I taught in the MBA program - my point of view ( unlike the Chicago School where shareholder value and quarterly earnings per share targets were central to their version of the purpose of the business ) centered on the concept of treating employees as allies . If you get the right employees and take good care of them , they will provide a good product to the customer . If the customer likes the product or the service the customer will return ( and tell others ) . Then sales will grow over time and profits will follow . When short sighted companies put profits first and foremost , and treat the employees as costs to be minimized , the product of service suffers and the customers will leave and profits will decline .
Unfortunately , many of my university cohorts reject that idea , and claim that the only way a top manager can survive is to hit the quarterly earnings objectives set by some arbitrary third party on Wall Street . So far - the compensation for the top executives and the gap at the lower wage levels seems to indicate that treating employees as costs to be minimized works -
I've worked at a couple of companies where they hired every Harvard MBA they could. I've literally worked with hundreds over the years. I'm convinced that Harvard is like AI - it provides information, and information is power, an enabler. So those who didn't care about society had the information to benefit themselves at the expense of society, while those who did care about individuals and society also had the information to use or not use as they saw fit. This aligns with the study saying that those who took the Harvard ethics class learned how to game the system, and became some of the least ethical business leaders.
From that great American Gordon Gekko. I don't see any stopping AI running amok as long as the current Adm. is in power. All businesses want to increase their 'productivity' meaning profitability. Stock market loves it.
What better way than shed those pesky human employees and replace them with AI? I think us Baby Boomers were born at a good time in history, our opportunities were boundless. But I fear for Gen-Z and the problem of troubled young males is practically epidemic.
I think the causes of the so-called "troubles" of young males are being manufactured and exploited by the GOP to create resentment so they do not have to come to terms with some needed self-reflection and that self-reflection would involve getting help for a serious gaming and media addition that is keeping them from achieving what they feel is expected of them.
It is not "women." It is not "minorities." It is not "DEI." It is not "woke." It is not "liberals"
It is an addiction!
The GOP (and some predatory media personalities) seem to hope they will stay addicted and angry and deflect blame onto whoever the GOP say they should deflect blame onto so they will vote for them instead of simply accepting responsibility and making life changes.
The GOP are like drug dealers keeping them on a string in that respect with all of this manipulation and their manipulation always seems to be trying to find the right grievance that they can exploit and distort and manipulate.
Young men ARE suffering, but it's not women, minorities, DEI or "woke" causing it. And their suffering IS being USED.
Honestly, a lot of the young men I know are being eaten alive by porn and video games. They are being consumed by entertainment and it's preventing them from becoming anything much of what they could be.
When I went things were different so I do not agree with some of the points made in this post although I agree with other points.
They point out the CEOs with business degrees in the 1980s instilling a culture of lower blue collar wages, but that was largely the culture that grew out of Reagan and the whole "greed is good" thing which they also mention, so that came just a bit later. It was not taught in business classes when I went and certainly not in economics classes, either.
These wage myths are what many Americans sadly, simply believed, partly thanks to Reagan and Hollywood even though it was not supported by economics or even business teachings back then, at least not where I went.
The GOP has since spent decades with myth making trying force the square pegs of this false ideology, regarding greed, profits, and wages and "trickle down" into the round holes of reality and it still does not fit, so their pretzel-like logic keeps getting more and more twisted.
Thus, I would not argue that it was due to college graduates taking charge that caused the shift, but simply the change in culture that let those who more often had this false ideology to get hired and promoted, combined with the fact that more and more people were simply getting college degrees at that time. Because most were still being taught with pre-Reagan course materials and by older professors.
Correlation vs causation, I think, with there simply being more college educated people at that time when it comes to more business educated CEOs.
When I went to business school, and I started prior to Reagan getting elected, I took economics classes that were based on books that Krugman also likely studied from, although I did not go on to get a PhD in economics.
My professors, including business professors, made fun of Reagan's nonsense daily. He was laughed at by that learned set as much as Trump is now laughed at by most of the whole world.
Because it is, and was, simply all nonsense.
Plan and simple.
That was not what they taught in business school, at least not when I went.
