« Taxes, norms & belief equilibria | Main | Origins of the crisis »

June 13, 2013



Interesting stuff, Chris; you don't need to be left-of-centre to be concerned about potential political implications.

Yet another Chris

Do your data for wages include the self employed? If so, it's possible that the big rise in self-employed, often working for less than minimum wage, might be the reason. Indeed, I've often wondered if self employment is being used on a grand scale to get round the minimum wage. I've only got limited evidence for this among the white van man community, but some I know were employed and are now self-employed working for the same employer. Except they now own their vans and work for peanuts.


@ YAC - my data only measure the employed. Many self-employed have v. low earnings and hours.


Why not accept the consequences of more than two million immigrants on the employment market along with a stagnant economy.


"It found that between 2001 the proportion of foreign born men in work increased from 72.3 per cent to 76.9 per cent.

In comparison, the share of British-born men in work fell from 78.14 per cent to 74.73 per cent over the same period."

Of course immigration is good for all, is a matter of faith for economists.


Hasn't some IMF research shown that strong bargaining power is the best way to reduce income inequality...

Tom Chance

I had the same thought as Joe. What does this look like in other countries with the same technological changes, but with much higher levels of collective bargaining?

Also, what happens if you control for the change in GDP? The dips in the late 1970s and early 1990s might not quite go negative, but those recessions weren't anywhere near as deep as our current stagnation.


Yet another Chris -

There is some data in the IFS paper to suggest the experience of your white van men might not be untypical. 40% of self-employed 'businesses' do not make the full-time minimum wage income.


Luis Enrique

do these explanations apply equally across all industries? If not, the hypothesis could be tested by seeing if wages have fallen further in industries where supervision and control over workers has increased more than in others.

Or maybe that wouldn't work because wages are equalized within labour markets that contain a mix of these different types of firms.

I'm not sure how much I buy all of this in any case. If bosses cannot observe if I am pilfering or skiving, why would I pilfer or skive less if I'm paid more? I think I'd just be a better paid skiver. And what's the elasticity here? Say I work in Gap and could steal clothes, is a 10% rise in my wage really going to make much difference to my inclination to do so? Enough to justify the cost?


@Luis Enrique - I think there's two parts to this. The first is that some firms would pay more (or indeed, did pay more) as this gave them more choice in the labour market, thus helping them find those less likely to skive/pilfer. Ability to do this seems to have been related to scale. (Also of course management philosophy - Apple Stores are known to pay more that other retail, which they claim lets them find better workers.)

Of course, the second part is that this only works if some firms (or sectors, e.g. SMEs) don't take this approach. If everyone does it, the prevailing wage is just higher and you're back to square one. That's why I mention ability...


Michael Roberts on his blog answers the 'real wages' issue in large part as a consequence of changes in welfare and pensions:
"Lone parents and older workers – in part associated with increasing pension age for women and the fall in the value of pensions and annuities for those approaching retirement – have been forced to look for work. So the ‘reserve army of labour’ has risen and competition for jobs has been intense. As a result, employers have been able to cut wages, especially in non-union sectors. As a result, the majority are taking the pain through lower real incomes rather than job losses, as price inflation outstrips pay rises."
It's smaller firms [less than 250 employees] who are reducing wages the most rather than sack staff and its these firms who tend to have little or no union representation. Whilst those firms with 250 plus employees are tending to lay off staff and and maintain wages.

Luis Enrique


so competition for higher ability workers between firms used to drive wages up, but now tasks are standardized and firms don't care so much about worker ability, this doesn't drive wages up any more?

that's a somewhat different argument, but I guess it works.

thing is, to my mind mechanisms like that are going to be dominated by cruder considerations like how large is the pool of unemployed workers you are recruiting from and how flexible are wages (union power, legislation). Things like competition from China (see here http://economics.mit.edu/files/6613 ) look like more powerful explanations. Although I've pulled that claim out of my rear end.


I think I was unclear, it wasn't not competition for "higher ability" workers, it was competition for "higher character" workers.

And advances, as Chris outlines, have reduced the need for "higher character" workers...

But of course, I actually agree with you, all the cruder considerations, labour pool, foreign labour pool, automation, unions, look far more important in determining wage level.

Luis Enrique

ah, I see. But still, not sure I buy it. For example, seems to me that in service industries, where the "customer experience" matters, having higher character workers is likely to be more important to bosses than it was in metal bashing. And our economy has become dominated by services.


@Luis Enrique - on "customer experience" - you might think so, but you clearly haven't visited an 02 store (to name one) recently...

The British Service Economy is an odd beast, built as it is on a culture of non-service...

