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Open thread October 13, 2015

Dan Crawford | October 13, 2015 4:11 pm

Tags: open thread Comments (8) | Digg Facebook Twitter |
8 Comments
  • Arne says:
    October 13, 2015 at 8:00 pm

    Services have grown from 35 percent to 75 percent of the economy in the past century.
    http://www.minnpost.com/macro-micro-minnesota/2012/02/history-lessons-understanding-decline-manufacturing
    Service sector wages are 80 percent of manufacturing sector wages.
    http://www.bls.gov/news.release/empsit.t19.htm

    How could we expect anything other than declining labor share?

  • Arne says:
    October 13, 2015 at 9:03 pm

    I took weekly wages to get 80 percent. Hourly wages series goes back further.
    https://research.stlouisfed.org/fred2/graph/?g=28iN
    But I cannot seem to get it to create a link with the services divided by goods producing (which shows hourly wages for services at 82 percent in 1980 going to 94 percent now).

    There is a change over the decades, but a change to services leads to reduced labor share even without rising inequality. You can’t extrapolate back to the 60s or forward to the 2000s, so there is more going on.

  • Arne says:
    October 13, 2015 at 9:06 pm

    “But I cannot seem to get it to create a link”
    After closing and reopening tabs I do see the link the way I intended.

  • bkrasting says:
    October 14, 2015 at 11:09 am

    Wallmart shares down 9% at the opening today. The company announced that all new hires will be at $10/h. The cost will be $1.5B a year.

    Wallmart will cut its Capex budget to offset the increasing costs. So less new stores, less construction, less jobs.

  • Jack says:
    October 14, 2015 at 2:26 pm

    Krasting,
    Is your analysis of Walmart’s stock price collapse too simple or just simple minded? Tell the entire story as this article from this afternoon’s NY Times seems to do. http://www.nytimes.com/2015/10/15/business/walmart-sales-forecast-share-buyback.html?ref=topics&_r=0. It seems that Walmart’s executives see the pain as related to the company’s falling sales, not the improvement in its employees pay. To fix the problem as they see it they seem to be proposing many revisions in how the company operates, one of which is to increase employee pay. More stores selling less goods is not exactly good business. Better managed stores and better employee relations may be the better tact. At least that what the Walmart management team seems to think. Good thing that Krasting isn’t on their team.

  • bkrasting says:
    October 14, 2015 at 3:32 pm

    Jack – You say:

    “It seems that Walmart’s executives see
    the pain as related to the company’s falling
    sales, not the improvement in its employees
    pay.”

    Well, it might seem that way to you, but the CFO of WMT does not agree: From the WSJ:

    “The company’s chief financial officer,
    Charles Holley, said the company’s
    program to raise hourly wages
    accounted for 75% of the lowered
    earnings target.”

    Who to believe here? Jack, or the CFO?

    The link:

    http://www.wsj.com/articles/wal-mart-lower-sales-earnings-outlook-1444835896

  • Marko says:
    October 14, 2015 at 3:42 pm

    In a demand-constrained economy , if one company cuts wages , it will appear to be to its benefit , as reported earnings rise. However , if all companies follow suit , it will be to the detriment of all of them , as demand constraints worsen.

    It works the same way , in reverse , when raising wages. One company alone raising wages will suffer. If they all do it , they’ll all gain.

    You know this , Bkrasting. Why do you pretend otherwise ?

  • bkrasting says:
    October 15, 2015 at 8:26 am

    Marko – I know this? Actually I don’t agree with the assumption that “they’ll all gain”.

    Don’t get me wrong. I’m not apposed to pay increases, but I don’t see it as a force that boosts the economy. 70% of US GDP is consumption. Most likely the extra money people will get from higher wages will go toward buying “stuff”. Things like clothes, shoes, electronic things like phones. Maybe a new A/C or fridge.

    None of those things are made in America. The increased consumption will result in more imports, not jobs and prosperity in the US.

    Yesterday WMT said it would raise pay by $1.5B – the result was that the value of the stock fell by $21B. One one side you have increased income, on the other side you have decreased wealth. I think the two cancel each other out.

    Wait a few years to measure the results of this. As of today WMT has 1.4m people working for them. If that number is the same in 3 years than nothing much has been accomplished.

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