Anyway, my point is that most CEOs with business degrees may not have been taught badly but that those with bad behavior and a greed mindset were promoted and hired by those who bought into this same culturally promoted nonsense at that time and those who hired the bad actors and nincompoops may not have had business degrees.
Those who approved of "looting" profits from worker pay (and often even shareholders who may have been unaware) at the expense of retaining an experienced work force and the long-run health of the company were being hired by others who bought into this same ideology and the public and maybe even some of those same blue collar workers also bought into this culture of nonsense. (Why some blue collar workers still vote against their own interests may be because they were raised in thus culture - so it is not just CEOs it was the culture at the time)
However, this is certainly not what was being taught at the time at least not in the 1970s and 1980s in college that I am aware of, so I assume some who bought into this may have either simply thrown what they learned in the dumpster to make big bucks or were "bros" who cheated their way though and had "old boy" connections.
This is the only way I can explain it based on my learning and experience.
I think one is pointing out correlation to culture rather than causation by those with business degrees being hired as CEOs, because when I went, many decades ago, they never taught things contrary to economic thinking and it was similar to what Krugman talks about today.
don't u think that in addition to the voodoo economics of Raygun, the chicago school and milton friedman were to blame for the 40-50 years of neoliberal policies?
They are talking about people hired in the 1980s, but they were trained on largely what Krugman talks about on a regular basis.
It was later, post Reagan or during term 2, that some tried to pretend Reagan was right and came up with some nonsense excuses and theories about trickle down and tried to mainstream it into academics.
Now, I did not go to Harvard, but they are not exactly a "fresh water" school of thought that I am aware of. So, I do not know what was influencing there or what they are referring to, but i did not see it where I went.
I do agree that the culture of the late 1980s and 1990s and post Reagan caused a lot of the nonsense and bad behavior.
So, I think they are spot-on there in this discussion about culture.
In addition, except in a few cases, what I read from more college educated CEOs does not match the GOP ideology at all, although there are some few exceptions who make headlines. Now, that does not mean they are not all getting bizarre pay packages, but they do seem to not be on board with most of the GOP nonsense.
Great article on labor economics with these comments
(1) Politics supported by lying and complexity determines wages not the simplified model in Economics 101 of Supply and Demand, (2) When politics in the government are determined by lying and greedy billionaire oligarchs who control Republicans, politics as policy increases their high income by increasing profits from businesses which increase stock prices and income from their investments in stocks, while decreasing tax rates on their income increase their income and their income from capital investments which gets privileged treatment in taxes and income from wages for labor gets screwed as does R&D, (3) what shareholder capital says about growing the economy is that government policy must direct the supply of money to investors in businesses and directly to businesses with legal policy that screws labor and R&D while minimizing government expenses including social support and R&D, (4) what business schools like Harvard and consultants teach as economic, business and government policy comes from the ideology of maximizing profits.
On a Business Profit and Loss (P&L) statement, labor and R&D expenses directly reduce profitability in the current time period. In contrast, capital investments do not hit the P&L immediately; instead, they are recorded as long-term assets and slowly lower your profits over time through depreciation.
1. Labor Expenses
Labor costs are the operational backbone of most businesses and impact profits in two distinct ways:
Cost of Goods Sold (COGS): Payroll for employees directly involved in creating your product or delivering your service is factored into COGS. This lowers your Gross Profit.
Operating Expenses (OpEx): Payroll for "indirect" staff (like sales, admin, and management) is categorized as an operating expense, which reduces your Operating Income (EBIT).
2. Research & Development (R&D) Expenses
R&D costs are treated as day-to-day Operating Expenses in the period they occur.
The Immediate Impact: Because they are fully expensed as they happen, heavy R&D investments will cause a significant, immediate drop in Net Income.
The Strategy: R&D is designed to generate long-term value, but accounting rules require companies to take the hit upfront in the P&L rather than spreading the cost.
3. Capital Investments (CapEx)
Capital investments (such as purchasing machinery, vehicles, or software) do not show up as a single, large expense on your P&L. The Balance Sheet Shift: The money spent is recorded as a long-term asset on the Balance Sheet rather than the P&L.
