I take issue with the "Average Company Salary" graph at the center of the article. The article claims that "This means that the rising gap in pay between firms accounts for the large majority of the increase in income inequality in the United States."
However, when CEOs make on average 300 times more than their workers, it kinda screws up that crucial average, doesn't it. Then there's the other executives messing up the data. For reference, in 1965 the ratio was 20-1.
Between 1978 and 2014, inflation-adjusted CEO pay increased by almost 1,000%, according to a report by the Economic Policy Institute. Meanwhile, typical workers in the U.S. saw a pay raise of just 11% during that same period. Hmm.
It's cute that the article lumps rent-seeking behaviour, political corruption, monopolistic practices, exploitation of the environment by a handful of massive companies, tax dodging and evasion etc. into one small paragraph that acknowledges there are other problems.
And it's hilarious that the article claims that "focus on education" and "focus on anti-trust" are "unique recommendations" born of looking at the issue this way.
But to me, it smells of a deliberate attempt to shift blame. There were only a handful of protesters angry at how much Google employees get paid (Bless their hearts). But this article will reach many people, and under the surface - it's bullshit.
Ceos only make an average of 300x employee salary in a subset of the largest us firms. That statistic is often used imprecisely which i think can be confusing.
The authors of the report anticipated your criticism:
"Critics of examining these trends suggest looking at the pay of the average CEO, not CEOs of the largest firms. However, the average firm is very small, employing just 20 workers, and does not represent a useful comparison to the pay of a typical worker who works in a firm with roughly 1,000 workers. Half (52 percent) of employment and 58 percent of total payroll are in firms with more than 500 or more employees. Firms with at least 10,000 workers provide 27.9 percent of all employment and 31.4 percent of all payroll."
Also, you'd think they could have at least mentioned possible distortion of average wage figures, considering they base their entire article on the idea that top companies paying their employees well are somehow responsible for the insane levels of inequality.
It worries me that this turd of an article is getting attention (no disrespect OP). The 8 richest people who own the wealth of 3.5 billion people would probably find it real fucking funny that the 'esteemed' Harvard Business Review is blaming Google employees for the inequality we all face.
First, the EPI weren't trying to find the "average worker to CEO" pay, they were examining trends to determine how well the top 1 and 0.1 percent were doing in 2014.
Second, the article is blaming the largest and most successful companies and using their average wage to make their point - while making no attempt to account for or mention the CEO getting paid as much as 300 or more workers. This is a pretty gross mistake, and I find it disturbing that the HBR could spread bullshit like this.
Third, a study that looks at the top 350 firms' ratio of CEO to worker pay is in this case :more: relevant than the average of all companies, as the article is talking about :the largest companies:.
What I want to know is, why are so many people trying to make an issue of the EPI study I referenced, when the HBR article is riddled with basic, glaring errors and ludicrous claims?
I was only addressing the your comments regarding the study addressing certain criticisms. I didn't read the article, and I don't really care about it.
Yes, them using the mean wage at those companies is inaccurate. They should probably be using median instead.
> blaming Google employees for the inequality we all face.
exactly. The employees riding that bus are ultimately in the same economic boat as the ones throwing the rocks. They might be slightly better off, but are still probably 3-5 paychecks away from being homeless and without health insurance. The ones who are responsible for this polarity and who have the power to do something about this, do not ride on the 7:30am employee shuttles.
However, when CEOs make on average 300 times more than their workers, it kinda screws up that crucial average, doesn't it.
Not at all. The "300x" statistic comes from an analysis of the 350 largest firms; these all have at least 10,000 employees, so even the outsized CEO compensation is at most a few percent of the total.
cjwilliams wrote pretty much the same thing. See my response to him.
Also, considering that TFA is expressly talking about the largest firms and blaming them for income inequality, the criticism holds even less water for me.
How much of CEO pay prior to the Reagan tax reforms were cash, and how much were things like corporate apartments, golf club memberships, company cars, etc.?
Follow up question: When US CEO pay is compared to CEOs of European and Asian companies, how much of those same non-cash benefits are included?
Final question: How much of US CEO pay is cash (I.e. payed by the company) and how much is equities (I.e payed by shareholders)?
Yeah I'm sure CEOs had other perks in the past. This refutes precisely none of my criticism of the article.
As to your other two questions, I completely fail to see how they affect my argument, and I don't want to get off track.
To reiterate the criticism I was making - basing your entire article on the claim that the difference between average pay in companies is at fault for "the majority" of inequality, while making no attempt to account for or mention the fact that those firms average wages are likely grossly distorted by executive pay, is at best ignorant and more likely intentional.
We live in a world where the 8 richest people own the wealth of 3.5 billion of the poorest. This is insane, it's dangerous, and it's :not: the fault of Google employees' wage packets; no matter how much CEOs in the 60s or in Asia are paid. For the HBR to suggest this is grossly irresponsible, I find it ghoulish.
In a global economy, workers have no leverage. If a group tries to form a union, the work goes elsewhere. Globalism exploits the fact that there are people willing to work for $1/hr, and leads to many of the problems of capitalism predicted by Marx and friends in the early 1900s. As long as globalization is allowed to continue, inequality within the US will just grow worse.
Globalization is not the enemy. Centralised globalization with a handful of megacorps dominating the global economy is fucking awful however.
Protectionism is at best a short term solution that comes with a host of other problems.
The major threats to our existence are global problems like climate change and nuclear arsenals. Fighting against all globalization will only divide us.
I believe that the best leverage workers of the world can have is the ability to live a decent life without the threat of starvation or extreme poverty. This dream is attainable, and worth planning for and building towards as a species.
We have near instant communication, the ability to translate between languages is developing rapidly, and automation can potentially, realistically, make it so that work is truly optional. Fighting against all globalization and protecting US interests above all others is, I would think, very much not what 'Marx and friends' would have had in mind.
The problem is there are two kinds. The classic one, and the one you can easily defend, was just eliminating tariffs. Don't discriminate against foreign businesses; treat them the same as local businesses.
But there is another one that generally gets called "harmonization", and that's the one that kills everything. Because what it means in practice is the undemocratic international enforcement of regulations created via regulatory capture. You enforce the same rules everywhere, those rules are created by megacorps to give them an advantage and the predictable result obtains.
Western/1st/etc world (used to?) treat workers well. The rest of the world didn't. Once tariffs are eliminated, all countries join the rat race to the bottom. How can western countries with good social safety net, reasonable work hours and good wages compete with cut-throat conditions in Asia? Naturally the conditions equalise. The good ones get worse, while bad ones adopt a thing or two.
> How can western countries with good social safety net, reasonable work hours and good wages compete with cut-throat conditions in Asia?
In theory the idea is that they're not supposed to -- if you have unskilled work with no geographical restrictions, you do it where there is the lowest labor cost, and then everyone benefits by paying lower prices. Meanwhile western countries do the higher paying jobs that require a skilled workforce and the unskilled workers in western countries either do service jobs that do have geographical requirements or go to school and become skilled workers.
One of the things that's been killing us on that front is the broken welfare system that puts high marginal rates on lower income people through benefits phase outs, which makes it so that middle class people can't afford to hire lower income people to do service jobs, because 80% of the money goes to the government in benefits phase outs. Which means those people become unemployed, and the higher unemployment rate pushes down unskilled wages, erodes the tax base and increases the total cost government is paying out in benefits to the unemployed.
And it turns out that those cheap countries can produce skilled work too, without becoming expensive and as caring about the workers. Yet bigger than expected portion of western countries' population does not perform well in skilled work market..
>> I believe that the best leverage workers of the world can have is the ability to live a decent life without the threat of starvation or extreme poverty. This dream is attainable, and worth planning for and building towards as a species.
What do you mean by "ability"? Opportunity? I don't see how any particular economic status of anyone can be guaranteed with regards to what you're saying.
How I see it: The rich get richer and the poor, poorer. Once the rich have all the wealth, they go elsewhere with it. Corporations move to Singapore to save money. Automation will only benefit those who own it. Once things are automated, most people will lose their jobs and won't be able to afford even the things that are produced by automation. The rich aren't going to share, and if they do, they do it with strings attached so they can manipulate the spending and promote their own agendas (which is what they do now anyways).
The biggest problem is simply human selfishness. Because of it, there will never be peace. There will always be people seeking more than they need, always seeking their own survival over that of others, always seeking to crush others to give themselves a boost physically/economically/egotistically/etc. There will never be world peace as long as people are selfish, which basically makes world peace a pipe dream. Sorry to step on toes, but that's life.
How do you explain the massive transformation of China from a backward rural basket case, to a dynamic modern manufacturing led economy in which industrial employment and industrial labour wages have both rocketed in the last 20 years?
That has come at a cost. Manufacturing really has transferred from the West to the East. Yet the West doesn't have mass unemployment and job vacancies for skilled workers are at an all-time high in the West.
The problem is that low skilled jobs have gone East and the West is moving up into high value services jobs, but our training and education systems have adapted too slowly to bring our worker pools along for the ride. The answer is not to turn back the clock, it's to ride the economic wave and up-skill our labor pool because too many people in the west are being left behind in unskilled jobs, when actually there are plenty of skilled job vacancies available compared the the actual number of unemployed.
> How do you explain the massive transformation of China from a backward rural basket case.
