Have We Hit The Top?

[ValueArb]

46 minutes ago, Luca said:

Id go so far and say that the average service worker joe is not better off today in terms of wealth than a factory worker 60 years ago, yes he will live longer, can use more technology etc but uber drivers are broke and dont make any money. On top comes that these companies try everything to pay them as little as they can, part of the business model. Wealth increases for qualified earners but those will become fewer with automatization, many more will drop into services and we can all see that the delivery drivers, nail salon polishers whatnot are not getting wealthier. 

 

Unemployment will increase if even service sector can use automatization (automated delivery drivers etc), i dont think its plausible to argue that increase of automatization and AI will NOT lead to less jobs in total. 

 

You'd be wrong. Inflation adjusted, median incomes have increased nearly 50% in the last 38 years alone. 

 

https://fred.stlouisfed.org/series/MEHOINUSA672N

 

Automatization means your factory with 1000 workers can now produce significantly more product with same number of workers. It means an end to scarcity, not work. 

[ValueArb]

45 minutes ago, Jaygo said:

I was replying to ValueArbs comment of Bezos girlfriend. I referring to breast size of wives or girlfriends as the true measure of wealth but i'm immature, sorry.

 

You totally missed my point. Its not just size, its also shape and feel. Only the rich today can afford implants that are more natural in appearance and softness. I'm ready to march in the streets, who wants to join me!

[ValueArb]

6 minutes ago, ValueArb said:

 

You'd be wrong. Inflation adjusted, median incomes have increased nearly 50% in the last 38 years alone. 

 

https://fred.stlouisfed.org/series/MEHOINUSA672N

 

Automatization means your factory with 1000 workers can now produce significantly more product with same number of workers. It means an end to scarcity, not work. 

 

People blaming automation for slow wage growth are missing the forest for a tree. Government spending as a percentage of GDP has increased massively since the great depression, especially over the last twenty years. That leads to less investment in productivity increases and slower growth, ultimately giving us the tepid wage growth of today.

 

Automation helps, not hurts, but it can't help as much if a third of our economy is government directed spending. 

[Gregmal]

Lower income folks don’t see wage growth because they have no bargaining power being at the bottom of the food chain. That’s life. 
 

There’s a reason good marine mechanics in cold states all head south once they’re able to. Theres a reason all good cooks go to big cities when they can. If you bag groceries or mop floors, tough luck. 

Edited February 29 by Gregmal

[gfp]

Am I wrong that most people are making at least $15 per hour these days?  I know that is still near impossible to live on, but it seems like through the pandemic even restaurant dishwashers were making at least $15 / hour.  California's $20 minimum wage for fast food workers is going into effect in a month.

[blakehampton]

1 hour ago, gfp said:

Am I wrong that most people are making at least $15 per hour these days?  I know that is still near impossible to live on, but it seems like through the pandemic even restaurant dishwashers were making at least $15 / hour.  California's $20 minimum wage for fast food workers is going into effect in a month.

It’s pretty easy to find a mean but I think that median is more representative. The issue being that finding a reliable figure for the median is harder.
 

I’ve looked at a lot of data and I’m assuming that the median hourly wage in the United States is somewhere around $22 dollars an hour.

[Dinar]

3 hours ago, ValueArb said:

 

People blaming automation for slow wage growth are missing the forest for a tree. Government spending as a percentage of GDP has increased massively since the great depression, especially over the last twenty years. That leads to less investment in productivity increases and slower growth, ultimately giving us the tepid wage growth of today.

 

Automation helps, not hurts, but it can't help as much if a third of our economy is government directed spending. 

I agree with everything that you say, but I think that if you include state & local government spending, the figure is more than 40% of GDP.  

[vinod1]

3 hours ago, ValueArb said:

 

People blaming automation for slow wage growth are missing the forest for a tree. Government spending as a percentage of GDP has increased massively since the great depression, especially over the last twenty years. That leads to less investment in productivity increases and slower growth, ultimately giving us the tepid wage growth of today.

 

Automation helps, not hurts, but it can't help as much if a third of our economy is government directed spending. 

 

To me it seems like only the part where Government spends directly on goods and services would lead to inefficiency. Say Govt collects 40% of GDP in taxes, gives 25% directly to people for Social Security, medicare, etc. That 25% is still efficiently spend by the people as they are the ones making purchases in an informed way on private goods and services. The other 15% where govt hires and manages things, like IRS agents, Social Security administration employees, direct procurement, etc. This is the part that is inefficient. 

 

Wage growth has been impacted mostly due to outsourcing/China which is fed by CEO incentives/stock options.

