There was famously an inflection point 40-50 years ago where wages decoupled from productivity to the downside. I'm sure it wasn't perfect before then, but things did change.
The last time we hit this low point was in the Gilded Age, when the economic producers essentially revolted and forced governments to regulate against capitalistic greed. As you correctly identify, in the early 80s U.S. leadership figured out that if you issue debt more freely then you can get the economic growth of ‘household spend goes up’, ‘production and GDP goes up’, and ‘foreign currencies weaken versus the dollar’ without having to force* corporations to pay out profits as wage increases against their will. One bonus outcome is that you end up with lifelong debtors who are forced to accept work circumstances that they wouldn’t have to accept if they still had wage negotiating power. Too bad about the demonization of unions in tech, eh?
* A tax on (gross revenue – wages – cogs) with rate (cpi + fedrate) ^ 0.9 would be an excellent start, with an exponential factor that halts ‘shift the tax to consumers through simple price increases’ — the more you earn, the more you have to raise prices, which raises inflation, which raises your future tax by more than your price increase; the more revenue you pay out as wages instead of shareholder dividends, the lower you can set prices, which lowers inflation, which lowers your future tax — and adding the FFER lever allows the Fed to perform their mission to control (price) inflation not only with banks but also with businesses. For example, (8% inflation + 4% fedrate) ^ .9 is ~14.8%, which is a completely acceptable surcharge for businesses having raised prices so high that it caused an 8% inflation year!
When I looked at this, the first thing which popped into my mind came from the 95th percentile graph... third one I think.
If you're a CTO, CEO, CxO, you have direct, in depth knowledge to how the company is doing. You also likely have insight into how that translates into free capital to spend on wages. Many companies are not public, and even when companies are, earning reports aren't easy for a line worker to fully understand.
So if you have that knowledge, it's much easier to push back when someone says a wage increase isn't possible. Such as the board, or the CEO (eg, if CTO, or whatever).
This by no means "makes it fair", it's simply that the inequality may be from knowledge, and therefore bargaining power.
Another aspect of things, is that every CxO class worker can agree, their knowledge is very very important, irreplaceable in fact! Upper management, you see, is quite valuable, as of course (from their perspective) "I'm irreplaceable and valuable!". Who doesn't think they have value, after all?
But.. those line workers, or even those engineers, well.. they're like cogs. One as another.
Some might attribute malice to the above thoughts by CxO class individuals, but it can also simply be driven by self-belief in innate value, and by good old ego.
We were talking about the 1970 inflection point in wages vs productivity. The inability of line workers to understand corporate finance does not seem to be a likely explanation for the 1970 inflection because it did not inflect in 1970.
Obviously wages and productivity had to decouple. Wages measure human labor, while productivity measures all output, including that which comes from automation. ~50 years ago is when automation started to become more than a curiosity in industry.
Human productivity to wages have kept pace with each other, though, so there is nothing to suggest anything has changed for the human. It is not like the robots are seeking promotions (yet).
The PLC, Programmable Logic Controller, was 1968. After which it started to become possible to have automated assembly lines with a few humans monitoring specialized robots.
Yeah, that's one specialized piece of automation in a long line of automation throughout history. I'm not sure why taking humans off of the assembly line is a larger deal than taking humans out of agriculture, textile production, or printing?
The only thing that is significant is that shift brought us to reaching peak human productivity. Prior to that, humans were not able to be as productive. Consider agriculture: You might be able to be maximally productive some times of the year, but usually you were waiting on Mother Nature to do her thing. This is why wages were able to grow alongside productivity as we started moving away from a pure agrarian world — having less reliance on external factors limiting what humans could produce. Once humans reached peak human productivity their human-based measures stagnated, but productivity itself did not stop as automation advances have kept that ball rolling. Taking people off the assembly line saw them move into jobs, mostly "knowledge-based" ones, where there was no way to become even more productive. You can only sit around in so many meetings each day, so to speak.
Maybe there is a new frontier where humans can start to become more productive again. Some say that is AI, but that remains to be seen. For now, we've hit our known limit. There is no longer anything outside of human control, like waiting for a crop to grow, that limits our human productivity. The only limiting us is ourselves, and it may be a fundamental limit.
> You might be able to be maximally productive some times of the year, but usually you were waiting on Mother Nature to do her thing.
I don't know what that means. When did we have to stop waiting for crops to grow? The only thing that changed for the production side was requiring less humans as machines could do the work of many laborers.
> When did we have to stop waiting for crops to grow?
part of modern agricultural automation includes year round seasons, which means essentially you are no longer waiting for crops to grow in the way that was first discussed.
This of course is what allows us to have fresh tomatoes year round, and many other fruits and vegetables. Obviously these are not perfect, tomatoes as the example already given, quality of the automated output is significantly less in comparison to the natural - nonetheless we do not wait for many crops to grow in the same way that people did before the 1990s (when computerized climate management, hydroponics and advanced greenhouse tech took off, as some later advances on the already mentioned PLC, and enabled automation in that field of human endeavor)
> When did we have to stop waiting for crops to grow?
When we started producing more than basic things like food that are heavily dependent on the environment. In the knowledge-based economy, the only thing that meaningfully stops you from producing continually is you collapsing from exhaustion. However, even if you never got tired, you can still only produce so much per second, if you will, which caps your total productivity. That is the human limit; probably a fundamental one.
Only a tiny, tiny fraction of the population have to wait on crops growing now in order to offer that line of productivity. And of them, like myself, we can now do other productive things while we're waiting. I, for one, work in the tech industry when I'm not farming. Today, 96% of farmers in the USA are productive off of the farm in at least some capacity. Whereas, historically, farmers were busy trying to survive when they weren't being productive on the farm. Many a day were spent in the bush chopping wood so that they didn't freeze in the winter, for example. Interestingly, idle farmers staring to produce salable things during that cold winter downtime is when we first started seeing early signs of human productivity gains over the stagnant agricultural baseline.
Productivity can keep increasing beyond the human limit, but we have achieved that by introducing more and more non-human workers. Humans are already at the very top of their game, at least as we know it. 17th century farmers probably thought they were also as productive as humanly possible, so who knows what the future holds, but for now we have no idea how to make humans even more productive than they already are. We don't have any more obvious "winter downtimes" to expand into. Hence why the measure of human productivity is no longer increasing.
This was recognized a long time ago. It was the basis of the "go to college to make more money" script you may be familiar with if you are old enough to remember. It was well understood way back then that relying on human productivity gains had reached a dead end. The thinking was that colleges would enable people to move away from labor and into leveraging automation, where productivity is effectively unbounded, with college research labs having played and still playing a pivotal role in that, but somehow along the way that got twisted into "go to college to get a job", so here we are... Now people spend god knows how much money to go to college to get the same job, at the same pay, that they would have gotten anyway. Which is pretty hilarious, but also sad.
What limits the length of the lever? The agricultural lever is already crazy long, the manufacturing lever, same. We could be doing the same with less, not more with the same.
Depends on where in the world you're looking. In India, something like 50% of the population works in agriculture. At the scale of India's population that's a significant fraction of the population of the planet, it's more than twice the population of the entire US.
If this is what i think it is, then yes. Life for humans has rarely been fair but that inflection point is startling. It tracks the wealth gap growing too irrc.