It's not as if wealth doesn't get redistributed for a variety of reasons (war, theft, taxes, communism, etc.). But the reality is, any economic system left to its own ends will inevitably result in a few gaining manipulating the system to gain the majority of the wealth while the rest fall farther behind. The discrepancy in the West hasn't been noticed because the economic "pie" so-to-speak has simply grown larger. When the pie stops growing, you'll start to see the effects of the inevitable trend start to appear.
> The answer is not to turn back the clock, it's to ride the economic wave and up-skill our labor pool because too many people in the west are being left behind in unskilled jobs, when actually there are plenty of skilled job vacancies available compared the the actual number of unemployed.
I agree, turning back the clock isn't the solution. However, I'm also aware that the situation isn't going to improve for the majority of people in the west. It's easy to say "up our game" but how much? Most people in the US now have bachelors. That was SUPPOSED to get you in the door to business. What happened? The bar went up. Now people are stuck with debt they can't get out of to loan sharks who won't forgive. Even if we erased all that, would that fix the problem? No, because the skill level required for entry is too high. Why? It's not merely because companies couldn't just hire from a number of talented candidates to do the job, it's because companies want to make money, and they're trying to do it by only investing in candidates they believe will bring them money (which means the experts), no investment in training. Every dime they spend towards training candidates is a dime their competitor gains when their newly-trained employees leave. Companies each sit on their own money source, and at the top of the economic chain are the billionaires with investments in all these companies and siphoning out penny after penny until - should time be on their side - they have it all. That won't happen in the long run for the aforementioned reasons (war, taxes, etc.), but you can't deny it would be fantastic to be in a personal financial situation where "money is no object".
Notably, a number of people can't actually meet the bar, esp. the handicapped and those who just don't have a knack for technical things. What are they supposed to do? Their jobs will eventually be replaced by robots, and should we get to that point, even those "middle class Chinese" will eventually start to see their wages reduced from 2 yen to nothing.
So yeah, there are plenty of jobs, but they won't be filled. People (esp. the rich) want people to make them money, not people who don't. Of course, perhaps I've overly simplified all this for the sake of brevity and haven't ironed out the argument to your satisfaction, but I trust you can find some unemployed people - skilled or not - and ask how their job search is going.
The fact that living conditions improving for people in the 3rd world makes you feel better maybe doesn't do as much for "rich westerners" whose jobs have moved overseas.
I think he means you're taking from one to give to another, which eventually results in the former being as worse off as the latter was, so the sum total of your "humanitarian effort" ultimately amounts to zero. But that's a guess.
Really, the only issue seems to be a loss of status (not goods and services) by some rich white westerners. (Non-white westerners seem to have improved their situation by quite a bit also.)
We haven't just lost status. We've lost leverage and loyalty too. Globalization has made the demand for lower class labor in the US drop to the point where the uneducated cannot do well anymore. In a balanced economy, there's a demand for everyone, yet in our outsourced service economy, only the highly educated do well. The opioid epidemic isn't here because of a loss of status.
> Really, the only issue seems to be a loss of status (not goods and services) by some rich white westerners.
You're saying there have been literally no negative effects from globalization? That unemployment in the rust belt has had no effect on standard of living?
If you think things are so bad, surely you can name a single good or service that westerners have less of today than they had in 1970. What is that good or service?
Housing: http://www.jparsons.net/housingbubble/ - compared to the rise in wages, this cost increase has been much more moderate, but it's still an increase.
Your second article says health care is more expensive than other countries, not that fewer people consume it than some past period. Looking at real resources (e.g. # of health care employees) suggests more people consume it, not less.
Your third source does not claim fewer people consume housing than at some past point. In fact, people consume more housing than ever before - houses have nearly doubled in size since 1973, even as # of people in the household decreased.
It takes a special kind of logic to look at rising prices, stagnant wages, and conclude that things are better.
Oh, no, wait, you didn't say better/worse, you said 'goods that we have less of'. So even if people bankrupt themselves over a broken leg, or go into decades of debt for a home or education, everything is just peachy! Even better, actually, since we can add credit availability to the list of things we have more of! http://www.businessinsider.com/chart-of-the-day-credit-card-...
There's also more jobs: https://www.bls.gov/opub/ted/images/2012/ted_20120731a.png ! Gone are the dreary days when you were set for life by your 2nd job - these days you could find yourself looking for a new job any moment - how exciting!
I guess I stand corrected, we have more of everything, and shouldn't complain, even if corporation's obscene wealth allows them to buy politicians and regulatory agencies. Who cares how concentrated power and wealth are, as long as there's enough bread and circuses.
Scroll up. You compared us to Somalia. In Somalia, they don't have all these things.
I'm not sure how you believe it's possible that consumption is up while compensation is stagnant and prices are higher. Could you explain - with numbers - how you propose that standard accounting identities are violated?
>I'm not sure how you believe it's possible that consumption is up while compensation is stagnant and prices are higher.
I cited sources with statistics, not my personal beliefs.
But to answer your question - the accounting is explained by an increase in debt (see the businessinsider article I linked earlier), and by the fact that what's spent on education/housing/healthcare, isn't spent elsewhere.
And I'm well aware we're better off than Somalia - that was my point. We don't have to wait until we're not before we start complaining. Should we do nothing but feel guilty we live in decent countries, until there's no-one who's worse off?
In terms of driving down third world poverty and lifting hundreds of thousands of people out of hand-to-mouth existences globalization is unbelievably effective. A large fraction of the rural poor in China are now skilled workers. Factory laborer wages in China have rocketed in the last 15 years just as the number of such laborers has also shot up. The massive expansion of IT companies in India is sucking huge amounts of money into the Indian economy while driving down the costs of services in the West.
So it depends on what you think is most important. Yes many manufacturing jobs have moved out of the West, yet overall unemployment in the Western world is not particularly high. In the US it's fallen by half in the last 5 years to historically fairly low levels and job vacancies are at an all time high because businesses are having difficulty finding skilled or experienced workers. the real problem in the actual jobs market is training and education, not de-industrialization.
The anti-globalization narrative is utter claptrap peddled by a 70's soviet-era industrialist view of the world where all we had to do was put everybody in factories and we'd everything would be fine. Actually, it wasn't true back then either, hence the collapse of the Soviet Union.
The globalization equation has nothing to do with transfers of wealth from Western world labour to Western world fat cats. It's mainly about transfers of wealth from Western world labour to eastern world labour. The solution isn't to reverse that trend and impoverish foreigners. It's to climb our economies up the value chain and capture more global wealth. We have been doing that, but we're just not doing it fast enough.
Please don't cite that 3.5 billion number, it's entirely based on total assets, which means that:
My 16 year old self with $3000 in the bank saved up from summer jobs was also wealthier than a few billion or so people combined, because they were counted as having $0 or negative net worth.
And if you don't think that's already a reductio, then bear in mind that you're also calling an 18 year old working minimum wage with a few dollars in their pocket richer than people making six figures who happen to have student debt.
The income and wealth concentration in the hands of the 1% and .01% are sufficiently extreme that any choice of numbers will show them. This one just happens to be nearly meaningless.
I am aware what that 3.5 billion number means, but others may not be, so thanks for that.
Only last year, the number was 62 people owning as much wealth as the poorest half the world, the year before that was around 87 I think. It's a good number to keep an eye on. In a discussion about inequality, the number is very relevant, and far from meaningless.
>...the number is very relevant, and far from meaningless
How closely coupled are those numbers though? Do changes in the wealth of the richest few dozen people directly affect the wealth of the poorest few billion? If a new Mark Zuckerberg founds an internet company and becomes a billionaire what effect does that have on poverty in Africa? What changes in policy concerning the economics of billionaires do you think would benefit the poorest people in the world?
The statistic you are citing doesn't say CEOs don't make 300x their workers. It says they make 300x the average worker.
Between 1978 and 2014, inflation-adjusted CEO pay increased by almost 1,000%, according to a report by the Economic Policy Institute. Meanwhile, typical workers in the U.S. saw a pay raise of just 11% during that same period. Hmm.
Did all CEOs see this raise, or just the CEOs of the top corporations (who's workers also saw raises)?
None of the statistics you cite remotely contradict the claim that between-firm inequality is the primary driver of inequality.
I doubt any one but you thought I meant that CEOs make more money than 300x ALL their workers, but er, thanks for the clarification anyway.
I didn't say the statistics refute the claim, I said the article's claim is mostly based on a graph that fails to take extreme executive pay into account when discussing average worker pay. The statistics I cite back that up.
And the word you're looking for is 'whose'. Who's means ' who is'. Apostrophes can be tricky, I know, but hey - you got pedantic on me first.
I doubt any one but you thought I meant that CEOs make more money than 300x ALL their workers, but er, thanks for the clarification anyway.
You are completely misinterpreting me. I was not arguing against this claim at all.
The statistic you cite claims that a select set of CEOs make more than the average worker across all firms. I.e., the CEO of Goldman makes 300x more than the average worker at Goldman and Walmart combined.
It does not make any claims about inequality within forms - i.e., whether the CEO of Goldman makes 300x the average worker at Goldman.
I remain convinced that CEOs of Google and Goldman make hundreds of times more money than their average workers, and that if you're going to publish an article that makes such a large claim as this one, based almost entirely on average pay data, then that should be taken into account.
