> The stock market is breaking records. Corporate profits are booming. And yet plenty of us look at our paychecks and don’t quite feel the boom.
It is a shame that many people are so risk averse in general that they don't invest in the stock market, getting richer along with the rest. Investors aren't a special class of people, so I don't get why society should look down on the fact that the stock market is breaking records while your paychecks doesn't substantially increase. Your investments do!
> To be clear: I’m not saying that workers are poorer than they were 30 years ago. On average, they’re doing better. The size of our economic pie has grown, and so a smaller slice of a bigger pie still adds up to more pie.
> My point, instead, is to focus on the change in how we slice that pie. It matters because the split between workers and owners is one of the most important factors driving who gets what from our economy.
The author should expand on why he thinks it is actively bad that some people are getting more while everyone is better off anyway.
> The author should expand on why he thinks it is actively bad that some people are getting more while everyone is better off anyway.
If you ask this from a perspective of fairness, you will have to consider scenario 1: A worker's labor is getting worth more. Great: then the worker could ask you: why shouldn't I claim a greater total percentage from my labor's worth if the owner is better of anyway?
Scenario 2: I have a hunch the owner does not like that, even if the owner gets richer that way. Instead, the owner and the worker could also decide to keep the workers key at 75%, splitting all the new proceeds between them with the same distribution key. This sounds like the most stable option.
Scenario 3, aka reality. The worker's labor is getting worth more, but the proceeds from this increase goes mainly to the owner. Sidestepping the fairness issue, this is a problem on a macro-economic scale. Wealth will accumulate within a few families who invariably are going to thwart the democratic process to gain more influence than one person=one vote. The system will tune to the needs of a few families, it won't optimize for a global maximum. You can look at the healthcare industry in the USA to understand how a local optimum is disastrously lower than the global optimum. Which by the way has effects on the economy itself (workers will choose to stay in a bad job out of fear for medical costs, or they have to live in bad health, etc). Sociology and economy are deeply intertwined.
> many people are so risk averse in general that they don't invest in the stock market
You have to be doing pretty well compared to the average person before investing in the stock market is even a consideration. Most people, if they had any surplus income, would use it to pay off debts or save against emergencies.
It’s not risk aversion, it’s lack of money and access. Half of Americans can’t afford a $1k surprise bill. How do you expect them to invest? With what money?
People don't invest the bloody stock market because they can't afford rent and groceries.
If labor's share of GDP were more equitable, and more akin to what it was during the US's "Golden age" then sure, us regular folks might have some money to invest, but since the rich are gobbling up literally everything these days, a lot of us out here are struggling just to get by, and don't have money to pay our bills let alone invest.
When the worker has bargaining power, i.e. when demand for labor exceeds availability (and if companies don't collude). The big problem for workers here is globalization, which the article goes into as well.
> Also, AI makes workers do more for a less.
The article touches that briefly:
If AI makes workers more productive and workers share in those gains, we get higher wages, better jobs, shorter workweeks, and a richer society.
But if AI mostly replace workers with computers — and the gains flow overwhelmingly to the people who own the technology — then the pie gets bigger but most workers won’t gain much (and may even lose).
The million dollar question is of course whether or not AI will devalue labor or whether it will make labor more valuable. Afaik, there is no conclusive evidence for either position.
Employer monopsony can also produce less with fewer people and keep demand for labor below availability. This will also increase prices due to scarcity of the product.
Just give me employer monopsony, government in their pocket, and I will give you N ways to screw the workers.
> workers share in those gains
Not gonna happen until workers obtain bargaining power and they are working hard to keep it that way.
> will it devalue labour or not
I agree with Kent Beck here: “The value of 90% of my skills just dropped to $0. The leverage for the remaining 10% went up 1000x.”
> The stock market is breaking records. Corporate profits are booming. And yet plenty of us look at our paychecks and don’t quite feel the boom.
It is a shame that many people are so risk averse in general that they don't invest in the stock market, getting richer along with the rest. Investors aren't a special class of people, so I don't get why society should look down on the fact that the stock market is breaking records while your paychecks doesn't substantially increase. Your investments do!
> To be clear: I’m not saying that workers are poorer than they were 30 years ago. On average, they’re doing better. The size of our economic pie has grown, and so a smaller slice of a bigger pie still adds up to more pie.
> My point, instead, is to focus on the change in how we slice that pie. It matters because the split between workers and owners is one of the most important factors driving who gets what from our economy.
The author should expand on why he thinks it is actively bad that some people are getting more while everyone is better off anyway.
Scenario 2: I have a hunch the owner does not like that, even if the owner gets richer that way. Instead, the owner and the worker could also decide to keep the workers key at 75%, splitting all the new proceeds between them with the same distribution key. This sounds like the most stable option.
Scenario 3, aka reality. The worker's labor is getting worth more, but the proceeds from this increase goes mainly to the owner. Sidestepping the fairness issue, this is a problem on a macro-economic scale. Wealth will accumulate within a few families who invariably are going to thwart the democratic process to gain more influence than one person=one vote. The system will tune to the needs of a few families, it won't optimize for a global maximum. You can look at the healthcare industry in the USA to understand how a local optimum is disastrously lower than the global optimum. Which by the way has effects on the economy itself (workers will choose to stay in a bad job out of fear for medical costs, or they have to live in bad health, etc). Sociology and economy are deeply intertwined.
> many people are so risk averse in general that they don't invest in the stock market
You have to be doing pretty well compared to the average person before investing in the stock market is even a consideration. Most people, if they had any surplus income, would use it to pay off debts or save against emergencies.
It’s not risk aversion, it’s lack of money and access. Half of Americans can’t afford a $1k surprise bill. How do you expect them to invest? With what money?
Lol, classic hand-wavey "Just be rich" nonsense.
People don't invest the bloody stock market because they can't afford rent and groceries.
If labor's share of GDP were more equitable, and more akin to what it was during the US's "Golden age" then sure, us regular folks might have some money to invest, but since the rich are gobbling up literally everything these days, a lot of us out here are struggling just to get by, and don't have money to pay our bills let alone invest.
Why would company pay worker more?
Also, AI makes workers do more for a less.
> demand for labor exceeds availability
Employer monopsony can also produce less with fewer people and keep demand for labor below availability. This will also increase prices due to scarcity of the product. Just give me employer monopsony, government in their pocket, and I will give you N ways to screw the workers.
> workers share in those gains
Not gonna happen until workers obtain bargaining power and they are working hard to keep it that way.
> will it devalue labour or not
I agree with Kent Beck here: “The value of 90% of my skills just dropped to $0. The leverage for the remaining 10% went up 1000x.”
Fairly nuanced ELI5 take from prof. Wolfers.