[rkbabang]

4 hours ago, gfp said:

Am I wrong that most people are making at least $15 per hour these days?  I know that is still near impossible to live on, but it seems like through the pandemic even restaurant dishwashers were making at least $15 / hour.  California's $20 minimum wage for fast food workers is going into effect in a month.

 

Well, not all fast food workers in California will be making $20/hr, only the ones that work for companies with no political pull.

 

"When fast food restaurants across California have to start paying workers $20 per hour on April 1, one major chain will be exempted from the mandate—and it just so happens to have a connection to a longtime friend and donor to Gov. Gavin Newsom."

https://reason.com/2024/02/28/why-is-panera-exempted-from-californias-new-minimum-wage-law/

[gfp]

22 minutes ago, rkbabang said:

 

Well, not all fast food workers in California will be making $20/hr, only the ones that work for companies with no political pull.

 

"When fast food restaurants across California have to start paying workers $20 per hour on April 1, one major chain will be exempted from the mandate—and it just so happens to have a connection to a longtime friend and donor to Gov. Gavin Newsom."

https://reason.com/2024/02/28/why-is-panera-exempted-from-californias-new-minimum-wage-law/

 

Oh wow.  So are we going to see a bunch of El Pollo Loco loaf of bread and Jack in the Box loaf of bread menu items in April?

[ValueArb]

3 hours ago, vinod1 said:

 

To me it seems like only the part where Government spends directly on goods and services would lead to inefficiency. Say Govt collects 40% of GDP in taxes, gives 25% directly to people for Social Security, medicare, etc. That 25% is still efficiently spend by the people as they are the ones making purchases in an informed way on private goods and services. The other 15% where govt hires and manages things, like IRS agents, Social Security administration employees, direct procurement, etc. This is the part that is inefficient. 

 

Wage growth has been impacted mostly due to outsourcing/China which is fed by CEO incentives/stock options.

 

Outsourcing to China is one of the few drivers of higher wages the US has. Because of chinese labor Apple gets to sell iPhones at lower prices, which means they sell more iPhones, which means they generate more sales of services and IOS developers (mostly american) sell more apps and iPhone accessory makers (mostly american) sell more accessories. That means Apple and third party developers create more high paying developer, designer, engineer, testing, marketing, and sales jobs.  All for sending what we consider the worst, lowest paying jobs to China, where they are considered such great high paying jobs compared to the brutal rural farm work many Chinese do that Chinese stand in line for days in order to get one.

 

Or we could build a massive infrastructure of low paying assembly jobs in the US to make iPhones in order to make Samsung's phones even cheaper relative to the iPhone so Samsung can take even more of the market.

[Luca]

16 hours ago, ValueArb said:

 

You'd be wrong. Inflation adjusted, median incomes have increased nearly 50% in the last 38 years alone. 

 

https://fred.stlouisfed.org/series/MEHOINUSA672N

 

Automatization means your factory with 1000 workers can now produce significantly more product with same number of workers. It means an end to scarcity, not work. 

 

14 hours ago, Gregmal said:

Lower income folks don’t see wage growth because they have no bargaining power being at the bottom of the food chain. That’s life. 
 

There’s a reason good marine mechanics in cold states all head south once they’re able to. Theres a reason all good cooks go to big cities when they can. If you bag groceries or mop floors, tough luck. 

 

12 hours ago, blakehampton said:

It’s pretty easy to find a mean but I think that median is more representative. The issue being that finding a reliable figure for the median is harder.
 

I’ve looked at a lot of data and I’m assuming that the median hourly wage in the United States is somewhere around $22 dollars an hour.

 

 

This is a problem if the stagnation persists. 

[formthirteen]

48 minutes ago, Luca said:

This is a problem if the stagnation persists. 

 

This is perhaps by design and a sign the system is working as intended. The more complex the task, the more difficult it is to compete at the top, and the more the most productive employees need to be rewarded.

 

Soon the low income workers will be competing with robots:

https://www.figure.ai/

 

Quote

There are 10 million unfilled jobs in the United States.

 

7 million of those job openings are for essential roles in warehouses, transportation, and retail.

 

There are only 6 million people available to fill these open positions — and attrition rates remain high.

 

The middle class is already competing with robots: you can rent the most competent ”robot knowledge worker” for $7.92 / hour, less than minimum wage:

 

 

Maybe were on the path to capitalist utopia, whatever that is, robots vs. humans?

Edited March 1 by formthirteen

[Luca]

10 minutes ago, formthirteen said:

 

This is perhaps by design and a sign the system is working as intended. The more complex the task, the more difficult it is to compete at the top, and the more the most productive employees need to be rewarded.

 

Soon the low income workers will be competing with robots:

https://www.figure.ai/

 

 

The middle class is already competing with robots: you can rent the most competent ”robot knowledge worker” for $7.92 / hour, less than minimum wage:

 

 

Maybe were on the path to capitalist utopia, whatever that is, robots vs. humans?

