WI US wages rose with productivity after the 70s?

In the 20th century wages and productivity rose pretty much in lock step in the US until the 70s, after which wages only increased about 9% but productivity rose 74%. What if wages grew more or less in line with productivity after the 70s?

I don't want a lot of economic sophistry, I'm interested in the results of wage increases rather than PoDs.
 

Pangur

Donor
In the 20th century wages and productivity rose pretty much in lock step in the US until the 70s, after which wages only increased about 9% but productivity rose 74%. What if wages grew more or less in line with productivity after the 70s?

I don't want a lot of economic sophistry, I'm interested in the results of wage increases rather than PoDs.

Its a good quesion. The simple answer if that people would have more money to spend which surely would help growth. BTW I think that you will find similar numbers across most of Europe, Aussie and NZ.
 
The economy is better because people have more money to spend, the question is how do you manage this? Once the wall falls and China modernizes their is going to be a glut in the labor market.
 
Its a good quesion. The simple answer if that people would have more money to spend which surely would help growth. BTW I think that you will find similar numbers across most of Europe, Aussie and NZ.

Also Canada I believe.

I do suspect it had to do somewhat with women entering the workplace in larger number too. Effectively doubled the workforce.
 
A lot of stuff is just going to be more expensive. If that 74% wage increase applies to fast food employees, Walmart employees, the stuff people buy everyday will cost more (eating up some of the extra money).

Labor costs in manufacturing are less so cars and such won't be that much more expensive (and the UAW kept up better anyway during that time).

If teachers cost 74% more, property taxes will have to go up.

More people will buy less lawn care, child care and other high labor costs and just do that stuff themselves.

I see inflation as everybody can't have an upper middle class lifestyle. Spikes in commodity prices will get worse, companies will lay off more because their costs are higher. A economic crises like 2008 could get ugly fast.

It is just the ugly secret of our western ideology that cheap leabor is required and one way or another cheap labor will happen. Its better not to fight that and just subsidize the necessities of life like food, housing and health care so people can actually live off of cheap labor.
 
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shiftygiant

Gone Fishin'
More industry might move south to Mexico. Cheaper labor means larger profits for those calling the shots, so if it's going to cost more to make in America, whilst it costs a fraction of that in Mexico, we might see what happened with General Motors happen with more companies a bit earlier.
 
Different world politically

Good question and I won't go into economic sophistry, despite 34 years as a professional economist
:rolleyes:

To bring this result about would require a different political outcome from the 1970s. Basically you'd have to stop the Republicans in the US and their allies elsewhere winning the political battle over inflation, economic regulation (especially financial sector) and income distribution.

So we might well have slower growth overall in real terms, higher inflation but living standards for the majority similar to today. Albeit, in Europe at least , more in the form of better public services, such as healthcare and education, than cheap electronic gadgets or exotic holidays. Maybe social wage in form of childcare or welfare also.

Globalisation would be less advanced, due to no NAFTA and tariff barriers being higher generally. This would be good for the working class, and maybe middle class, in the advanced economies, not so sure about everyone else.

How you view this hypothetical world is a personal political and moral choice. But I hope this is helpful
:)
 
That's the strange thing, though, that it didn't really happen until the 1970s.

I wonder if WWII was part of that and the residual patriotism. You are not just going to slash people's wages, lay them off, just for business resasons when they fought and died with you and for you during the big one.

That generation was alive and wiorking back then. Now the boomers or younger run everything without the same viewpoint.

Labor supply/demand was just more favorable back then too, less automation, less women working, less illegal immigration.
 

jahenders

Banned
There may be some element of that. But I think it was largely a matter of big manufacturers simply not being sure that it was viable to stand up an advanced manufacturing structure in Mexico, that the supply chain logistics wouldn't eat all your gains, and that government regulation (one or the other) wouldn't drown you in paperwork. Once they saw it could work (to Mexico, India, etc), companies were able/willing to do a real cost/benefit analysis.

I wonder if WWII was part of that and the residual patriotism. You are not just going to slash people's wages, lay them off, just for business resasons when they fought and died with you and for you during the big one.

That generation was alive and wiorking back then. Now the boomers or younger run everything without the same viewpoint.

Labor supply/demand was just more favorable back then too, less automation, less women working, less illegal immigration.
 
Have service industries increased their productivity by 74%? I know that supermarkets and other bigger shops these days have self-serve checkouts where one person monitors 5 or more registers, which is a big jump in productivity. But I don't know if the self stackers in the same supermarket are any more productive than they were in the 80s.
 

