There is one way government try to drive down the living standards of their citizenry, Immigration. For instance farmers want lots of immigrants to come over and help them pick their crops so they don’t have to pay high wages to crop pickers. Silicon Valley moguls want more immigrant programmers so they don’t have to pay such high wages to native programmers. This is not the only motivation, since the immigrants are the ones who benefit the most, but they are not citizens. Thus there is a traditional bootleggers and baptists coalition trying to increase immigration. Those who are concerned with the welfare of the immigrants and those who want to keep wages lower. There is also a Curley effect going on as well.
You completely missed the point. If moving the pool of programmers to India would help, why in heaven’s name didn’t they move them to Montana twenty years ago? Or West Virginia? God, it’s cheap there. What about trading with India is somehow more magical than trading with West Virginia?
Well, you’ve answered your own question; because there are reasons to stay in the Bay Area beyond simply price.
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There is one way government try to drive down the living standards of their citizenry, Immigration.
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Well, that certainly explains why Australia and Canada, with the highest immigration rates in the industrialized world, have the fastest-shrinking qualities of life. Except of course that they do not, because it’s absurd. Immigration, at the levels experienced by a typical industrialized country, don’t drive down living standards. If anything, they’re propping them up.
Wealth transfer wasn’t a good term. What I was trying to say was that even though there’s a fair trade going on between the companies and the offshore outfits, there are still negative effects (or fewer good ones) in the communities where the locally hired programmers would have lived.
In other words, if a company hires a guy for 80k, that guy is going to spend his salary in his locality, state and nation. If the company contracts with an offshoring firm, they’re both spending less money, AND a big chunk of that goes to pay someone elsewhere. It doesn’t stimulate the economy nearly so much, and nor does it employ anyone. So it sucks not only for that guy who didn’t get hired, but it also sucks for the economy where he’d have lived.
Whether or not they’re acting as a cartel is kind of immaterial.
Ultimately though, the vast majority of consumers are choosing one airline over another based on price, not on creature comforts and “happiness”. That’s price competition straight up. Which is why they don’t bother with a lot of policies, procedures and changes that might increase customer happiness.
Not coincidentally, the price competition model is also why so many airlines struggle so much with staying profitable; the way that price competition works is that prices will be driven about as low as they can possibly get and still make a nominal profit. Any shocks to that system without correspondingly responsive pricing translates into losses on the part of the sellers.
I wasn’t saying that they’re consumed with the concept of worker happiness, but that rather, there’s a minimum value of happy for certain industries that has to be provided, and for most workers in most industries, it’s benefits and comparable pay, not extra creature comforts, etc…
But, the higher up that ladder of skill and capability you go, you get more special treatment and concern for your happiness. I mean, if you want some guy of Nathan Myhrvold’s caliber to work for your software outfit, you don’t stick him in a cube and pester him about whether he shows up at 7:30 or 11:30. You let him do his thing how he sees fit, and you pay him well. Otherwise, he’ll go elsewhere.
You see this all the time in companies with professional and hourly folks; they’re often completely draconian with the hourly types- firing out of hand for stuff like being 3 minutes late, or screwing up a little bit. But you have to usually fuck up pretty badly as a professional person to get summarily shit-canned. Otherwise, they’ll usually talk to you, then put you on a performance plan, etc… before they finally get rid of you. It may not translate into “happiness”, but it shows a definite behavioral difference on the part of the company based on how much they value the two workers.
I think we’re in agreement. Even though improving the work life of lower level people can produce benefits for the company, few companies do it because it is not on their radar and does not directly add to the bottom line.
As for airlines, they are very profitable now since they learned that reducing capacity eliminates the need to compete on price. We have to wait for the investigation to see if this is collusion or not. And it is primarily a US thing. My daughter works in the airline industry, so I get flight benefits, which involve being in standby. In Europe it is possible to hop onto a plane at almost any time. In the US it is a lot more difficult, unless you choose your route and time very carefully.
In the old days airlines did compete on happiness - on food and on sexist things like flight attendant outfits. Things were regulated back then, but I’ve had awesome steaks on Eastern Airlines. Now they hardly pretend that you are going to have a good time in coach. I understand why - I was just saying that happy customers as a sales edge has vanished.
Well, it depends how you define “the economy where he’d have lived.”
If you mean his house, yeah, absolutely. If you mean his state or country, it’s not true. The economy is better off for having gotten the same product (a year of programming work) for less money; everyone else in the country benefits from the more efficient allocation of resources. It’s very hard to notice on an individual level, but it is absolutely there, and the totality of all those transactions adds up. It is much, much cheaper to clothe your children than it used to be because of international trade. That helps all families. The efficiency leads to better allocation of labor resources in the long run (that’s why the unemployment rate isn’t 96% even though almost all jobs that have ever existed have been eliminated.)