Did you know the CEO of Goldman made 54 million dollars in 2007? I don't know if you remember, but the next year there was a significant economic crash that caused immense hardship for a large portion of the world, and a huge amount of the blame for it was laid at Goldman's door. HBR had fuck all to say about that, or the massive global austerity protests. A few protesters yell at Google employees getting on the bus, and they're all over it drawing wild conclusions.
I point that out because it's ironic that you'd use Goldman to make that point, considering the effect they've had on inequality.
Let's be real - blaming the amount Google pays its employees for the extreme inequality in America is fucking absurd. It's misdirection, and apparently it works to an extent even on literate, mathematically educated populations, such as this one. This is deeply concerning to me.
I don't doubt that firm inequality is a factor worth looking at.
But, the article claims, with the flimsiest of evidence, that "the rising gap in pay between firms accounts for the large majority of the increase in income inequality in the United States."
Really? Do you honestly believe it's more relevant than rent-seeking behaviour, political corruption, monopolistic practices, environmental pillage, tax dodging and evasion?
Again, I have no doubt that it might be a good idea to look at antitrust issues, invest in education, and somehow make business leaders look at the consequences of their actions on the economy as a whole. But claiming that these are "unique recommendations" that emerge from "shifting the focus from individuals to companies", while relegating the other factors I mentioned above to a minor sidenote against "the majority of the increase in income inequality" - Straight bullshit. Please.
I think looking at CEO-only pay is a red herring. The CEO of a company like Google might be paid a lot, but if you cut that pay to zero and redistributed to the rest of the company, the impact wouldn't be massive. To wit, the CEO of google was paid $100 million in 2015, and Google has about 50K employees, resulting in a $2K difference for everyone.
Do you believe that if all corporations just reduced the pay of the top 1% of the pay grade, that within-US inequality rises would be majority eliminated? What's the evidence either way?
No I don't believe that. Never implied anything of the sort.
You made a fair point about the number of employees, but I was careful to also mention other senior executive pay. I mentioned a host of other factors such as political corruption and rent-seeking behaviours being likely far more important factors. Jumping to the conclusion implied in your question is unfair, and might point to a bias you're walking around with, I think.
Do you believe, as this article claims, that :the majority: of inequality in the US is due to how much Google and other top companies choose to pay their employees?
Regardless, do you believe that this article employed convincing analysis and evidence to back up such a belief?
I don't think that between firm inequality is the main driver of inequality within the US. (Internationally, inequality has decreased over the last 40 years). My personal belief is that the main causes are technology and globalization.
I think the article looks at it in a unique perspective that is missed. Between firm inequality is a result of technology, especially technology with natural monopoly characteristics (search, social network).
I don't think the article's recommendation of breaking up monopolies will reduce inequality at all. If you break Google or Facebook up, you'll get two companies with nearly isomorphic hiring and pay practices.
This was a long article, but I think it boils down to this:
"I believe that much of the rise of between-firm inequality, and therefore inequality in general, can be attributed to three factors: the rise of outsourcing, the adoption of IT, and the cumulative effects of winner-take-most competition."
"For example, contract janitors no longer receive the benefits or pay premium tied to a job at a big company. Their wages have been squeezed as their employers routinely bid to retain outsourcing contracts, a process ensuring that labor costs remain low or go ever lower."
I think possibly the most effective change that could be done along these lines is to change the laws to where hiring as few actual employees as possible is the only responsible business decision. One big part of this would be decoupling health care and possibly other benefits from place of employment, if not universal health care then just put everybody into the individual market by law.
Or close the 'contractor' loophole entirely, but that could be messy.
I have flirted with GooAma AppMicroFace, and got a few interviews deep once, but after careful thought I stopped the process, and now I ignore the biggest tech companies. I simply don't want to be a cog in a giant machine, and therefore my talents will always go to start ups and small companies. Surely I can't be the only person who refuses to work for the top tech companies out of preference?
> In an increasingly winner-take-all or at least winner-take-most economy, the best-educated and most-skilled employees cluster inside the most successful companies, their incomes rising dramatically compared with those of outsiders.
US median income is $52K, software developer is maybe 100K, so around double. But to make that you have to live in an area with a much higher cost of living, and the various governments take more than a quarter of the difference in taxes and more than a quarter of the difference in disqualifications from income-based benefits programs. While you work 80 hours a week.
Someone making $100K in San Francisco is not doing better than someone making $50K in Houston. (You have a serious problem, however, if you make $50K in San Francisco.)
And the people clearing a million aren't typically silicon valley developers, they're Wall St quants and investment bankers. And those same people are generally paying the lower capital gains rate rather than the higher earned income rate, and losing a smaller percentage in benefits phase outs because by then everything is already phased out.
The numbers in the article are also including people who aren't working -- it has the 25th percentile income as zero and the median as something like $25K, which it probably is if you include retirees and homemakers and students, but how is that "income inequality"? For it to mean anything you have to be comparing people who are actually working full time. Anyone working obviously makes infinity times more than anyone with zero income.
As to the central thesis of "winner take most", markets like Facebook with network effects are the exception and have existed before (e.g. AT&T). In most other markets you can really blame regulatory compliance costs and regulatory capture. More paperwork to do and lawyers to hire and fees to pay to do business today than in 1970. The higher the cost of operating a business, the more advantage to consolidation.
There are plenty of $80K developer jobs in cities with a $20K lower cost of living.
If there were actually enough jobs in Texas and Tennessee for everyone in San Francisco to live there with lower expenses but the same salary, explain why most of those people don't do that. Note that things like "cost of finding a new job if you lose yours" are components of cost of living.
Don't move the goalposts or shift the burden. You said have to. Now you say most and demand that others prove the contrary. Please stick to your original claim and prove it yourself. That's how honest discussion is done.
The real question here is not whether developers can get the exact same salary working somewhere other than SF/SV. For one thing, the story wasn't just about our industry. The original story posited three possible causes for between-firm inequality. Before we obsess over the winner-take-all factor and how it relates to being or not being in the Center Of The Universe (ha), we need to consider how those other two factors play out across the entire economy.
Even among tech companies, subject to the exact same cost-of-living issues, there are significant differences in pay scales. Believe me, I know, because I'm taking advantage of that right now as I transition between jobs. The richer companies are very successfully capturing a disproportionate share of the high-end labor market, either by direct hiring or by acquisition. That enables them to compound their original advantage, in a feedback loop that IMO must be attenuated unless we want to live in a true monoculture. The idea that developers must move to high-cost areas is crap, but the problem of developers going to work (often remotely) for the richest companies is very real.
It's a fact that they do. If they didn't have to then why would they leave the money on the table?
> Now you say most and demand that others prove the contrary.
It's most because if most of the developers in silicon valley moved to other places then the cost of living there would fall to parity with the other places as a result of decreased scarcity of housing and other resources, before all of them did. And because not everyone has the same utility function -- some people have to live there more than other people, e.g. because their spouse also works there and they can't find two equally-paying jobs in the same other city at the same time.
> Please stick to your original claim and prove it yourself. That's how honest discussion is done.
"People behave rationally" is a basic assumption. It isn't always true, but if you're going to contend that it isn't in a particular case then you're the one who needs to show that.
> The real question here is not whether developers can get the exact same salary working somewhere other than SF/SV. For one thing, the story wasn't just about our industry.
You're changing the subject. The story, and the protests, refer to "highly paid" tech workers at SV companies like Google and Apple. But it remains true that those people are not significantly wealthier on a PPP basis than people making median US wages but living in a city with a lower cost of living.
> Even among tech companies, subject to the exact same cost-of-living issues, there are significant differences in pay scales.
Better developers obviously get paid more than worse developers. But the same is true in Texas. They both get paid less and pay less for housing but the better developer still makes more than the worse developer. And that isn't new either -- "better talent costs more" is as old as money.
> That enables them to compound their original advantage, in a feedback loop that IMO must be attenuated unless we want to live in a true monoculture.
There are two kinds of markets. One is natural monopolies, like local roads or last mile telecommunications, where the fixed cost is the essentially whole cost, barriers to entry are high, monopoly is inevitable, and they should be operated by the local government. The other is "real" markets that, left alone, would have competition.
We keep screwing up the second ones and forcing them into monopolies anyway, by making it harder for small entities to compete. The situation with software patents is a prime example.
Having money to pay talent is an advantage, but it isn't an insurmountable advantage. The only way to use it to stay on top is to be efficient. Serve every possible niche so well that nobody else can come in and carve one out for themselves. And if a company is doing that, nobody objects.
The problem isn't that, it's that we've set things up so that little companies have prohibitively high costs, so a startup that should be five people in a garage using money borrowed from parents instead has to take a million dollars in VC funding to hire lawyers and file paperwork. And then, if they succeed, megacorp shows up with a buyout against the threat of a lawsuit if you refuse to take the money to make the competition go away, which is what the VCs wanted all along anyway, so everybody gets paid but nobody competes.
The problem isn't that they have too much money, it's that they have too much leverage. If was only the money and regulatory barriers to entry were lower then there would be too many startups to buy them all and more of them would become independent competitors.
> But it remains true that those people are not significantly wealthier on a PPP basis than people making median US wages but living in a city with a lower cost of living.
No, it remains your unfounded - and untrue - assertion. A lot of people have salaries very close to those in Silicon Valley, in housing markets significantly cheaper than Silicon Valley. Haven't you heard of remote work? A lot of us at the high end are able to do it, but maybe you haven't reached that point yourself. For people like me and quite a few of my friends/colleagues, we're winning the PPP game by not living in SV.
