So… most articles I’ve read decrying the disconnect between wages and productivity peg this as having gone on for the past 40 years, which is longer than I’ve been alive. The tone is always that this isn’t right because things didn’t used to be like that. I don’t doubt that there is currently a disconnect - the fact that jobs report that overall productivity goes up 1.3% and real wages go up 1-3 cents at the same time illustrate that. But I don’t know what it used to be like.
What was it like when wages and productivity increases were more closely linked? Was one’s annual raise typically higher than the 2-3% people are lucky to get these days? Did a business having a good year trickle down to the workers having a good year too, as compared to now?
And when exactly were these halcyon days when wages weren’t stagnant? There seems to be a lot of upset that this has changed, but if the “change” has gone on for 40 years, and the industrial revolution wasn’t until the early 20th century, just how long did this magical time when a worker could expect to profit by producing more last in order to be perceived as the now upsetted status quo?
The late 90’s was nice, I was too young to appreciate it. Expectations were much different. But you know what, people still bitched and moaned about the same amount as they do now.
I would say that the period between 1945 when the war ended and 1980 was such a time. Taxes were heavily graduated (until the Kennedy tax cut, the highest marginal rate was 91%) so companies didn’t see any point in paying their major executives since the government took most of it away. While there were probably not actual labor shortages, virtually anyone could find a decent job. Labor unions were still pretty strong before major manufacturing fled to right-to-work states. So yes, wages went up pretty regularly with productivity. It all unraveled with Reagonomics, aka supply side. Just remember that a rising tides lifts all yachts (and swamps all those other boats stuck in the mud).
That wasn’t universally true though. I grew up in Louisiana in the 1980’s and we had a full-blown regional recession because of the collapse of the oil and gas industry during most of the 80’s and the 70’s sucked too for different reasons. Whenever I hear someone refer to the high-flying 80’s, I think ‘Oh yes, the famine years’. I am sure other areas had their serious economic problems during that time as well. Many of the major cities including NYC were high-crime hell-holes compared to today.
The only time that I believe it was generally true was the early to late-50’s when the U.S. was left as the world’s main remaining industrial power and the Baby Boom started rolling in.
Wages weren’t stagnant in the 1970s… but inflation was rampant. You were making more and just having to spend more, which of course is a known feedback loop.
REAL wages, that is adjusted for inflation, are pretty much the same today in the USA as they were 50 years ago.
I’ve been working since 2001, and I can’t remember a time when wages weren’t stagnant. The late 90’s period mentioned above does seem to generate a fair amount of nostalga, and it was that kind of thinking that dominated when colleges, professionals, and everyone else promised us we’d have unlimited opportunities. And then we graduated into the worst recession in decades, and discovered that nobody was hiring. :mad:
I’m not going to fall in the masturbatory trap of blaiming Reaganomics, however. My industry (the automotive industry) had been speeding toward a cliff for years, and really everybody knew it, even if they preferred to spend their time fiddling with the radio instead of hitting the brakes.
At my workplace, the old-timers (the folks who’ve been here longer than 15 years) talk about the days when they’d get a raise every year. As long as you were rated “contributer” or better on your performance evaluation, you’d get a 2% bump every year. Which is why the “old-timers” have more enviable salaries than the relative new-comers such as myself. And this also explains why the old-timers tend to be more bitter about the current state of things than the newcomers. Their expectations are a lot higher than ours.
Which country do you mean?
In the US on average, the 1960s (along with the 1950s) were definitely considered a time of economic prosperity. I believe the same was true in the UK, and probably elsewhere in the First World nations.
Now, by the mid-1970s, in the US things started looking a bit tarnished - I recall as a kid the WIN buttons of the Ford administration and the “malaise” of the Carter Administration (although amusingly, according to Wiki the number of jobs created during the one term of the Carter Administration exceeds the number of jobs created during both Bush administrations…).
At least in my experience, the 1990s were more of a period when you could jump jobs and get a pretty serious pay jump, or possibly get a large profit-sharing bonus from your company, rather than a period where you could stay in the same job and get serious raises.
I mean, I was in the technology field as a new grad in 1997, and nobody I know got a big salary by staying in the same place and getting big raises. The raises were probably larger than they are today, but that probably means 3-4% rather than 2-3% . If you jumped jobs, you got at least somewhere between 5-15% as part of the switch. Even within companies, I think a lot of people got pay jumps by getting promoted or laterally moving into higher-paid positions instead of just doing the same job and getting paid more for it.