Ken Cameron

The competitive labour market created by the EU is holding down labour rates in Europe. Employers have a larger choice of quality workers because those workers are permitted to cross borders. This has to be contrasted with the Soviet style uncompetitive state controlled economies of the EU which reward the rich by rewarding failure and so perpetuate economic inefficiency. This is achieved by printing money i.e. by using “have another drink to cure a hangover” economics i.e. Free labour market but distorted/retricted financial market. Small to medium sized enterprises (SMEs) are also disadvantaged by this system, as cheap zero interest money bypasses them and is used to bail out multinational organisations especially banks which are also allowed to minimise their taxation by exporting their profits to low taxation countries i.e. Free labour market but uncompetitive economics. The national SMEs are therefore at a disadvantage when competing with multinationals so their reduced profits result in lower wages for their employees which displaces local labour in favour of migrant labour.


"You cannot understand economics without understanding power."


The more complicated version of my response in Econ-jargon is: Arrow-Debreu is about equilibrium resulting from given exogenous boundary conditions. It is politically safe for economists to tediously marvel at the miracle of equilibrium while studiously ignoring the boundary conditions which generate those equilibria.

Equilibrium is the result of market action. The exogenous variables -- also known as externalities in some contexts -- are frequently tied directly to old fashioned power relations.

Economists are professionally at risk when they venture into the power dimension of their subject. This is why departments of Political Economy no longer exist. The economics profession are now a Dr. Panglossian priesthood chanting endlessly: all is for the best in this the best of all possible worlds. The more math they use to camouflage this, the better their career prospects.


Felony Ariel Castro may have defeated Michelle Soldier worst for Cleveland nightmare property The main casualty on the New mexico residence associated with disasters was in fact expected the actual captors' key 'punching tote.Lol By Michael Walsh / San francisco Day to day Press Tuesday, May perhaps 15, 2013, 8:25 In the morning Produce Screen-print Statement Family graphic Mrs . Dark night, at this point 24, will probably need to have face treatment reconstruction surgical procedures when staying attempting outdone by using weights and also other materials. Inside Ariel Castro's Cleveland nightmare family home, three young women purportedly lived through on a ten years of exploitation 鈥攂ut their to begin with captive, essentially, perhaps have carried any brunt of those beast's violence. Mrs . Knight's family members associate informed Msnbc that they has been Castro's main hand techinques container, being previously defeated which means significantly by using weight load and even [url=http://longchamp-bags-sale.tripod.com]Longchamp Outlet[/url] other subjects [url=http://louboutin-pascher.tripod.com]Louboutin Pas Cher[/url] that the girl encountered perception and tinnitus, and in addition lean muscle mass and even ankle problems.Similar: Exactly CLEVELAND ESCAPEE Mrs . Dark night Back with June 2006, Castro abducted Dark night, 20, however the lady appeared to be taken out of all the FBI's missing out on people customer base immediately following 13 many weeks along with little by little forgotten; unlike, information efforts sprouted for the some other people, Gina DeJesus along with Amanda Fruit flesh.Handout/Getty Graphics Ariel Castro theoretically abducted a real 21-year-old Miche [url=http://www.coach-outlet-onlinestore.com/]Coach Factory Outlet Online[/url] lle Dark night on Aug . 2008, although your lady ended up being slowly and gradually lost. Castro supposedly raped women continually as well as heavy-laden Dark night at the least more. Though once, he deprived your ex not less than a fortnight prior to when pounding their digestive system till the lady miscarried, th [url=http://louisvuittonsitoufficialeoutlet.weebly.com]Borse Louis Vuitton[/url] a law enforcement agency state browse.Appropriate: TIMELINE OF THE CLEVELAND KIDNAPPINGS 鈥?Several FOUND When participating in captivity, these adult females was chained in your home, exactly where detectives additionally observed spread pet leads, [url=http://www.borselouis-vuittonoutlet.com/]Borse Louis Vuitton Outlet[/url] until the pair were carried 2nd floor towards houses for the minute flooring. Knight, at this point 34, appeared to be gaunt by means of tightly cropped wild hair anytime your sweetheart steered clear of thanks to friends May well Half-dozen, sources point out. The lady remained from the the hospital for several days following additional people and indistinctly allowed to remain lacking warning her spouse and children. Might possibly must returning regarding rosacea renovation surgery.Jesse MAXWELL/EPA Ariel Castro said to be impregnated Michelle Knight 5 times, once eager her for not less than 2 weeks together with punching the girl's belly right until this girl miscarried, police say. Affiliated: CLEVELAND ABDUCTION VIC GANG-RAPED Throughout Junior. Excessive Soldier generally have gone in to privacy, possibly by numerous relatives, your girlfriend granny talked about. Having Media Line Solutions [email protected] Using a mobile phone? Discover the shocking truth right.

The comments to this entry are closed.

blogs I like

Blog powered by Typepad