Impact on Profits: Because assets wear out or become obsolete, a portion of the asset's cost is recorded on the P&L each year as an expense, known as depreciation (or amortization for software/patents). This spreads the financial hit over the useful life of the item, protecting your current-period profits from taking a massive, singular hit.
The result of these political, legal and economic policies is (1) business go bankrupt especially businesses like Kodak that don’t properly invest in transformation innovation driven by R&D, (2) wealth inequality, low wages, a lack of good paying jobs, and poor affordability of food, energy, housing, healthcare, education and childcare, and (3) monopolies who raise prices, (4) voters who are pissed off become fools who elect Republicans led by Trump, and (5) a lawless, fascist autocracy that kills democracy and equal justice
I always do enjoy watching one person say “this careful study says that when X happened, Y happened” and then someone else comes along and doesn’t read the study or even a good summary and just says “my anecdotal evidence OBVIOUSLY proves that your ideas are flawed”.
When "X happened Y happened" whenever not done in a scientific setting and whenever not using the scientific method even in a careful study, one always arrives at an assumption, and even if it is a good assumption as to cause, this is the stage where hypotheses are formed, not proven.
One can only assume it is causal or correlational, even if the assumption has a lot of evidence to support it. One can not apply controls to past occurrences or control variables.
A good example is Kennedy's statement about Tylenol and autism which takes evidence that more women who took it in pregnancy had a higher rates of kids with autism, and he assumed a causal effect.
However, when more careful methods were used for analysis only a potential for a correlational effect was found, and not cause.
This means "perhaps" an underlying condition that may have caused autism also caused some pregnant women to more often need to take pain relief medicine, but that is also unknown. There could ne no relationship to autism and the need for pain relief. Maybe a correlating underlying genetic makeup causes more headaches or body aches, we simply do not know. Thus, the impact was merely correlational and not causal and any other relationship to autism is unknown to exist, but some of the studies showing more women took it still resulted in objective data, so it was a place to begin a study not end it.
I did not say he did not find a correlation between more college educated CEOs and lower wages. I simply said that one can't then assume 100% that this points to a cause because during that time, a lot more people were getting college degrees and the whole culture had significantly changed after Reagan, as well, regarding wages and unions, etc.
Under those conditions and looking at past data, one can never be sure of a cause, only correlations.
I had to take statistics for science classes and business and psychology, etc. and it was hammered home how to isolate cause and arrive at a conclusion that was statistically significant and provable and all of this was hammered home over and over.
If the culture was like it was after Reagan, prior to him, would we assume the non-college educated managers and CEOs would have behaved similarly due to culture and anti-union sentiment and a "greed is good" mentality? I simply think so, only my opinion, and they may have even been worse, in my view, because the college educated were not indoctrinated into that behavior by universities, that I am aware of, because that is not what they taught when I went. I am making an assumption, of course.
If what was taught changed in later decades, I do not know, but if it was later it would not explain the timing of the shift to low wages, mentioned here.
Most of the titans of Industry during the Industrial Revolution and Robber Baron era, did not have business or economics degrees, etc and workers were treated far worse especially prior to unions and labor laws. Culturally, this was seen as the norm, sadly, where low skilled and low paid workers suffered a lot and people saw it as a norm. They were seen as expendable as well and conditions were often also dangerous in mines and factories.
People like Teddy Roosevelt, unions and labor laws changed the culture and also likely the Great Depression, world wars with men of various social classes serving side by side as well as and FDR, etc.
Thus, he would have had to make an assumption with this type of data, just like I am doing, and I say I am assuming, as well. Even if he used good data.
This type of historic correlational data collected can never ever lead to an absolute conclusion, so I am simply saying where I see other variables that may be far more significant. It has always been the case that owners and managers have known that labor is a cost impacting profit, this is not new with modern business classes and one reason the greedy non-college educated industrialists from over 100 yrs ago did not pay well either.
Yes, even business law textbooks pointed out that the idea of corporations as "like a separate person" was only meant so they could be taxed as a separate entity and also hold liability like a separate entity as a way to ---
SEPARATE them from their owners.
So, when SCOTUS took this to mean that they were like a person meaning people in charge of them could donate, binding the two as one, it made zero sense.