Pangur

Donor
A lot of stuff is just going to be more expensive. If that 74% wage increase applies to fast food employees, Walmart employees, the stuff people buy everyday will cost more (eating up some of the extra money).

Labor costs in manufacturing are less so cars and such won't be that much more expensive (and the UAW kept up better anyway during that time).

If teachers cost 74% more, property taxes will have to go up.

More people will buy less lawn care, child care and other high labor costs and just do that stuff themselves.

I see inflation as everybody can't have an upper middle class lifestyle. Spikes in commodity prices will get worse, companies will lay off more because their costs are higher. A economic crises like 2008 could get ugly fast.

It is just the ugly secret of our western ideology that cheap leabor is required and one way or another cheap labor will happen. Its better not to fight that and just subsidize the necessities of life like food, housing and health care so people can actually live off of cheap labor.
The logic of your position is that the tax paper subsidizes profits. How is that either logical or fair? To keep that going you need a decent tax base yet if you don't pay people feel that's doomed to fail. We are seeing this already. What we are seeing is naked greed.
 
I do suspect it had to do somewhat with women entering the workplace in larger number too. Effectively doubled the workforce.

Working class women always worked. What they worked though were in general fractional lives, and fractional jobs. The movement for equal wages was premised on the existence of full time women workers. So while a swathe of labour aristocrats have been proletarianised, forcing the female portion of their household into labour; the number of hours worked by working class households generally has increased.

It is just the ugly secret of our western ideology that cheap leabor is required and one way or another cheap labor will happen. Its better not to fight that and just subsidize the necessities of life like food, housing and health care so people can actually live off of cheap labor.

Other countries manage different rates of return to labour (Cuba), or different compositions of return of social product to labour (Australia), with different outcomes. There is no iron law of wages here. The question is: why did the bourgeoisie become strong enough to force a general cheapening of labour in the 1970s across the first world. Why were they not strong enough prior to 1970s, as Saphroneth notes:

That's the strange thing, though, that it didn't really happen until the 1970s.

I wonder if WWII was part of that and the residual patriotism. You are not just going to slash people's wages, lay them off, just for business resasons when they fought and died with you and for you during the big one.

It is more that WWII developed working class power in the US. Strikes went up. CIO unionisations went up. Soldier mutinies went up. Discontent with the appalling living conditions of the 1930s and 1940s had increased. In addition, there was a virtual threat in the existence and symbolism of the Soviet Union which appeared real and credible. And of course, the funnelling of consumer commodities to the white working class solved some problems of market realisation.

Where labour remained cheap, for black americans and for America's new style colonies (Japan, Korea, Germany, Italy), cheap labour manufactured a lot of consumer goods.

Perhaps one aspect of the war was the willingness of the US dominated international bourgeoisie to pull together and implement features of the war economy (the military industrial complex, for example, or reduced competition), in order to generally benefit their class position with the round robin system of contracting. And also to tolerate the increase in social wages demanded in the 1940s (housing, etc.).

This would put the moment of inflection in the late 1960s as the conflict between round-robin military industrial contracting in the West, and the demands for increased social wages (equal pay, wages for housework, free health systems, free higher education). This is also the point where labour saving in new forms is experimented with (generalised female employment, generalised tertiary education, JIT techniques). This is also the period where there are major failures in defence contracting spending.

More industry might move south to Mexico. Cheaper labor means larger profits for those calling the shots, so if it's going to cost more to make in America, whilst it costs a fraction of that in Mexico, we might see what happened with General Motors happen with more companies a bit earlier.

But this isn't universal. France and Germany haven't done this, and they've gone through the same waves of post 1970s social wage windback, youth unemployment, and wages not keeping pace with productivity.

To bring this result about would require a different political outcome from the 1970s. Basically you'd have to stop the Republicans in the US and their allies elsewhere winning the political battle over inflation, economic regulation (especially financial sector) and income distribution.

So we might well have slower growth overall in real terms, higher inflation but living standards for the majority similar to today. Albeit, in Europe at least , more in the form of better public services, such as healthcare and education, than cheap electronic gadgets or exotic holidays. Maybe social wage in form of childcare or welfare also.

Well, social wages were a massive demand in the 1960s and 1970s, so there's no way for a "roll over and die" state to avoid implementing them. Some elements of the social wage were won in this period as late hold-outs from the prior period (Australian Medicare / PBS social wage for example). Other forms of social wages such as baby bonuses were finally eliminated.

And this is the point, it isn't just the yanks. Labour in Britain were fighting off the local working class in the 1970s, and refusing to implement social wages. In Australia and New Zealand the labour parties (with the appalling assistance of the Communist Party in Australia) were the parties that attacked the social wage, the unions built in the 1960s, and who privatised (commodified) social services.