> Better developers obviously get paid more than worse developers.
Now who's changing the subject? We're not talking about better or worse developers. We're talking about developers at the same level, often the same people as they move from job to job. Rich companies can and do pay higher salaries regardless of the worker's location. That creates a feedback loop, distorting both labor and capital markets, turning temporary advantages into permanent ones and stifling competition.
I've worked at a lot of startups, and learned a lot about their advantages and disadvantages relative to larger competitors. Over-regulation was never one of those problems, and nobody responsible for setting strategy was ever so ideologically blind that they tried to pretend otherwise. I'm guessing that's not a recipe for startup success, in Silicon Valley or anywhere else.
> No, it remains your unfounded - and untrue - assertion.
Which part do you assert is untrue, that there are developers actually living in SV, or that making more money there is equivalent to making less money somewhere with a lower cost of living?
> A lot of people have salaries very close to those in Silicon Valley, in housing markets significantly cheaper than Silicon Valley. Haven't you heard of remote work?
Everybody wants remote work at SV salaries. That doesn't mean everybody can get it.
It's obviously true tautologically that people who don't live in SV don't have to live there, but those are also not the people bidding up area rents or riding a shuttle with people protesting outside it.
You still haven't offered any explanation for why the people living in SV continue to do so if it was actually possible for them to do the same thing you're doing.
> We're not talking about better or worse developers. We're talking about developers at the same level, often the same people as they move from job to job.
We are talking about better or worse developers, or what is your argument? When one person goes from making less money to more money, all it shows is that they were previously under-compensated (or are now over-compensated) for their skill level. Or that their skill level has changed. If big companies were paying higher salaries to the same developers then how would that create any advantage for them?
> Rich companies can and do pay higher salaries regardless of the worker's location. That creates a feedback loop, distorting both labor and capital markets, turning temporary advantages into permanent ones and stifling competition.
Rich tech companies don't have a monopoly on capital. If all it took is to pay developers a lot of money then it would be Wall St rather than tech companies doing the paying and collecting the yields.
> I've worked at a lot of startups, and learned a lot about their advantages and disadvantages relative to larger competitors. Over-regulation was never one of those problems, and nobody responsible for setting strategy was ever so ideologically blind that they tried to pretend otherwise.
Over-regulation isn't a problem for the startups that actually exist -- VCs don't fund the ones the regulations make prohibitive and provide the money to pay the cost for the others. But the result is fewer startups, so rich companies can afford to buy every one of them that poses a threat to them.
Let me give an example of bad regulation. DMCA 1201 (or software patents, or the CFAA, or whatever they use this year), which Apple et al use to lock smaller entities out of their platforms unless they pay 30% and just outright prohibit people from making apps they don't like. Are you taking the position that that sort of a veto doesn't prevent startups that would otherwise compete with Apple's apps from getting off the ground?
Neither of your strawmen. I am not making my own assertion at all. I am challenging your assertion that maintaining a high standard of living requires moving to the Center Of The Universe for all or nearly all developers. You seem to base this assertion on a premise that the difference in salaries outweighs the difference in cost of living, but have provided no evidence to support that. I know it's not true for me, but at least I don't assume that my experience is universal.
> Everybody wants remote work at SV salaries. That doesn't mean everybody can get it.
True. You have to be pretty good at what you do.
> We are talking about better or worse developers, or what is your argument?
Again, it's not my argument. It's yours, and it's ridiculous. It's only about good vs. bad developers if one assumes that a good developer lives in Silicon Valley and a bad developer is one who lives anywhere else. If one accepts that there are good and bad developers everywhere, or that some people measure value differently than you do, then it makes absolutely no sense.
> If big companies were paying higher salaries to the same developers then how would that create any advantage for them?
Have you heard abou this little thing called network effects? The theory is that, by bringing good developers together, synergy creates value that doesn't exist with them separate. It's an idea I could argue from either side, but the important thing is that it doesn't require physical proximity to work. It can be well worth paying a premium to bring good developers into logical or virtual proximity with one another, and the big rich companies are taking advantage of that.
> Rich tech companies don't have a monopoly on capital. If all it took is to pay developers a lot of money then it would be Wall St rather than tech companies doing the paying and collecting the yields.
It doesn't require a monopoly. All it requires is a significant asymmetry. Also, Wall Street very much has been playing this game too, with effects and remedies that would be just as worthy of debate if we could get past the facile attempts to deny the reality of it happening.
> Neither of your strawmen. I am not making my own assertion at all. I am challenging your assertion that maintaining a high standard of living requires moving to the Center Of The Universe for all or nearly all developers.
You seem to be challenging your own straw man.
> You seem to base this assertion on a premise that the difference in salaries outweighs the difference in cost of living, but have provided no evidence to support that.
The evidence is all of the developers who choose to live and work in SV despite the high cost of living.
> I know it's not true for me, but at least I don't assume that my experience is universal.
That is the straw man -- I never claimed it was universal. It's true of the people who live there, or why do they?
> True. You have to be pretty good at what you do.
That doesn't seem to have much to do with it. Plenty of call center workers are allowed (or required) to work from home, because it saves the company from having to pay for office space for them, but that doesn't make them particularly highly skilled or highly paid.
> Again, it's not my argument. It's yours, and it's ridiculous.
Here's you from before:
> Rich companies can and do pay higher salaries regardless of the worker's location. That creates a feedback loop, distorting both labor and capital markets, turning temporary advantages into permanent ones and stifling competition.
If the higher salaries aren't paying for better work then how do the companies get any advantage out of it?
> Have you heard abou this little thing called network effects? The theory is that, by bringing good developers together, synergy creates value that doesn't exist with them separate.
"Big" isn't an advantage here. It means bureaucracy and politics and Mythical Man Month problems. These companies succeed despite these things, not because of them.
> It can be well worth paying a premium to bring good developers into logical or virtual proximity with one another, and the big rich companies are taking advantage of that.
What do you suppose is stopping the same people from coming together on their own and just keeping the money their work generates?
> It doesn't require a monopoly. All it requires is a significant asymmetry.
Asymmetric capital? How is Apple's billion dollars better than any random capitalist's billion dollars?
> Also, Wall Street very much has been playing this game too, with effects and remedies that would be just as worthy of debate if we could get past the facile attempts to deny the reality of it happening.
What game? "Money makes money" has been the basis of Wall St since day zero. The method by which this doesn't lead to permanent massive consolidation of power is that new entities come into existence and displace old ones, but are owned by new people. The problem is the thwarting of that process by requiring the permission of incumbents to make new things.
> The evidence is all of the developers who choose to live and work in SV despite the high cost of living.
...ignoring all those who do not make that choice. Nice cherry-picking.
> Plenty of call center workers are allowed (or required) to work from home
Changing the subject again. We were talking specifically about people who were making Silicon Valley salaries, not call center workers. You need leverage to do that. The fact that you don't even know anyone with that kind of leverage tells me that you don't even know what you're talking about, and your constant employment of sleazy rhetorical tactics tells me that you're not even trying to learn.
> That isn't what "network effects" means.
OK, so it's not exactly network effects, but it's still synergy. Two good people together can often do things that neither could do alone. You got the point, so stop being obnoxious about terms.
> "Big" isn't an advantage here. It means bureaucracy and politics and Mythical Man Month problems.
Such a jaundiced view at such a young age. At least I assume you're young, based on not being senior enough to negotiate - or know anyone else who negotiates - better working conditions. Better than assuming you're old but barely competent. In any case yes, bigger companies can have their problems. So can smaller ones. They can each have their advantages. For example, at a startup there will inevitably be some specialized areas of knowledge where coverage is thin. That can be great for creating opportunities to learn, but not for solving an immediate problem in minimal time. At a larger company, especially a larger rich company which is what we're talking about, there might well be a world-class expert on staff for even the most obscure specialty. There might be specialized hardware (or teams to develop it), partner relationships, etc. Big companies can be mismanaged and small companies can be mismanaged. That's why nine out of ten startups fail. Counting only the hits for one side and only the misses for the other is not how rational people approach a problem, or how honest people discuss one.
> What do you suppose is stopping the same people from coming together on their own and just keeping the money their work generates?
There could be many reasons, from simple risk aversion to lack of skill (or interest) in the non-technical aspects of running a business to the need for leads and contacts. You do realize that most people don't work for startups, right? There's a whole world outside that bubble.
> How is Apple's billion dollars better than any random capitalist's billion dollars?
Wrong question. What matters is how Apple's budget for technical hires compares to others' budgets for hiring in those same specialties. That's where the competition occurs. The VC money, fragmented across many companies pulling in many directions and each having to carry their own business infrastructure, would have to be much more than a single focused company's investment in that area of overlap. One of the big five can spend a million dollars each for a dozen hires in a particular area. A startup would be hard pressed to justify that to their investors, precisely because those investors would rather have that money to make other bets entirely. It's a bit of a collective action problem, which I would have thought anyone spouting so much pseudo-economics would know about.
Also, even if VC-funded startups could compete with the Big Five, not every small company is a VC-funded startup. Forcing entrepreneurs to ally with one group of rentiers and arbitrageurs or be crushed by another group of the same is not a good way to build a long-term healthy innovation economy.
> News outlets reported that people had thrown rocks and a bus window had been smashed.