 

The problem I pointed out is that we will have too many people who do not have the disposable income to buy the surplus production created by automatization and AI. And that this needs government policies, which I assume will happen by then

[formthirteen]

1 minute ago, Luca said:

The problem I pointed out is that we will have too many people who do not have the disposable income to buy the surplus production created by automatization and AI.

 

Yes, that is a problem depending on your mindset and circumstances. There are not many that are, e.g., starving in advanced economies. Everyone seems to agree that the problem is overconsumption, but somehow we want more for less.

 

Everyone is competing on a global scale and the ones with lower income will not be able to buy the latest and greatest things created by society; they will have to settle for the cheapest Android and iPhones instead of the high-end ones. I already have, not because I can't afford the latest high-end iPhone, but because I don't need it in any way...

 

You could argue that anyone can buy the same, a functionally equivalent, TV or computer as a billionaire. Billionaires will continue buying bigger yachts and diamond cases for their high-end iPhones to make everyone else envious and sad.

 

Housing is a bigger problem as everyone can't afford to live affordably and near to their workplace. The market COVID pandemic and the internet seems to have solved that problem for some people, temporarily or permantently.

[rkbabang]

11 hours ago, gfp said:

 

Oh wow.  So are we going to see a bunch of El Pollo Loco loaf of bread and Jack in the Box loaf of bread menu items in April?

I think there will be a lot of places to buy bread in CA soon. McBread, Starbucks Grande Loaf, Taco Bell Bread Flavored Loaf, etc.   The best way to play this is to offer the bread, but make it taste really bad and charge an outrageous price for it. It will be there on the menu, but no one will buy it.

Edited March 1 by rkbabang

[Luca]

36 minutes ago, formthirteen said:

Yes, that is a problem depending on your mindset and circumstances. There are not many that are, e.g., starving in advanced economies. Everyone seems to agree that the problem is overconsumption, but somehow we want more for less.

This overconsumption argument is harmful IMO, we really should want more growth. Overconsumption arguments mostly comes from well off upper middle class people, many still would like to own an appartment/house, have a second car, higher quality of food etc. Yeah, the more for less is just a weird cognitive dissonance for some.

36 minutes ago, formthirteen said:

Everyone is competing on a global scale and the ones with lower income will not be able to buy the latest and greatest things created by society; they will have to settle for the cheapest Android and iPhones instead of the high-end ones. I already have, not because I can't afford the latest high-end iPhone, but because I don't need it in any way...

Yes and exactly those people need more growth, if you'd stop the system now it will be those people who will vote for more radical types of politicians because they see how other people live and their standard of living isn't growing anymore. Then you will have fights for distribution of resources because general wealth isn't growing. That exactly will cause instability, which we really don't want:

 

Little anecdote...

36 minutes ago, formthirteen said:

You could argue that anyone can buy the same, a functionally equivalent, TV or computer as a billionaire. Billionaires will continue buying bigger yachts and diamond cases for their high-end iPhones to make everyone else envious and sad.

Yes, people will always be jealous, but they also see they are getting better off over the years. If that stops then they will start rioting, stealing in stores etc. The promise of everybody benefitting in capitalism was great for stability, until the growth stops...

36 minutes ago, formthirteen said:

Housing is a bigger problem as everyone can't afford to live affordably and near to their workplace. The market COVID pandemic and the internet seems to have solved that problem for some people, temporarily or permanently.

Yeah, housing is difficult.

Edited March 1 by Luca

[vinod1]

12 hours ago, ValueArb said:

 

Outsourcing to China is one of the few drivers of higher wages the US has. Because of chinese labor Apple gets to sell iPhones at lower prices, which means they sell more iPhones, which means they generate more sales of services and IOS developers (mostly american) sell more apps and iPhone accessory makers (mostly american) sell more accessories. That means Apple and third party developers create more high paying developer, designer, engineer, testing, marketing, and sales jobs.  All for sending what we consider the worst, lowest paying jobs to China, where they are considered such great high paying jobs compared to the brutal rural farm work many Chinese do that Chinese stand in line for days in order to get one.

 

Or we could build a massive infrastructure of low paying assembly jobs in the US to make iPhones in order to make Samsung's phones even cheaper relative to the iPhone so Samsung can take even more of the market.

 

This is exactly what I believed for 20 years. I know the theory. Pretty basic. If you read the economist magazine this is hammered into you all the time. 

 

There is a major flaw in this line of thinking. Absolutely massive mistake. Try to find it, it was now well known.

[treasurehunt]

42 minutes ago, vinod1 said:

 

This is exactly what I believed for 20 years. I know the theory. Pretty basic. If you read the economist magazine this is hammered into you all the time. 