This actually combines the people running the company with the entity - the opposite of the intent of the law that created a separate entity.
If they are one in the same, shouldn't we be able to sue the owners and shareholders and shouldn't they be responsible for the debts of a bankrupt company?
SCOTUS applied the intent of the language backwards, in my view.
As a customer, I HATE when I'm treated as a "revenue generator" who can be milked and squeezed with upsales and price increases. "Bundling" is also annoying and anti-competitive...Why can't I get different communications services from different companies at competitive prices?
Not coincidently it's industries with low competition.
We now have more choices for internet where I am and people have diched the cable company as fast as they could due to decades of monopolistic abuse and bad behavior towards customers.
Now one can choose fiber or a cell phone company hub for their home.
Suddenly the cable company is offering deals after long abuses and playing nice.
I still use a digital antenna as well as now tubi, and although it seems to be owned by FOX, one can watch NBC and ABC news on it and I watch PBS online, as well.
So, we still have choices.
My computer uses lowe watts so I prefer to use it for viewing.
I do not do social media, unless you include substack as social media, so sort of.
I learned many years ago, working in the software industry, that there are two kinds of jobs. In one type, the employees are considered a profit center, creating the software that customers buy. In the other, they're a cost center, providing support for a product that (apparently) arose out of thin air, created whole and perfect.
That which was a profit center, will one will day be a commoditized cost center.
Another way of expressing so many of the comments is just to recognize a basic point always hidden in mainstream - this is a financial form of capitalism, thus is NOT industrial capitalism.
Lincoln's comment about fooling ppl seems relevant.
FedEx misdelivers about HALF the packages entrusted to them, in my local experience.
Sadly, competition works only when consumers have a choice, another reason companies like to merge to escape competition, and public policy should extract large penalties (in terms of graduated taxes on GROSS corporate income) for mergers.
I have hated Reaganomics since 1980. And it’s sadness me the business schools taught managers to be assholes. And we definitely need stronger labor laws to prevent the whole corrupt industry of drawing out negotiations forever.
That said, however, I have to ask: Starting in the 1970s and accelerating in the 1980s, didn’t foreign competition dramatically increase, making it hard for US workers to compete?
Luckily, it’s my understanding that now foreign wages have increased - better for those countries, but also giving some room for higher wages here at home.
I supported lowering tariffs and generally increasing trade among nations . I did not support US business decisions to close plants and outsource the entire production process to foreign “ cheap labor “ countries .
Nor did I support the wholesale reduction of the anti trust divisions in the Dept. of Justice and the Federal Trade Commission . It was a green light for merger mania which reduced competition and gave firms much more monopoly like power .
There is way too little competition in many sectors. I live in Chicago and no of only two cable and Internet companies, for example - Xfinity and RCN. For YEARS, I’ve been angry that anti-trust laws were not enforced. I was delighted to see Biden start to do that - yet he didn’t get enough credit.
i take heart in the enthusiasm of an articulate scholar participating to draw useful lessons from the laboratory of the US economy. Everything can’t be left to theory.
I taught in a business school and had a similar set of observations. Across several industries you would see the UPS vs Fedex comparison. Iconic examples like Costco and Walmart/Sam’s Club come up. That comparison gets tricky because Costco has a different mix of products and services leading to a different customer mix. The cleanest example is Southwest Airlines. Over their history they have been the most consistently profitable airline. It is a difficult industry so they also encounter challenges. But they are more profitable offering the same exact service; get me from point A to point B.
Close to the beginning he mentions “shareholder value” as reigning corporate management concept in certain recent decades - which underlies the topic of the comment above, I think.
What should be clarified is that there are now many scholars and influencers who discuss this concept - mostly hidden in mainstream - that the “stakeholders” of corporations include workers and various components of society other than just the direct shareholders whose interests are measured by short term price movements in stocks.
The elevation of the interests of (often short term) shareholders over workers, communities, etc was implicitly embedded in certain key legal changes, like the opening up of the hedge fund / private funds exemption to allow unlimited money and investors in hedge funds, some of which have enormous clout and which repeatedly impose structural changes on the companies they invest in through various shareholder proposals, board takeovers, etc.