Do poor people really want to settle their resentment issues with violence? Because it seems to me that they will lose, at least if rich people defend themselves.
>> Why are some firms paying better than others? It could be that some are just more generous — paying their workers higher amounts than other firms pay for the same work — although that would surprise economists
I'm not an economist, but as someone who has worked for many different companies in the software industry, I don't find this 'generosity' hypothesis surprising at all.
Managers usually don't have a clue who to promote so they just promote their friends or those who are liked by the rest of the team (for reasons unrelated to skill).
Maybe it's time to enforce a maximum wage similar to how we enforce a minimum wage? Maybe maximum = 10000 * minimum? This won't stop people from amassing assets and power (i.e. we aren't enforcing a maximum number of expensive art you can own, or senators you can call), but might curb the inequality among wage workers and CEOs.
I've thought about this, and very nearly would agree with you, but it would take some things away. The hope of lottery winnings and the escapist dreams that come with it, for example. Would that be excluded?
If some bloke comes up with a cure for 20% of the world's most common cancers, do I care if he's filthy rich? Would Gates be able to do his charity work if he didn't once make a load of money?
Furthermore, do I care if the person at the top is getting rich so long as the folks at the bottom aren't struggling and miserable?
The answer to the last one is: Not really. I do prefer that there be less difference between the CEO and the janitors. I'd prefer to set a standard of living that is higher than the poverty guidelines in the US and encourage companies to pay enough to meet this (at least for a single person to live independently and be a part of society). I just don't see how the maximum would help this more than it'd hurt other things.
Corporate world is just another market for me, driven by supply and demand. You cannot "force" oranges to have the same price in their production land and the same price in their export targets. Don't forget that equality IS NOT about equal number as many think, its about EQUAL chances and fair trade.
>Firm inequality is an expression of many of these factors.
Exactly. It's not the cause, like this article is claiming.
Considering that most people consistently grossly under-estimate the divide between the wealth 'classes', I'd say that it's a bit premature to say the debate has been poisoned. Most people think it's not nearly as bad as it is, despite the work of many people, like Wilkinson. His findings should have been on the fucking news every day until people got it, not a Ted Talk.
The uber-wealthy control the vast majority of media, politics, and distribution of resources. The signs that they're working in the interest of equality or the common good are sparse, to say the least. Focusing on inter-firm inequality may in a roundabout way touch on those issues, but as you say yourself, it's not the cause.
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[ 3.9 ms ] story [ 124 ms ] threadLets focus on the rights of the living and let automation eat the jobs that it is able to.
However, when CEOs make on average 300 times more than their workers, it kinda screws up that crucial average, doesn't it. Then there's the other executives messing up the data. For reference, in 1965 the ratio was 20-1.
Between 1978 and 2014, inflation-adjusted CEO pay increased by almost 1,000%, according to a report by the Economic Policy Institute. Meanwhile, typical workers in the U.S. saw a pay raise of just 11% during that same period. Hmm.
It's cute that the article lumps rent-seeking behaviour, political corruption, monopolistic practices, exploitation of the environment by a handful of massive companies, tax dodging and evasion etc. into one small paragraph that acknowledges there are other problems.
And it's hilarious that the article claims that "focus on education" and "focus on anti-trust" are "unique recommendations" born of looking at the issue this way.
But to me, it smells of a deliberate attempt to shift blame. There were only a handful of protesters angry at how much Google employees get paid (Bless their hearts). But this article will reach many people, and under the surface - it's bullshit.
"Critics of examining these trends suggest looking at the pay of the average CEO, not CEOs of the largest firms. However, the average firm is very small, employing just 20 workers, and does not represent a useful comparison to the pay of a typical worker who works in a firm with roughly 1,000 workers. Half (52 percent) of employment and 58 percent of total payroll are in firms with more than 500 or more employees. Firms with at least 10,000 workers provide 27.9 percent of all employment and 31.4 percent of all payroll."
Also, you'd think they could have at least mentioned possible distortion of average wage figures, considering they base their entire article on the idea that top companies paying their employees well are somehow responsible for the insane levels of inequality.
It worries me that this turd of an article is getting attention (no disrespect OP). The 8 richest people who own the wealth of 3.5 billion people would probably find it real fucking funny that the 'esteemed' Harvard Business Review is blaming Google employees for the inequality we all face.
If you want an average (average worker to CEO) pay ratio, then doing what they did is also inaccurate.
I think that you should pick the average firm size, select a sample of firms around that size, and then get the pay ratio from that set.
First, the EPI weren't trying to find the "average worker to CEO" pay, they were examining trends to determine how well the top 1 and 0.1 percent were doing in 2014.
Second, the article is blaming the largest and most successful companies and using their average wage to make their point - while making no attempt to account for or mention the CEO getting paid as much as 300 or more workers. This is a pretty gross mistake, and I find it disturbing that the HBR could spread bullshit like this.
Third, a study that looks at the top 350 firms' ratio of CEO to worker pay is in this case :more: relevant than the average of all companies, as the article is talking about :the largest companies:.
What I want to know is, why are so many people trying to make an issue of the EPI study I referenced, when the HBR article is riddled with basic, glaring errors and ludicrous claims?
Yes, them using the mean wage at those companies is inaccurate. They should probably be using median instead.
exactly. The employees riding that bus are ultimately in the same economic boat as the ones throwing the rocks. They might be slightly better off, but are still probably 3-5 paychecks away from being homeless and without health insurance. The ones who are responsible for this polarity and who have the power to do something about this, do not ride on the 7:30am employee shuttles.
Not at all. The "300x" statistic comes from an analysis of the 350 largest firms; these all have at least 10,000 employees, so even the outsized CEO compensation is at most a few percent of the total.
Also, considering that TFA is expressly talking about the largest firms and blaming them for income inequality, the criticism holds even less water for me.
Follow up question: When US CEO pay is compared to CEOs of European and Asian companies, how much of those same non-cash benefits are included?
Final question: How much of US CEO pay is cash (I.e. payed by the company) and how much is equities (I.e payed by shareholders)?
As to your other two questions, I completely fail to see how they affect my argument, and I don't want to get off track.
To reiterate the criticism I was making - basing your entire article on the claim that the difference between average pay in companies is at fault for "the majority" of inequality, while making no attempt to account for or mention the fact that those firms average wages are likely grossly distorted by executive pay, is at best ignorant and more likely intentional.
We live in a world where the 8 richest people own the wealth of 3.5 billion of the poorest. This is insane, it's dangerous, and it's :not: the fault of Google employees' wage packets; no matter how much CEOs in the 60s or in Asia are paid. For the HBR to suggest this is grossly irresponsible, I find it ghoulish.
Protectionism is at best a short term solution that comes with a host of other problems.
The major threats to our existence are global problems like climate change and nuclear arsenals. Fighting against all globalization will only divide us.
I believe that the best leverage workers of the world can have is the ability to live a decent life without the threat of starvation or extreme poverty. This dream is attainable, and worth planning for and building towards as a species.
We have near instant communication, the ability to translate between languages is developing rapidly, and automation can potentially, realistically, make it so that work is truly optional. Fighting against all globalization and protecting US interests above all others is, I would think, very much not what 'Marx and friends' would have had in mind.
The problem is there are two kinds. The classic one, and the one you can easily defend, was just eliminating tariffs. Don't discriminate against foreign businesses; treat them the same as local businesses.
But there is another one that generally gets called "harmonization", and that's the one that kills everything. Because what it means in practice is the undemocratic international enforcement of regulations created via regulatory capture. You enforce the same rules everywhere, those rules are created by megacorps to give them an advantage and the predictable result obtains.
Western/1st/etc world (used to?) treat workers well. The rest of the world didn't. Once tariffs are eliminated, all countries join the rat race to the bottom. How can western countries with good social safety net, reasonable work hours and good wages compete with cut-throat conditions in Asia? Naturally the conditions equalise. The good ones get worse, while bad ones adopt a thing or two.
In theory the idea is that they're not supposed to -- if you have unskilled work with no geographical restrictions, you do it where there is the lowest labor cost, and then everyone benefits by paying lower prices. Meanwhile western countries do the higher paying jobs that require a skilled workforce and the unskilled workers in western countries either do service jobs that do have geographical requirements or go to school and become skilled workers.
One of the things that's been killing us on that front is the broken welfare system that puts high marginal rates on lower income people through benefits phase outs, which makes it so that middle class people can't afford to hire lower income people to do service jobs, because 80% of the money goes to the government in benefits phase outs. Which means those people become unemployed, and the higher unemployment rate pushes down unskilled wages, erodes the tax base and increases the total cost government is paying out in benefits to the unemployed.
What do you mean by "ability"? Opportunity? I don't see how any particular economic status of anyone can be guaranteed with regards to what you're saying.
How I see it: The rich get richer and the poor, poorer. Once the rich have all the wealth, they go elsewhere with it. Corporations move to Singapore to save money. Automation will only benefit those who own it. Once things are automated, most people will lose their jobs and won't be able to afford even the things that are produced by automation. The rich aren't going to share, and if they do, they do it with strings attached so they can manipulate the spending and promote their own agendas (which is what they do now anyways).
The biggest problem is simply human selfishness. Because of it, there will never be peace. There will always be people seeking more than they need, always seeking their own survival over that of others, always seeking to crush others to give themselves a boost physically/economically/egotistically/etc. There will never be world peace as long as people are selfish, which basically makes world peace a pipe dream. Sorry to step on toes, but that's life.
