> Wages reflect the labor portion's contribution to "input." We know that tech and automation's portion is continuing to increase in relation to labor. Therefore, with this understanding, wages must decrease in proportion with productivity.
Let's say I make widgets for $10 an hour, and make 100 widgets per hour. That's $0.10 per widget.
Then, a new tool comes along, and allows me to make 200 widgets per hour. The cost of a widget is now $0.05 per widget.
Who "deserves" this extra profit? Yes, my employer paid the expense for the new tool, but this is (more or less) a one-off expense. They will recoup this cost, and eventually the increased productivity will be pure profit,.
I, on the other hand, am still spending eight hours a day making widgets. My time is now worth twice as much as it was, but I'm still being paid the old rate.
The issue we're seeing with wage stagnation is that companies are making one-time investments and recouping increased profits forever, while employees are working just as hard, but seeing no increased benefit.
And that's just from a simple math perspective. This discussion entirely ignores the fact that when you employ someone, you are essentially renting a human being, and in order for our society to function, that cost must have a floor. Society as a whole suffers when you are able to rent a person for less than it costs to live.
no. your time is now worth half as much as it once was. the tool is what brings the increase in value, not you nor your time.
the owner can now replace you with someone who costs half as much and is half as efficent and get the same result as before the new tool was brought in. even with this decrease in time efficiency, the cheaper less efficient worker has the same value as you did before.
so lets say the owner still wants to increase efficiency but cut costs. ok, they fire you and hire someone else for 75% of your wage and 75% of your efficiency. the owner can still make the same amount of widgets as before in less time and for less cost.
I think a lot of people undermine the competitive nature and other risks that companies have to take in its pursuit of higher profitability only looking at a few with bad practices.
For example, a company may have to spend 1 year's worth of R&D to reach a new tool that would add 10% productivity to its current workforce. What % should go to increasing employees' wage? What are the risks of competitors finding similar productivity gains and not increasing employee's wage, leading to a competitive disadvantage to your company?
When a company hits a breakthrough that adds a multiplier to a part or all of its work, society, including its employees expects it to share more of their gains. What is the right balance? Who deserves the gains and at what %?
I do believe you have some fair points on the employee's side of things and that your last paragraph really hits the nail with a key problem society faces.
Let's say that you pay that hypothetical employee twice as much, so that his wage increases with the output. In effect, you've negated the technology's effect on productivity. In this case, wages would trend with productivity, but only because productivity would not increase.
Let's say I make widgets for $10 an hour, and make 100 widgets per hour. That's $0.10 per widget.
Then, a new tool comes along, and allows me to make 200 widgets per hour. The cost of a widget is now $0.05 per widget.
Who "deserves" this extra profit? Yes, my employer paid the expense for the new tool, but this is (more or less) a one-off expense. They will recoup this cost, and eventually the increased productivity will be pure profit,.
I, on the other hand, am still spending eight hours a day making widgets. My time is now worth twice as much as it was, but I'm still being paid the old rate.
The issue we're seeing with wage stagnation is that companies are making one-time investments and recouping increased profits forever, while employees are working just as hard, but seeing no increased benefit.
And that's just from a simple math perspective. This discussion entirely ignores the fact that when you employ someone, you are essentially renting a human being, and in order for our society to function, that cost must have a floor. Society as a whole suffers when you are able to rent a person for less than it costs to live.