 

There is a major flaw in this line of thinking. Absolutely massive mistake. Try to find it, it was now well known.

 

The flaw I see is that China is not content being at the bottom of the value chain. They might start with assembling a product, but pretty soon they will be designing, manufacturing and selling their own branded products that compete with the original product. The IPhone has withstood this kind of competition well, but that is perhaps an exception.

[blakehampton]

I read an article in the WSJ this morning that was interesting: Link

 

It basically talks about the two gauges of inflation, both CPI and PCE, and states “One place where price-weight differences have mattered a lot lately is housing. In the CPI, shelter costs for homeowners and renters account for about 34% of the index’s weight. They account for only about 15% of the PCE.”

 

This makes me feel like CPI is more indicative of the average American’s experience of inflation. So why then does the FED use PCE as their benchmark? Thoughts?

[RedLion]

21 hours ago, gfp said:

Am I wrong that most people are making at least $15 per hour these days?  I know that is still near impossible to live on, but it seems like through the pandemic even restaurant dishwashers were making at least $15 / hour.  California's $20 minimum wage for fast food workers is going into effect in a month.

$10 happy meals 

[Castanza]

14 minutes ago, RedLion said:

$10 happy meals 

I rarely eat at MCD's but the wife and I were road tripping and stopped for a "quick and cheap meal."

 

Small fry - $3.69

Large fry - $4.95

Quarter Pounder meal - $13.69

McChicken - $3.99

McDouble - $3.19 

4-Piece Nugget - $3.69 

 

We kept driving...absurd prices for borderline garbage food. Can go to a local sit down burger joint for those prices. 

[hardcorevalue]

A local burger joint is charging like $18-20 for a meal in Toronto in USD equivalent and then want you to tip 20% minimum. 

 

Don’t know if I’m getting old and cranky but it feels like the government and central banks are bleeding people of their wealth trying to avoid a recession. 

[ValueArb]

1 hour ago, treasurehunt said:

 

The flaw I see is that China is not content being at the bottom of the value chain. They might start with assembling a product, but pretty soon they will be designing, manufacturing and selling their own branded products that compete with the original product. The IPhone has withstood this kind of competition well, but that is perhaps an exception.

 

How is that a flaw? China reinvesting capital to produce up the value chain lowers the costs of many useful goods, and makes them wealthier and able to buy more of our goods and services. 

 

The traditional free market example is the Lawyer who bills $200/hour for legal work, but has to spend a lot of time typing up the product of their legal expertise, so she gets really fast at typing and can type 200 wpm. Still she only spends 4 hours a day doing actual billable legal work, and 4 hours a day typing it up. So she hire a secretary who can only type their notes at 100 wpm for $20/hour, and it takes him far longer, 8 hours a day. But now she can bill 8 hours a day, her gross income doubles, and even after paying her secretary her net income increases 80% (though she actually has to hire two secretaries to handle the greater billable output in this example, so net income "only" increases 60% in reality). This demonstrates why even if we can do something better and more productively than another country, it makes sense to let them do it if the net result lowers the cost of that input and allows us to focus our capital, time and energy on higher return activities. 

 

So by your example, now her secretary passes her paralegal exam and he can start charging $40/hour to help clients with simple legal forms and activities. First this isn't bad for the clients, its good. And its probably not bad for the lawyer. She can probably connect clients to her paralegal for simpler tasks and charge them $50/hour, increasing client retention and their budgets, which may even allow them to hire her for legal projects they previously couldn't afford to fund. 

 

Apple is a great example of this. Cheap smartphones and commodity PCs have been around forever, if Chinese companies make them cheaper and better that's great for americans who choose that option, giving them more money to spend elsewhere or enabling their companies to equip more employees with better PCs to be more productive. But Apple has invested immense amounts of capital into building proprietary operating systems and software, CPUs, hardware, services and stores to provide value and experience that a huge number of customers consider superior. Its not going anywhere, and neither are its customers as long as they consider it even slightly better than Android, Windows and Linux devices.

 

Companies like Dell would rightly go away if cheap Chinese PC makers can build generic PCs to undercut it's offerings. But even Dell has long understood this, and provides most of its value to the enterprise in easily managable and servicable equipment. As China moves up the value chain, we get to make the value chain even longer and better.

[ValueArb]

2 hours ago, vinod1 said:

 

This is exactly what I believed for 20 years. I know the theory. Pretty basic. If you read the economist magazine this is hammered into you all the time. 

 

There is a major flaw in this line of thinking. Absolutely massive mistake. Try to find it, it was now well known.

 

There is no flaw, other than self interested actors incented to profit seek at the expense of everyone else by inducing politicians to return to mercantilism.