As concerns the governing state laws one highly recommended writer / thinker is former Delaware chancery court chief justice Leo shrine, jr. who is a professor and legal commentator on topics involving corporate governance.
Agree. Harvard's approach is more callous than Stanford's or INSEAD having seen them together is a 6 week executive program and taken courses at HBS when in another grad program at Harvard.
It's the narrow focus on short-term profits, and the idea it's ok to ignore externalized costs.
IMO, this is a consequence of allowing companies to merge to become so big they no longer have competition, so they can raise prices and reduce value without immediate consequences.
The corollary is that public policy should discourage mergers, through higher taxes for higher GROSS income, because corporations can fiddle calculation of their 'profits'.
Antitrust suits are slow and uncertain. Unavoidably higher taxes for merged companies would preserve the competitive market.
The main Industrialists from the Robber Baron and Gilded Age did not have college degrees and labor was paid far worse and treated badly often working nearly 24/7 for dirt poor wages and in very dangerous conditions.
Then you had an era where some college educated progressive types fought against all of that like Teddy Roosevelt and FDR and things like the world wars and the Great Depression helped to reduce the class system and help people see each other as people and they strugeled and fought side by side. With this new perspective, and labor laws and unions, workers faired far better and so did our economy post GD and post WWII.
The culture had changed.
Then Reagan came along and his popularity ushered in a new era of "Greed is Good" and anti-union mentality. Of course the idea that it would make things better, was all nonsense.
This happened at the same time that there was a surge in college grads, as well, but what Reagan was saying was actually contradicting what business majors were being taught.
Thus, to me, the evidence suggests that it is not college grads that caused the new low pay issues, but the new conservative culture of the times that was ushered in by Reagan and the GOP.
Personally, I assume that if the CEOs post Reagan were not college educated, that things would have been even far worse and even more like the Robber Barons and the Gilded Age sooner, not less so, because no, that is actually not what is taught in business school (back when I went) in fact we took many of the same economics classes that Krugman did, even if at a lower level and back then it was still largely all Keynesian, so it is hard to see any of that leading to what is being described here, although I can see how Reaganomics and the culture he ushered in and all that mythmaking as being a big cause.
However, college business and economics courses contradicted Reagan, and he was not respected when he got elected by my business and economic professors who thought he was an idiot.
So, I think personally, had fewer college educated people been hired that the impact of that new greed culture would have been far worse. What surprised me coming from a liberal arts oriented family was that we were not being taught a conservative mindset in business classes, quite the opposite, and if you read what many CEOs have to say, many are as far away from the GOP and Trump as you can get. I wonder if the old boy types and the new Reaganites, who were more conservative, simply hired those college grads who were like themselves, rather then those who were ready to apply what they learned in college based on this study.
Sadly, the few who are like Trump are also the ones surrounding him and helping to make a mess. I'm not so sure how many of Trump's enablers have business degrees, not many from what I can tell, and what Trump says suggests he never actually went to a single class. There are few business graduate degrees either in those who surround him. Many in who kowtow are computer science, or law, or dropped out.
A disturbing amount of biz school coursework can fairly be described as learning how to game the system, rather than how to achieve something while staying within the rules.
"One simple example to start with is FedEx and UPS. Workers may be driving very similar routes delivering similar packages, but it turns out FedEx pays lower than UPS."
That explains things to me, with my FedEx package deliveries. FedEx must be taking a low-end approach to the business. I see it in the customer service.
So, the other day, I was dealing with AI voice as it answers the phone for customer service at FedEx, for a delivery that I had to sign for. (The driver failed earlier in the morning to read my clear, typed note, to open the downstairs door, and walk up to my apartment, and knock on the door.)
Going beyond the question of whether a more highly paid driver would have read my note, I suspect others have had the experience of dealing with the FedEx AI that answers the phone and claims to be handling your customer service problem, including missed deliveries. (I have used in numerous times, and it simply fails and frustrates the heck out of me.)
It asks you the same question multiple times. If you ask to a speak to a customer service representative, it asks you to first explain your problem again. And again. And again.
I have learned, over many months, that you can’t insist on speaking directly to a person, because if you keep insisting, without answering its further questions, which it then fails to understand, it will hang up on you.
