Ohio miners forced to attend Romney rally without pay...

[Jester]

I would disagree in part with what Bolty said, in that yes certain production efficiency has impacted the consumer price. We've not experienced the expected price deflation in response to multiplicative increases in productivity. Our monetary policy precludes the possibility of deflation, and uses productivity as a means of moderating inflation. All the benefits are structured for owners/producers, and not consumers/employees.

Except that wage increases are negotiated with inflation in mind, and that inflation has been mild and predictable since the Volcker shock. That's what the whole theory of rational expectations is about - inflation only matters if you can't see it coming. Otherwise, it's no more relevant than multiplying the numerator and denominator by the same number - it changes nothing.

And yes, we have seen multiplicative declines in prices of goods. Holding performance constant, what's the price of a television today, compared with the 1950s? A toaster? A cellular phone? A computer? A car? There's no comparison. I can buy more computing power than was available to the whole US government in the 1940s on my student budget. I can buy a car that outperforms every car in the 1950s for a fraction of the real price. I can buy a TV that's five times the area and a thousand times the image quality for far cheaper. Cell phones didn't even exist, and yet now, they're everywhere, have more computing power than 1980s computers, and are so cheap they're even widely owned in the third world.

Let's look at some historical charts then.

a) Labor participation rate.
b) Savings Rates vs Household debt
c) Inflation Rate
d) Real GDP

Real income up, year on year? Check. Labour force participation down? Yes, we're still in the great recession, and that graph only goes back to 2002. But as I pointed out to Bolty, rather amazing that GDP was barely dented, even as employment went so far down! I think solving the employment problem is priority one (way, way, way above taming non-existent inflation), but it's still reflective of remarkable productivity gain.

In a way, I'm worried that Martin Ford is correct. That the pace of technological change is displacing workers faster than the economy can absorb and reinvent the need for them. I have some issues with the idea that there is a monolithic 1% that dominate the 99%, but essentially the idea is correct that "workers" have not benefited in compensation at the same rate as the GDP has grown (mostly due to increases in productivity).

Marx said the same thing 160 years ago. He was wrong then, and I'm pretty sure Mr. Ford is wrong now.

The big factor for work and wages has been globalization. Low-skill workers in the developed world compete with rising-skill workers in the developing world, and not just China. That suppresses their wages, which will continue until the third world catches up, or they get some education (my preferred solution...) I think this is a fantastic thing, overall - I'd much rather see the world's poorest get richer, and first world wages stagnate, than the opposite.

I think part of the problem is our tradition of an industrial 40 hour work week, and that we must go serve 45 years in the factory from 8-5 M-F, with 3 weeks off per year -- to earn an average living wage. Then, at about 65 you get taken care of until you die.

I don't want to be that bird in the gilded cage, whether that cage be managed by an oligarchy, government, or a collusion of both (through the banking system). To me, this doesn't seem to be freedom.

Freedom and income are not the same, so maybe they do trade against one another. So long as the US does not accept a more vigorous system of social security, universal health care, education, and so on, people will continue to work longer and harder than their European counterparts, in order to buy that which the state provides in Europe. That's a preference choice - if you'd rather work more, and think that's important for freedom, that's fine.

-Jester