How do you explain the massive transformation of China from a backward rural basket case, to a dynamic modern manufacturing led economy in which industrial employment and industrial labour wages have both rocketed in the last 20 years?
That has come at a cost. Manufacturing really has transferred from the West to the East. Yet the West doesn't have mass unemployment and job vacancies for skilled workers are at an all-time high in the West.
The problem is that low skilled jobs have gone East and the West is moving up into high value services jobs, but our training and education systems have adapted too slowly to bring our worker pools along for the ride. The answer is not to turn back the clock, it's to ride the economic wave and up-skill our labor pool because too many people in the west are being left behind in unskilled jobs, when actually there are plenty of skilled job vacancies available compared the the actual number of unemployed.
It's not as if wealth doesn't get redistributed for a variety of reasons (war, theft, taxes, communism, etc.). But the reality is, any economic system left to its own ends will inevitably result in a few gaining manipulating the system to gain the majority of the wealth while the rest fall farther behind. The discrepancy in the West hasn't been noticed because the economic "pie" so-to-speak has simply grown larger. When the pie stops growing, you'll start to see the effects of the inevitable trend start to appear.
> The answer is not to turn back the clock, it's to ride the economic wave and up-skill our labor pool because too many people in the west are being left behind in unskilled jobs, when actually there are plenty of skilled job vacancies available compared the the actual number of unemployed.
I agree, turning back the clock isn't the solution. However, I'm also aware that the situation isn't going to improve for the majority of people in the west. It's easy to say "up our game" but how much? Most people in the US now have bachelors. That was SUPPOSED to get you in the door to business. What happened? The bar went up. Now people are stuck with debt they can't get out of to loan sharks who won't forgive. Even if we erased all that, would that fix the problem? No, because the skill level required for entry is too high. Why? It's not merely because companies couldn't just hire from a number of talented candidates to do the job, it's because companies want to make money, and they're trying to do it by only investing in candidates they believe will bring them money (which means the experts), no investment in training. Every dime they spend towards training candidates is a dime their competitor gains when their newly-trained employees leave. Companies each sit on their own money source, and at the top of the economic chain are the billionaires with investments in all these companies and siphoning out penny after penny until - should time be on their side - they have it all. That won't happen in the long run for the aforementioned reasons (war, taxes, etc.), but you can't deny it would be fantastic to be in a personal financial situation where "money is no object".
Notably, a number of people can't actually meet the bar, esp. the handicapped and those who just don't have a knack for technical things. What are they supposed to do? Their jobs will eventually be replaced by robots, and should we get to that point, even those "middle class Chinese" will eventually start to see their wages reduced from 2 yen to nothing.
So yeah, there are plenty of jobs, but they won't be filled. People (esp. the rich) want people to make them money, not people who don't. Of course, perhaps I've overly simplified all this for the sake of brevity and haven't ironed out the argument to your satisfaction, but I trust you can find some unemployed people - skilled or not - and ask how their job search is going.
https://s3.amazonaws.com/content.washingtonexaminer.biz/web-...
I feel so bad for those rich westerners with a house, running water, 24/7 electricity, free schools, etc.
http://ourworldindata.org/wp-content/uploads/2015/07/ourworl...
http://siteresources.worldbank.org/DEC/Images/84796-11797610...
https://cdn.static-economist.com/sites/default/files/images/...
Really, the only issue seems to be a loss of status (not goods and services) by some rich white westerners. (Non-white westerners seem to have improved their situation by quite a bit also.)
You're saying there have been literally no negative effects from globalization? That unemployment in the rust belt has had no effect on standard of living?
Yeah, until western countries have fallen to the level of the worst parts of Somalia, we really shouldn't complain.
In the UK home ownership is lower for people under 45 than it was (for people of the same ages) in 1981.
For example 62.1% of 25-34 year olds owned a home in 1981. In 2012 42.8% of 25-34 year olds owned a home.
Healthcare: http://www.huffingtonpost.com/2013/10/03/health-care-costs-_...
Housing: http://www.jparsons.net/housingbubble/ - compared to the rise in wages, this cost increase has been much more moderate, but it's still an increase.
All while productivity has grown: http://blogs.reuters.com/macroscope/2012/05/04/the-u-s-produ...
http://www.mybudget360.com/wp-content/uploads/2012/04/colleg... http://www.mybudget360.com/wp-content/uploads/2014/11/Enroll...
Your second article says health care is more expensive than other countries, not that fewer people consume it than some past period. Looking at real resources (e.g. # of health care employees) suggests more people consume it, not less.
https://cdn.theatlantic.com/assets/media/img/3rdparty/2013/7...
Your third source does not claim fewer people consume housing than at some past point. In fact, people consume more housing than ever before - houses have nearly doubled in size since 1973, even as # of people in the household decreased.
https://www.nar.realtor/RMODaily.nsf/pages/News2007032701?Op...
Or if you prefer primary sources: https://www2.census.gov/prod2/ahsscan/h150-80e.pdf https://www2.census.gov/programs-surveys/ahs/2013/factsheets...
Care to try again?
Oh, no, wait, you didn't say better/worse, you said 'goods that we have less of'. So even if people bankrupt themselves over a broken leg, or go into decades of debt for a home or education, everything is just peachy! Even better, actually, since we can add credit availability to the list of things we have more of! http://www.businessinsider.com/chart-of-the-day-credit-card-...
There's also more jobs: https://www.bls.gov/opub/ted/images/2012/ted_20120731a.png ! Gone are the dreary days when you were set for life by your 2nd job - these days you could find yourself looking for a new job any moment - how exciting!
Edit:
Oh, and there's more prisons, too! https://www.prisonpolicy.org/prisonindex/overviewincarcerati...
I guess I stand corrected, we have more of everything, and shouldn't complain, even if corporation's obscene wealth allows them to buy politicians and regulatory agencies. Who cares how concentrated power and wealth are, as long as there's enough bread and circuses.
I'm not sure how you believe it's possible that consumption is up while compensation is stagnant and prices are higher. Could you explain - with numbers - how you propose that standard accounting identities are violated?
I cited sources with statistics, not my personal beliefs.
But to answer your question - the accounting is explained by an increase in debt (see the businessinsider article I linked earlier), and by the fact that what's spent on education/housing/healthcare, isn't spent elsewhere.
And I'm well aware we're better off than Somalia - that was my point. We don't have to wait until we're not before we start complaining. Should we do nothing but feel guilty we live in decent countries, until there's no-one who's worse off?
So it depends on what you think is most important. Yes many manufacturing jobs have moved out of the West, yet overall unemployment in the Western world is not particularly high. In the US it's fallen by half in the last 5 years to historically fairly low levels and job vacancies are at an all time high because businesses are having difficulty finding skilled or experienced workers. the real problem in the actual jobs market is training and education, not de-industrialization.
The anti-globalization narrative is utter claptrap peddled by a 70's soviet-era industrialist view of the world where all we had to do was put everybody in factories and we'd everything would be fine. Actually, it wasn't true back then either, hence the collapse of the Soviet Union.
The globalization equation has nothing to do with transfers of wealth from Western world labour to Western world fat cats. It's mainly about transfers of wealth from Western world labour to eastern world labour. The solution isn't to reverse that trend and impoverish foreigners. It's to climb our economies up the value chain and capture more global wealth. We have been doing that, but we're just not doing it fast enough.
My 16 year old self with $3000 in the bank saved up from summer jobs was also wealthier than a few billion or so people combined, because they were counted as having $0 or negative net worth.
And if you don't think that's already a reductio, then bear in mind that you're also calling an 18 year old working minimum wage with a few dollars in their pocket richer than people making six figures who happen to have student debt.
The income and wealth concentration in the hands of the 1% and .01% are sufficiently extreme that any choice of numbers will show them. This one just happens to be nearly meaningless.
Only last year, the number was 62 people owning as much wealth as the poorest half the world, the year before that was around 87 I think. It's a good number to keep an eye on. In a discussion about inequality, the number is very relevant, and far from meaningless.
How closely coupled are those numbers though? Do changes in the wealth of the richest few dozen people directly affect the wealth of the poorest few billion? If a new Mark Zuckerberg founds an internet company and becomes a billionaire what effect does that have on poverty in Africa? What changes in policy concerning the economics of billionaires do you think would benefit the poorest people in the world?
Between 1978 and 2014, inflation-adjusted CEO pay increased by almost 1,000%, according to a report by the Economic Policy Institute. Meanwhile, typical workers in the U.S. saw a pay raise of just 11% during that same period. Hmm.
Did all CEOs see this raise, or just the CEOs of the top corporations (who's workers also saw raises)?
None of the statistics you cite remotely contradict the claim that between-firm inequality is the primary driver of inequality.
I didn't say the statistics refute the claim, I said the article's claim is mostly based on a graph that fails to take extreme executive pay into account when discussing average worker pay. The statistics I cite back that up.
And the word you're looking for is 'whose'. Who's means ' who is'. Apostrophes can be tricky, I know, but hey - you got pedantic on me first.
You are completely misinterpreting me. I was not arguing against this claim at all.
The statistic you cite claims that a select set of CEOs make more than the average worker across all firms. I.e., the CEO of Goldman makes 300x more than the average worker at Goldman and Walmart combined.