So, I had to kill 5 or 10 minutes the other day. (Then, when my first call got me to a person, the person vanished after asking for my name, so I had to kill a second 5 or 10 minutes recalling the same number and speaking to the same AI pseudo-person.)
As well, the customer service person, when you do finally get through the AI to get a person, is obviously from another country with cheap labor.
(As well, quite ridiculously, the person, after claiming to have resolved your problem, even-though in an inadequate way, asks you to take a survey immediately after the call to report on the quality of the service.
As though the people who are designing the quality-control checks are stupid enough to think that the thing to look at is what the person told you on the phone, rather than, whether the problem actually got resolved, which would be after the delivery, or still-failed-delivery, some days later!
I don't know, but perhaps this is intentional little shenanigans by MBAs to try to indicate to the stockholders that a quality-control problem is being addressed, and shareholder value is being protected!)
What you suggest here is that incompetent (thought to be uunnecessary) workers could be replaced by incompetent (uncooperative) AI. Facebook beat you to it
FedEx could be replaced by many other names and the experience would be the same. Of the retail web sites I visit at least 30% of them weren't designed by someone who thinks logically about how a retail online transaction should work or puts any thought into what customers would really appreciate.
Bill Whitten's enshitification comment is accurate.
Do note that one expert economist brought up the single example case FedEx vs. UPS, with the text I quoted from the post:
"One simple example to start with is FedEx and UPS. Workers may be driving very similar routes delivering similar packages, but it turns out FedEx pays lower than UPS."
And thus, I presented a bit of my own personal data, not from a single point in time, but from many months, about the customer-service situation at the apparent low-road low-wage of the pair of companies. Thus, being consistent with that FedEx is the low-road of the pair of employers as the one economist suggested. And I, and certainly anyone else who uses their damned system, can see the apparent results of this low-end ("enshitification" fits as well) approach.
Fair enough. Customer service excellence, or its lack, is a conscious decision made at the corporate level. As with wage monopsony there is a calculation being made. How many customers and revenue dollars will be lost due to poor customer service? Will those losses exceed the savings in customer service wages and capital investment? How will the resultant damage to a brand name impact the bottom line over time?
Quality control and warranty service also act the same, and involve the same calculated strategy. Service, quality, and warranty are obviously much more difficult to put hard numbers to than wages. I can understand that as a challenge to economists.
As a consumer my view is that if a product or service is well executed and provided at a fair price, then the need to provide fake customer service, or to offer virtually useless warranties would be greatly reduced and one’s brand name would not be preceded by an expletive so often. It’s really pretty simple but seems to be beyond the logic of those Harvard MBAs .
This has been my concern with the whole “affordability!” discussion. In general, affordability improvements after inflation come from higher wages, not deflationary price cuts. That’s where the work needs to happen, but practically nobody is talking about actions that raise wages.
I take affordability to imply wage raises without having to say it explicitly. Running openly on a platform to raise wages seems to me to be a non-starter today.
Running on a platform of price cuts over which the government has little to no control seems to me to be the real non-starter. Reality is that wage growth needs to happen or people will never catch up, and that’s just reality. I’m a fan of reality-based campaigns.
Is there an effect of distance or locality in wage patterns? In other words, do people tend to remain at a lower pay job if it means more convenient travel to work? A job at a distance may pay more, but if there are costs for parking a car and the gas and maintenance of a car factored in, perhaps those aspects of "overhead" could make the seemingly better job actually financially worse. Are there regional lifestyle effects? Do people living in a beach town tend to put up with lower wages in order to have the benefits of access to the water for activities?
Agree. There are a lot of qualitative factors besides wages that affect the desirability of a job. These are hard to quantify in labor economics. On top of that there are transaction costs to switching adding more friction to the process.
True - but remote work is not something that workers at McDonald's or WalMart can do. I've walked into some McDonalds on some long road trips recently, mostly to use the restroom. As a matter of fairness, when I do this I will generally buy something from the place - since I feel like I should pay a sort of fee for using their facilities. But these McDonald's I've gone in didn't have any counter workers, just stations where the customer had to input their order. Outsourcing the work to the customer (but without paying us even minimum wage. So I didn't buy anything. (And I won't.)