Neither Blair nor Clinton reregulated the workplace, nor forced unions into air traffic control. Its a bit of a deeper relationship than just "elect the other mob."

More incentives for research into labour-saving technologies, I imagine.

To be simplistic, any exertion of working class strength is an excuse for labour saving technologies. The solution in the US was to avoid labour saving technologies and deindustrialise. The recapitalisation costs, and expected gains, were insufficient, and the capital vacated and shifted through the finance markets to more profitable areas of activity. (Where labour saving devices were being used, but also with different national working classes).

* * *

So what if the coin fell the other way:

High inflation, high wage increase, high unionisation, high "bargaining" unions that have to fight off local class struggle tendencies built through the fighting.

Small consumer cultures due to tariffs. Similar consumer standards of living. Higher quality fewer purchases.

Greater social wages. Particularly in education, health, parenting.

Fewer households with 1.6+ standard adult hours of work: less feminisation.

Reduced status proletarianisation of the professions, increased financial proletarianisation of the professions. They earn less but have greater social esteem (as controllers and implementers of the social wage, "social foremen"). This is a tendency that was taking place in the 1950s and 1960s anyway.

More "linked colony" tariff agreements with "technology transfer" accounting for the realisation of profits. Deindustrialisation as plants reach the end of their commodity cycle in general, but linked to specific 1:1 offshore production agreements. Except in the strongest union sectors, where labour saving devices are a constant battle over who controls the line and skill structure.

Probably a call for a 28 hour week coming from the left. There was already debate about this over "automation," but it wasn't as widespread as the demands for social wages. Probably a 35 hour week standard achieved in the sections administering the social wage and a few of the "tinsel" industries. This being countered with "overtime" offers to get the rate of labour exerted back up.

Probably no housing bubble or similar financialisation led bubbles, instead a different more manufacturing centred set of crises.

Possibility that at least one European nation suffers a left revolution larger than 68 / Italy.

yours,
Sam R.
 
from Sam

"And this is the point, it isn't just the yanks. Labour in Britain were fighting off the local working class in the 1970s, and refusing to implement social wages. In Australia and New Zealand the labour parties (with the appalling assistance of the Communist Party in Australia) were the parties that attacked the social wage, the unions built in the 1960s, and who privatised (commodified) social services.

Neither Blair nor Clinton reregulated the workplace, nor forced unions into air traffic control. Its a bit of a deeper relationship than just "elect the other mob."

Short form - I think the "Right" was able to shift the policy framework by winning an intellectual as well as political debate

Longer form
Yes, I agree that 'electing other the mob" would be insufficient by the 1990s. However, the parties of Clinton and Blair had shifted from promoting the social wage and income equality (lesser inequality really) and accepted the intellectual arguments for Free Trade, deregulation etc. put forward in the 1970s by the Right in the US and UK. It's fair to say both did more for the poor and vulnerable than the Conservatives or Republicans would have, and were more liberal socially. But they both operated within the confines of an economy structured differently to those of the 1960s and 1970s. One with the power of organised labour much weaker and that of capitalists much stronger.

That intellectual and political shift seems to me to have been the result of the apparent failure of "social democracy" in Europe and "regulated capitalism" in the US to cope with stagflation in the 1970s. The Right offered an alternative while the centre & Left appeared to be wedded to "more of the same" or with unpopular incomes policies. So for 30-40 years parties in the US and UK (& Europe to some extent) have competed to make globalism work rather than challenge its basic tenets. Thus, to stop the erosion of the wage share would require different policies to be implemented in the 1980s, and to that extent different parties.

I think a similar shift in views towards "regulated capitalism" came about after the "Crisis Of Capitalism" post-WWI and in the 1930s (to use the phrase in Mazower's Dark Continent) with fascist autarchy and communism also seen by many as better than "Liberal Capitalism", with adherence to the Gold standard and tight fiscal policies producing depressions throughout the developed world. Hence Roosevelt's New Deal (Fair Deal?) and other attempts to reform capitalism leading to the "Keynesianism" of the 1950s-60s.

I wonder if the growing (IMHO) feeling that globalism works for the 1% but not the 99% will produce another shift in the political debate in a decade or so?

I'd be interested in your views. BTW I agree with most of the rest of your analysis, though I think the Harz reforms in Germany have shifted to a bit away from the social wage framework, unlike France. The terms of the Fiscal Compact and the stress on structural reforms in the Troika's programmes for Greece etc. also seem to be more like a European version of Neo-Liberalism rather than an alternative or old-style Social Democracy/ Though that can be debated also!
 
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