I know it seems like the money is just being shipped offshore but hell, that isn’t even really true, either. U.S. dollars are useful for buying U.S. products and services, and so they generally come back to buy U.S. stuff (this doesn’t necessarily happen at the same time, though.) As India gets richer, for instance, its people are flying more, and where do you think they buy the airplanes from? Not Vietnam. They buy a lot of 'em from Boeing - they just bought 27 of the cool new 787s, in fact. The richer they get the more they buy the things Americans are comparatively good at making, like giant zillion-dollar airplanes.
We should probably look at labor costs in countries where phones (and other products) are manufactured, work conditions, the level of pollution, etc.
At the same time goods are kept cheap due to lower labor costs, and even with lower living standards the average worker in developed economies earns and spends many times more than counterparts in poorer ones.
Also, more workers in poorer countries are becoming richer, such that they are now following their counterparts in richer countries by spending more. But the bulk of earnings from such markets go to the richest people in developed economies.
RickJay,
Since I was too young to pay attention to politics back then, did people say the same stuff about trade with Japan in the 80s and NAFTA in the 90s? I have a strong hunch that you could just replace the proper nouns and it’d sound just the same but I can’t be sure.
Guys,
Aren’t you just part of the great tradition going back at least to the early 19th century British textile workers protesting the power loom all the way to Jeremy Rifkin’s 1995 book The End of Work* and continuing on?
Is this thread meant as a support group for venting?
Yes, they absolutely did. And Canadians talked about Americans in 1988 when the original FTA was signed the same way Americans talk about China today, about how all your poor, unprotected workers with no health benefits would take our jobs. And in the 70s they said blah blah blah. It’s been like this forever.
It’s been like this because people simply do not understand the notion of comparative advantage.
I am not sure about Australia but I know that Canada is very picky about its immigrants and only wants highly skilled immigrants. If an economy has a shortage of a certain type of worker then importing that type of worker can grow the economy while only hurting the standards of living of that type of worker. If an economy does not have a shortage of a certain type of worker then importing more of that type of worker will not grow the economy, just hurt that type of worker.
However, by lowering the wages of certain types of workers immigration can raise the standard of living of other people without growing the economy.
Personally I do not think it is intentional effort to drive down standards of living. I feel it is laws of unintended consequences.
Years ago the US put in a law raising substantially taxes on ultra luxury goods such a yachts. As a result the new orders for yachts dropped like a stone and a number of projects in the works were cancelled. The ones who suffered the consequence were the blue collar types in this industry laid off in droves.
That is one obvious example, but there are many not so obvious ones. The end result is lowering of living standards.
The Canadian immigration system does have a system for skilled immigrants but does not expect them to leave their entire families behind, nor does it exclude refugees and the like.
In point of fact a lot of immigrants here start at the bottom and a lot of migrant workers pick fruit and such (I am told by people in the know is that one of the major reasons Jamaican migrant workers are brought to Canada to pick fruit is simply that they are incredibly good at it; local labor simply can’t match their speed and skill. So we get cheaper apples. Yay.) The system for matching immigrations levels to worker shortages is about as efficient as most government programs, which is to say that it barely functions at all.
Nevertheless, immigration does not drive down the cost of living of people already in Canada; that is a bizarre claim, to be honest. A person immigration into Canada of working age takes a job, but she also creates demand, by spending the money she makes at that job, thus creating jobs. All workers are also consumers; as Canada adds 250,000 people a year that consumes existing jobs, but simultaneously creates new jobs, since you need more doctors, bus drivers, construction workers and Starbucks workers to serve all those people. The children among the immigrants will need teachers and video games and kid’s clothing and a place to live. The immigrants eat food, live in houses, drive on roads, and do all the things that are the reason jobs exist at all.
The idea that increasing population would not also increase the number of available jobs is a misconception I find absolutely baffling. Where do jobs COME from, if not from the existence of a population?
Simple supply and demand. All things being equal if your country has more people with a certain skill set those people will make less per person than if your country has fewer people with that skill set. In your example what do you think happened to the wages of non Jamaican fruit pickers after the Jamaicans came north?
It is likely that the net gain from the economy from having cheap fruit outweighs the damage from the lower wages of Canadian fruit pickers. But that is a different claim. Overall, immigration especially high skill immigration is likely to be a net plus economically depending on other factors. However, the OP was asking about government policies that drive down the wages of its citizens. Immigration does that even if it has other positive aspects.
I think the idea is that immigration increases the overall functioning of the economy, thus opening up new jobs. If Jamacans pic fruit cheaper, that may well drive down the overall wages of fruit pickers; however, jobs may open up that would not have otherwise been available because now there is cheaper fruit - maybe fruit canners or fruit wine makers - which jobs are more readily available to existing Canadian citizens than to Jamacan fruit-pickers.
