better infrastructure and living conditions in general. The money belongs to the 1% because it was their idea. And they were made big because employees wanted to work under their guidance. Employee unions exist for the same reason you have mentioned. They look after the welfare of the workers including working conditions and salaries.
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Contrived _voice
Contrived _voice3 years ago
Shubhankar Kulkarni But can you really say that workers' benefits are being preserved when the minimum wage problem is a major global issue? Sure companies can take care of their workers, even here on public holidays, most companies give a bonus to their workers. The issue still remains that the worker doesn't feel the pay merits the work done in a day and the company shareholders still keep the majority of the profit.
And here is the problem. A worker can become a shareholder and make large profits too but for that to happen the wages need to be enough for both subsistence and investment. The wages are not that huge. The average worker lives hand to mouth, they make money so they can afford to eat and go back to work tomorrow. It's an existence that leaves no room for personal growth.
Sure you may improve roads and connectivity, but of what merit is that if the people that worked to make the money can't afford cars, homes, or smart devices. The benefits of development also go to the shareholders too. The worker gets nothing, just food on the table.
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Shubhankar Kulkarni
Shubhankar Kulkarni3 years ago
When you say median hourly compensation, do you mean "minimum wages"?
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