I think the economic contractions of 2001 and 2008 kind of removed a lot of that sort of opportunity and that’s why it looks like wages are more stagnant than before. But I don’t think people were just getting great raises for doing the same old job well in days of yore.
Stagnant wages is linked with Income Inequality (wages are stagnant because all the money that would be going to workers is being funneled upstairs). There have always been and there will always be obscenely rich people but from the 50s to the 70s generally the head of a small company or even a medium company did better than his employees but not by much. He lived in the nicer neighborhood and had appliances you might not afford but he was relatable. Look at sitcoms from the era for examples. there’s a reason “Having the boss over for dinner” was staple plot line of the era and is ludicrous to think of today.
In the 80s, this changed. There are many reasons but one of the biggest was Reagan made it legal to pay people in stock. This made the people at the top wealthier and also disconnected them form the company. They no longer cared about the company itself and only the stock price. This and other factors were a vacuum on new income, leaving everyone else in the dust.
That was the private sector. Unionized employees and public sector employees were immune to this for a long time so they got the raises and other benefits all Americans used to enjoy which made them pull ahead of most workers (and instilled bitterness that helped destroy unions but that is another story) so if you would like to get an idea what it was like you can talk to people in those positions because it is very close.
<Pete Hogwallop>That don’t make NO sense!</Pete Hogwallop>
The whole point of paying with stock and stock options is to give the people paid in that fashion a stake in the company, and by extension, care more about how profitable the company is.
In other words, if the bosses’ compensation is directly linked to how much money the company makes, they’ll have skin in the game in a way that your average salaried worker does not.
Plus, stock options aren’t really cash out of hand, and can help cash flow, in that the company gets a pretty large cash deduction when the options are exercised.
I’m pretty disconnected from whether or not my company makes money, and as a result, and a lot less invested in my job and the company’s success than I could be. But if I had say… 70% of my net worth represented by company stock that I’d been paid with, you’d better believe I’d be committed to not only making that stock keep its value, but growing that value as best as I can.
I think what you’re getting at is that a focus on stock prices tends to be at the expense of a focus in general on good business. And I can’t argue there- I’ve seen management types do some pretty stupid things to try and prop up quarterly stock forecasts prior to board of directors meetings, when they ought to be more concerned with making products inexpensively and selling them for as much as the market will bear, instead of worrying about something so capricious as the quarterly stock price.
The idea that somehow a C-level executive pocketing some worker’s pay when his stock options go up in price is profoundly ignorant. Changes in stock price (where these guys make most of their money) isn’t money that’s being “funneled upstairs” from within the company; it’s money from outside the company that the company never even sees as revenue at all.
Thanks to Caldazar for showing that this statement is incorrect. Inflation at the very end of the 1970s, and beginning of the 1980s, was indeed rampant. But not for most of the '70s, except in relation to the flat 1950s.
I got to do salary administration in the late 1980s and early 1990s, and the average raise was above inflation, with many people doing much better. I did much better. If you gave someone a 0 raise or a 1% raise you were giving them a message that they should be looking elsewhere.
In case you didn’t look at the chart, from 1975 - 2000 real wages went up about 305. From 2000 until 2013 they fell by about 4%.
That’s about the worst idea I’ve heard today, and I’ve been to a meeting. Enron workers had their retirements tied up in Enron stock - how did it work out for them? I know someone who had his 401K in IBM stock. When he got laid off in the early '90s when the stock was low he really got screwed. Maybe this would work if someone had a real voice in the company, but my impression is that even directors don’t have all that much of a stake in the company - outside ones, that is.
Ask a Chinese person. They have seen their wages and standards of living constantly grow for the last few decades. I believe when their economy was growing by 10% a year the wages for factory workers could grow by 20-40% a year.
The value of a company’s stock is often, but not necessarily, related to its long-term profitability. That’s why paying high-level executives in stock, or paying a substantial portion of compensation in stock, isn’t a great incentive to work for the overall good of the company. The value of a company’s stock can be significantly influenced by lots of factors that don’t have anything to do with the overall health of a company, including rumors of restructuring, decisions to pay dividends this quarter (or not), etc. If the bulk of your compensation is paid in the form of something that you can directly (or nearly directly) manipulate, you’re very likely to manipulate those values in *your *favor, even though that manipulation may, ultimately, be a bad idea for everyone else.