If the Canadian fruit pickers leave off fruit-picking and take fruit-canning or wine-making jobs, their wages would, presumably, go up rather than down. That increase, plus cumulative increases all along the chain of production and distribution, could more than compensate for the decrease in fruit-picker salaries.
Now, there are more people in the country it is true, but the wages of Canadians are now higher on average, rather than lower, as a result of a government policy of encouraging fruit-picker immigration.
Isn’t that the commonly accepted definition of “worth”?
Yes, that’s called “every marketing executive everywhere”. The fact is, there is an intangible value in a brand. It’s like your reputation. You know that a Maserati or Coke or Apple produce a certain kind of product with a certain level of quality.
Perhaps. Everyone always thinks they deserve to make more or can’t understand how that idiot next to them makes as much as they do. But generally, those who get paid a lot more than the value they generate don’t keep their jobs long and those who are worth more than they are getting paid soon looking for better opportunities. It’s not a perfect system and certain aspects of the hiring process like your skill at job hunting may impact your worth. But rarely do I see people not working in the ballpark of what they are worth.
Somehow I think Apple and Google employees still do ok. Maybe not the Apple store clerks.
But where do you think that negotiating power comes from? Maserati isn’t just going to hand over a $500,000 car unless they feel there is some sort of branding benefit to having the CEO seen driving it.
Some might argue that most interns aren’t worth anything. They have no experience and an incomplete education. I can get anyone to make copies or proof read my Powerpoint deck while they are gathering valuable skills and experience to put on a resume, plus a shot at a full-time job.
However, most professional companies recognize that there is value in paying interns. I don’t want a smart intern candidate to have to choose between the opportunity costs of an unpaid summer job with my firm vs actual short term financial gain of a dead end lifeguard job.
What happened to them is nothing, because there weren’t enough of them. They did not exist, in many cases.
Migrant workers are an unusual group in that they represent an actual complete lack of workers, in most cases; Canada allows them in because what happens otherwise is stuff rots in the fields or the prices rise so high it hurts poor people.
No, immigration does not do that. That simply makes no sense, and doesn’t even begin to address my point, which is that the perspective of “letting more workers in makes pay go down because there’s more workers” inevitably forgets the other side of the equation, which is that letting more workers in also increases the demand for workers. Every worker is a customer.
The population of Canada in 2014 was 35.5 million. In 2004 it was 31.9 million. That increase is largely due to immigration; in that period of time about 2.5 million people arrive in Canada. And yet the median income of a Canadian resident is not going down. If immigration drives down wages, why is* the second-most-immigration-heavy country in the entire industrialized world *not seeing wages go down?
The only country with higher immigration is Australia. But Australian wages aren’t declining, either. Why is that?
http://www.chforum.org/library/low_skill_future.pdf
I had a read of this, it doesn’t bode well for me and it looks like it reinforces the OP I made.
I found it in a lengthy discussion about wage growth in reddit.
https://www.reddit.com/r/Economics/comments/3edyre/pay_is_stagnant_for_vast_majority_even_when_you/
This particular executive was director of Quality - not a Marketing person. Look at the number of brands out there which used to be quality brands but got sold and now suck. They are examples of using the perception of quality to build market share or get extra money from a brand. Obviously not relevant when the brand is still a truly quality brand.
I’m not talking about what people think about themselves, I’m talking about what the managers who give them their ratings think about them. Then, because of our American taboo on discussing salaries, people often don’t know what they are worth relative to others. Salary surveys are not very useful for specialized areas - even underpaid people look good. And changing jobs is not necessarily simple, especially when it means a relocation. Even forgetting about pay, lots of people on clearly dying projects hang on way past any reasonable time.
Not as okay as they could have done in a truly free market for their services. If you’ve locked your stars in you don’t have to pay them as much.
He’s not negotiating with Maserati, he’s negotiating with his board.
I wouldn’t call media companies unprofessional. We pay our interns well, and they get all sorts of perks, but we’re in a competitive market. If you think that is the rule you haven’t been reading the articles about this problem.
Even free interns get “hired” through a selective process, and come from good schools, so I think they are capable of a bit more than copying. The rules say that they can’t do anything of value to the company for their internship - hah. And they learn just as much and their resume looks just as good if they are paid.
Internships are not a gating factor for me - in fact if I see that someone did an internship with a competitor last summer I tend to put that resume in the back, since the company who offered the internship has an advantage. (As do we for our interns.) This doesn’t seem to be the case for industries with free interns. And I recall seeing something that said that doing a free internship doesn’t significantly increase your job prospects, but I might be wrong.