It does not make any claims about inequality within forms - i.e., whether the CEO of Goldman makes 300x the average worker at Goldman.
I remain convinced that CEOs of Google and Goldman make hundreds of times more money than their average workers, and that if you're going to publish an article that makes such a large claim as this one, based almost entirely on average pay data, then that should be taken into account.
Did you know the CEO of Goldman made 54 million dollars in 2007? I don't know if you remember, but the next year there was a significant economic crash that caused immense hardship for a large portion of the world, and a huge amount of the blame for it was laid at Goldman's door. HBR had fuck all to say about that, or the massive global austerity protests. A few protesters yell at Google employees getting on the bus, and they're all over it drawing wild conclusions.
I point that out because it's ironic that you'd use Goldman to make that point, considering the effect they've had on inequality.
Let's be real - blaming the amount Google pays its employees for the extreme inequality in America is fucking absurd. It's misdirection, and apparently it works to an extent even on literate, mathematically educated populations, such as this one. This is deeply concerning to me.
It's really not. Here's a great blogpost summarizing some research that points to the firm inequality theory.
http://economistsview.typepad.com/economistsview/2016/10/how...
But, the article claims, with the flimsiest of evidence, that "the rising gap in pay between firms accounts for the large majority of the increase in income inequality in the United States."
Really? Do you honestly believe it's more relevant than rent-seeking behaviour, political corruption, monopolistic practices, environmental pillage, tax dodging and evasion?
Again, I have no doubt that it might be a good idea to look at antitrust issues, invest in education, and somehow make business leaders look at the consequences of their actions on the economy as a whole. But claiming that these are "unique recommendations" that emerge from "shifting the focus from individuals to companies", while relegating the other factors I mentioned above to a minor sidenote against "the majority of the increase in income inequality" - Straight bullshit. Please.
Do you believe that if all corporations just reduced the pay of the top 1% of the pay grade, that within-US inequality rises would be majority eliminated? What's the evidence either way?
You made a fair point about the number of employees, but I was careful to also mention other senior executive pay. I mentioned a host of other factors such as political corruption and rent-seeking behaviours being likely far more important factors. Jumping to the conclusion implied in your question is unfair, and might point to a bias you're walking around with, I think.
Do you believe, as this article claims, that :the majority: of inequality in the US is due to how much Google and other top companies choose to pay their employees?
Regardless, do you believe that this article employed convincing analysis and evidence to back up such a belief?
I think the article looks at it in a unique perspective that is missed. Between firm inequality is a result of technology, especially technology with natural monopoly characteristics (search, social network).
I don't think the article's recommendation of breaking up monopolies will reduce inequality at all. If you break Google or Facebook up, you'll get two companies with nearly isomorphic hiring and pay practices.
"I believe that much of the rise of between-firm inequality, and therefore inequality in general, can be attributed to three factors: the rise of outsourcing, the adoption of IT, and the cumulative effects of winner-take-most competition."
I think possibly the most effective change that could be done along these lines is to change the laws to where hiring as few actual employees as possible is the only responsible business decision. One big part of this would be decoupling health care and possibly other benefits from place of employment, if not universal health care then just put everybody into the individual market by law.
Or close the 'contractor' loophole entirely, but that could be messy.
US median income is $52K, software developer is maybe 100K, so around double. But to make that you have to live in an area with a much higher cost of living, and the various governments take more than a quarter of the difference in taxes and more than a quarter of the difference in disqualifications from income-based benefits programs. While you work 80 hours a week.
Someone making $100K in San Francisco is not doing better than someone making $50K in Houston. (You have a serious problem, however, if you make $50K in San Francisco.)
And the people clearing a million aren't typically silicon valley developers, they're Wall St quants and investment bankers. And those same people are generally paying the lower capital gains rate rather than the higher earned income rate, and losing a smaller percentage in benefits phase outs because by then everything is already phased out.
The numbers in the article are also including people who aren't working -- it has the 25th percentile income as zero and the median as something like $25K, which it probably is if you include retirees and homemakers and students, but how is that "income inequality"? For it to mean anything you have to be comparing people who are actually working full time. Anyone working obviously makes infinity times more than anyone with zero income.
As to the central thesis of "winner take most", markets like Facebook with network effects are the exception and have existed before (e.g. AT&T). In most other markets you can really blame regulatory compliance costs and regulatory capture. More paperwork to do and lawyers to hire and fees to pay to do business today than in 1970. The higher the cost of operating a business, the more advantage to consolidation.
No, you don't. Many choose to, but there are plenty of $100K developer jobs in cities with reasonable cost of living.
If there were actually enough jobs in Texas and Tennessee for everyone in San Francisco to live there with lower expenses but the same salary, explain why most of those people don't do that. Note that things like "cost of finding a new job if you lose yours" are components of cost of living.
The real question here is not whether developers can get the exact same salary working somewhere other than SF/SV. For one thing, the story wasn't just about our industry. The original story posited three possible causes for between-firm inequality. Before we obsess over the winner-take-all factor and how it relates to being or not being in the Center Of The Universe (ha), we need to consider how those other two factors play out across the entire economy.
Even among tech companies, subject to the exact same cost-of-living issues, there are significant differences in pay scales. Believe me, I know, because I'm taking advantage of that right now as I transition between jobs. The richer companies are very successfully capturing a disproportionate share of the high-end labor market, either by direct hiring or by acquisition. That enables them to compound their original advantage, in a feedback loop that IMO must be attenuated unless we want to live in a true monoculture. The idea that developers must move to high-cost areas is crap, but the problem of developers going to work (often remotely) for the richest companies is very real.
It's a fact that they do. If they didn't have to then why would they leave the money on the table?
> Now you say most and demand that others prove the contrary.
It's most because if most of the developers in silicon valley moved to other places then the cost of living there would fall to parity with the other places as a result of decreased scarcity of housing and other resources, before all of them did. And because not everyone has the same utility function -- some people have to live there more than other people, e.g. because their spouse also works there and they can't find two equally-paying jobs in the same other city at the same time.
> Please stick to your original claim and prove it yourself. That's how honest discussion is done.
"People behave rationally" is a basic assumption. It isn't always true, but if you're going to contend that it isn't in a particular case then you're the one who needs to show that.
> The real question here is not whether developers can get the exact same salary working somewhere other than SF/SV. For one thing, the story wasn't just about our industry.
You're changing the subject. The story, and the protests, refer to "highly paid" tech workers at SV companies like Google and Apple. But it remains true that those people are not significantly wealthier on a PPP basis than people making median US wages but living in a city with a lower cost of living.
> Even among tech companies, subject to the exact same cost-of-living issues, there are significant differences in pay scales.
Better developers obviously get paid more than worse developers. But the same is true in Texas. They both get paid less and pay less for housing but the better developer still makes more than the worse developer. And that isn't new either -- "better talent costs more" is as old as money.
> That enables them to compound their original advantage, in a feedback loop that IMO must be attenuated unless we want to live in a true monoculture.
There are two kinds of markets. One is natural monopolies, like local roads or last mile telecommunications, where the fixed cost is the essentially whole cost, barriers to entry are high, monopoly is inevitable, and they should be operated by the local government. The other is "real" markets that, left alone, would have competition.
We keep screwing up the second ones and forcing them into monopolies anyway, by making it harder for small entities to compete. The situation with software patents is a prime example.
Having money to pay talent is an advantage, but it isn't an insurmountable advantage. The only way to use it to stay on top is to be efficient. Serve every possible niche so well that nobody else can come in and carve one out for themselves. And if a company is doing that, nobody objects.
The problem isn't that, it's that we've set things up so that little companies have prohibitively high costs, so a startup that should be five people in a garage using money borrowed from parents instead has to take a million dollars in VC funding to hire lawyers and file paperwork. And then, if they succeed, megacorp shows up with a buyout against the threat of a lawsuit if you refuse to take the money to make the competition go away, which is what the VCs wanted all along anyway, so everybody gets paid but nobody competes.
The problem isn't that they have too much money, it's that they have too much leverage. If was only the money and regulatory barriers to entry were lower then there would be too many startups to buy them all and more of them would become independent competitors.
No, it remains your unfounded - and untrue - assertion. A lot of people have salaries very close to those in Silicon Valley, in housing markets significantly cheaper than Silicon Valley. Haven't you heard of remote work? A lot of us at the high end are able to do it, but maybe you haven't reached that point yourself. For people like me and quite a few of my friends/colleagues, we're winning the PPP game by not living in SV.
> Better developers obviously get paid more than worse developers.
Now who's changing the subject? We're not talking about better or worse developers. We're talking about developers at the same level, often the same people as they move from job to job. Rich companies can and do pay higher salaries regardless of the worker's location. That creates a feedback loop, distorting both labor and capital markets, turning temporary advantages into permanent ones and stifling competition.
I've worked at a lot of startups, and learned a lot about their advantages and disadvantages relative to larger competitors. Over-regulation was never one of those problems, and nobody responsible for setting strategy was ever so ideologically blind that they tried to pretend otherwise. I'm guessing that's not a recipe for startup success, in Silicon Valley or anywhere else.
Which part do you assert is untrue, that there are developers actually living in SV, or that making more money there is equivalent to making less money somewhere with a lower cost of living?
> A lot of people have salaries very close to those in Silicon Valley, in housing markets significantly cheaper than Silicon Valley. Haven't you heard of remote work?
Everybody wants remote work at SV salaries. That doesn't mean everybody can get it.
It's obviously true tautologically that people who don't live in SV don't have to live there, but those are also not the people bidding up area rents or riding a shuttle with people protesting outside it.
You still haven't offered any explanation for why the people living in SV continue to do so if it was actually possible for them to do the same thing you're doing.
> We're not talking about better or worse developers. We're talking about developers at the same level, often the same people as they move from job to job.
We are talking about better or worse developers, or what is your argument? When one person goes from making less money to more money, all it shows is that they were previously under-compensated (or are now over-compensated) for their skill level. Or that their skill level has changed. If big companies were paying higher salaries to the same developers then how would that create any advantage for them?
> Rich companies can and do pay higher salaries regardless of the worker's location. That creates a feedback loop, distorting both labor and capital markets, turning temporary advantages into permanent ones and stifling competition.
Rich tech companies don't have a monopoly on capital. If all it took is to pay developers a lot of money then it would be Wall St rather than tech companies doing the paying and collecting the yields.
> I've worked at a lot of startups, and learned a lot about their advantages and disadvantages relative to larger competitors. Over-regulation was never one of those problems, and nobody responsible for setting strategy was ever so ideologically blind that they tried to pretend otherwise.
Over-regulation isn't a problem for the startups that actually exist -- VCs don't fund the ones the regulations make prohibitive and provide the money to pay the cost for the others. But the result is fewer startups, so rich companies can afford to buy every one of them that poses a threat to them.
Let me give an example of bad regulation. DMCA 1201 (or software patents, or the CFAA, or whatever they use this year), which Apple et al use to lock smaller entities out of their platforms unless they pay 30% and just outright prohibit people from making apps they don't like. Are you taking the position that that sort of a veto doesn't prevent startups that would otherwise compete with Apple's apps from getting off the ground?
Neither of your strawmen. I am not making my own assertion at all. I am challenging your assertion that maintaining a high standard of living requires moving to the Center Of The Universe for all or nearly all developers. You seem to base this assertion on a premise that the difference in salaries outweighs the difference in cost of living, but have provided no evidence to support that. I know it's not true for me, but at least I don't assume that my experience is universal.
> Everybody wants remote work at SV salaries. That doesn't mean everybody can get it.
True. You have to be pretty good at what you do.
> We are talking about better or worse developers, or what is your argument?
Again, it's not my argument. It's yours, and it's ridiculous. It's only about good vs. bad developers if one assumes that a good developer lives in Silicon Valley and a bad developer is one who lives anywhere else. If one accepts that there are good and bad developers everywhere, or that some people measure value differently than you do, then it makes absolutely no sense.
> If big companies were paying higher salaries to the same developers then how would that create any advantage for them?
Have you heard abou this little thing called network effects? The theory is that, by bringing good developers together, synergy creates value that doesn't exist with them separate. It's an idea I could argue from either side, but the important thing is that it doesn't require physical proximity to work. It can be well worth paying a premium to bring good developers into logical or virtual proximity with one another, and the big rich companies are taking advantage of that.
> Rich tech companies don't have a monopoly on capital. If all it took is to pay developers a lot of money then it would be Wall St rather than tech companies doing the paying and collecting the yields.
It doesn't require a monopoly. All it requires is a significant asymmetry. Also, Wall Street very much has been playing this game too, with effects and remedies that would be just as worthy of debate if we could get past the facile attempts to deny the reality of it happening.
You seem to be challenging your own straw man.
> You seem to base this assertion on a premise that the difference in salaries outweighs the difference in cost of living, but have provided no evidence to support that.
The evidence is all of the developers who choose to live and work in SV despite the high cost of living.
> I know it's not true for me, but at least I don't assume that my experience is universal.
That is the straw man -- I never claimed it was universal. It's true of the people who live there, or why do they?
> True. You have to be pretty good at what you do.
That doesn't seem to have much to do with it. Plenty of call center workers are allowed (or required) to work from home, because it saves the company from having to pay for office space for them, but that doesn't make them particularly highly skilled or highly paid.
> Again, it's not my argument. It's yours, and it's ridiculous.
Here's you from before:
> Rich companies can and do pay higher salaries regardless of the worker's location. That creates a feedback loop, distorting both labor and capital markets, turning temporary advantages into permanent ones and stifling competition.
If the higher salaries aren't paying for better work then how do the companies get any advantage out of it?
> Have you heard abou this little thing called network effects? The theory is that, by bringing good developers together, synergy creates value that doesn't exist with them separate.
That isn't what "network effects" means.
https://en.wikipedia.org/wiki/Network_effect
"Big" isn't an advantage here. It means bureaucracy and politics and Mythical Man Month problems. These companies succeed despite these things, not because of them.
> It can be well worth paying a premium to bring good developers into logical or virtual proximity with one another, and the big rich companies are taking advantage of that.
What do you suppose is stopping the same people from coming together on their own and just keeping the money their work generates?
> It doesn't require a monopoly. All it requires is a significant asymmetry.
Asymmetric capital? How is Apple's billion dollars better than any random capitalist's billion dollars?
> Also, Wall Street very much has been playing this game too, with effects and remedies that would be just as worthy of debate if we could get past the facile attempts to deny the reality of it happening.
What game? "Money makes money" has been the basis of Wall St since day zero. The method by which this doesn't lead to permanent massive consolidation of power is that new entities come into existence and displace old ones, but are owned by new people. The problem is the thwarting of that process by requiring the permission of incumbents to make new things.
...ignoring all those who do not make that choice. Nice cherry-picking.
> Plenty of call center workers are allowed (or required) to work from home
Changing the subject again. We were talking specifically about people who were making Silicon Valley salaries, not call center workers. You need leverage to do that. The fact that you don't even know anyone with that kind of leverage tells me that you don't even know what you're talking about, and your constant employment of sleazy rhetorical tactics tells me that you're not even trying to learn.
> That isn't what "network effects" means.
OK, so it's not exactly network effects, but it's still synergy. Two good people together can often do things that neither could do alone. You got the point, so stop being obnoxious about terms.
> "Big" isn't an advantage here. It means bureaucracy and politics and Mythical Man Month problems.
Such a jaundiced view at such a young age. At least I assume you're young, based on not being senior enough to negotiate - or know anyone else who negotiates - better working conditions. Better than assuming you're old but barely competent. In any case yes, bigger companies can have their problems. So can smaller ones. They can each have their advantages. For example, at a startup there will inevitably be some specialized areas of knowledge where coverage is thin. That can be great for creating opportunities to learn, but not for solving an immediate problem in minimal time. At a larger company, especially a larger rich company which is what we're talking about, there might well be a world-class expert on staff for even the most obscure specialty. There might be specialized hardware (or teams to develop it), partner relationships, etc. Big companies can be mismanaged and small companies can be mismanaged. That's why nine out of ten startups fail. Counting only the hits for one side and only the misses for the other is not how rational people approach a problem, or how honest people discuss one.
> What do you suppose is stopping the same people from coming together on their own and just keeping the money their work generates?
There could be many reasons, from simple risk aversion to lack of skill (or interest) in the non-technical aspects of running a business to the need for leads and contacts. You do realize that most people don't work for startups, right? There's a whole world outside that bubble.
> How is Apple's billion dollars better than any random capitalist's billion dollars?
Wrong question. What matters is how Apple's budget for technical hires compares to others' budgets for hiring in those same specialties. That's where the competition occurs. The VC money, fragmented across many companies pulling in many directions and each having to carry their own business infrastructure, would have to be much more than a single focused company's investment in that area of overlap. One of the big five can spend a million dollars each for a dozen hires in a particular area. A startup would be hard pressed to justify that to their investors, precisely because those investors would rather have that money to make other bets entirely. It's a bit of a collective action problem, which I would have thought anyone spouting so much pseudo-economics would know about.
Do poor people really want to settle their resentment issues with violence? Because it seems to me that they will lose, at least if rich people defend themselves.
I'm not an economist, but as someone who has worked for many different companies in the software industry, I don't find this 'generosity' hypothesis surprising at all. Managers usually don't have a clue who to promote so they just promote their friends or those who are liked by the rest of the team (for reasons unrelated to skill).
If some bloke comes up with a cure for 20% of the world's most common cancers, do I care if he's filthy rich? Would Gates be able to do his charity work if he didn't once make a load of money?
Furthermore, do I care if the person at the top is getting rich so long as the folks at the bottom aren't struggling and miserable?
The answer to the last one is: Not really. I do prefer that there be less difference between the CEO and the janitors. I'd prefer to set a standard of living that is higher than the poverty guidelines in the US and encourage companies to pay enough to meet this (at least for a single person to live independently and be a part of society). I just don't see how the maximum would help this more than it'd hurt other things.
Exactly. It's not the cause, like this article is claiming.
Considering that most people consistently grossly under-estimate the divide between the wealth 'classes', I'd say that it's a bit premature to say the debate has been poisoned. Most people think it's not nearly as bad as it is, despite the work of many people, like Wilkinson. His findings should have been on the fucking news every day until people got it, not a Ted Talk.
The uber-wealthy control the vast majority of media, politics, and distribution of resources. The signs that they're working in the interest of equality or the common good are sparse, to say the least. Focusing on inter-firm inequality may in a roundabout way touch on those issues, but as you say yourself, it's not the cause.