American women as a whole are far better educated than American men. I can’t imagine what experience differences you’re theorizing here except those that come from failure to promote qualified women. Time out for pregnancy is an illegal basis on which to discriminate, and child raising being primarily unpaid work undertaken by the mothers alone is sexism pure and simple. So tell me again why women are paid less than men?
Younger women are indeed more educated but that hasnt been true historically and is less true for older women. What really matters is occupation/major.
Im not "theorizing" anything regarding experience. Just saying that if you control for experience/tenure on the job - that is compare men and women with similar levels of experience/tenure - the gender wage gap shrinks. This isnt "theory", it's an empirical fact.
With regard to pregnancy its not about legality. Just that pregnant women take time off from market work when pregnant and right after. That makes it harder to come back to the labor force later and to find a high paying job.
Again, this isnt "theory", it's like 30 years of empirical work and studies. When you compare, for example, unmarried women in middle of their career, with unmarried men in middle of theirs, with similar education and experience, and in similar occupation, the gender wage gap pretty much disappears
How convenient then that ONLY women (and other female people) can get pregnant, and must bear the full and total burden of very necessary reproduction. Isn't it so VERY sad that NOTHING AT ALL can be done to socialize these costs across society?
Im not sure why youre being sarcastic. Some of the costs are "socialized", within marriage. Theres also child care tax credits. But overall I do agree that more should be done in that regard. However, this is a different issue. The point is that the fact that the gender gap disappears once you control for the above mentioned factors, it doesnt look like it's discrimination but rather straightforward economic consideration.
Okay, so you're tracking how labor is doing, at the various employers, and in the various sectors.
And, partly, you must be relying on real wages, which itself relies on CPI.
And, some of labor has employers providing health insurance, and some have employers that do not provide health insurance.
And even it the employer provides health insurance, there is a question of, if there is a layoff, a loss of health insurance.
Which brings us the the ACA, which is supposed to cover the cases where the person has no employer-based health insurance.
So, I point out that the effects of the just-happened 1/1/26 lapsed ACA expanded subsidies (affecting and in almost all cases raising the premiums and copays for 24 the million people relying on that for coverage), and the coming cuts to ACA expanded Medicaid in OBBB, which covers a separate 20 million people, are not reflected at all in the standard measure CPI, and therefore the measure "real wage"!
(Because they are means-tested. From: https://www.bls.gov/opub/hom/cpi/concepts.htm "the CPI does not reflect changes to means-tested subsidies (dependent on the recipient’s income)".
(Please don't forget that non-reflection of the ACA cuts in real wages in your analyses!)
And, let me inform readers who are not aware of it already, that there is recent information: both data on the coverage-loss effects (of the part that already happened), and misleading information from the administration (on both parts).
The new information is in part due to some recent Jonathan Cohn posts.
The Cohn posts are on his Bulwark sub-account, behind a Bulwark Substack paywall, but I have alternative links not behind a paywall to the information. (One of those from me, actually.)
(Jonathan Cohn is a health and health-system reporter, and author of "The Ten Year War" (on the ACA), written about 6 years ago, when the war by the Republicans had only been going on for 10 years. Incidentally, he also spoke with prof. Krugman about 8 months ago, around the time of the shutdown, here: https://paulkrugman.substack.com/p/talking-with-jonathan-cohn)
The serious ACA weakenings are these two, that the Democrats fought, unsuccessfully, with the shutdown at the end of last year, to reverse:
1) ACA on-exchange coverage via 1/1/26 non-extension of the on-exchange expanded subsidies.
(Data on the coverage losses from this are now coming in, the losses look large, and there is evidence of misleading information about this will come from the administration, claiming falsely that the considerable coverage losses are mainly due to fraud reduction by the administration. Detailed in linked Substack posts below.)
2) ACA expanded Medicaid via OBBB work requirements and other restrictions going into effect start of 2027
(Misleading information from the administration has also come about the effects of this, being a claim of significant poverty reduction. Detailed also in linked Substack posts below.)
(Note the former, ACA on-exchange, covered, in 2025, roughly 24 million people, and the latter, ACA expanded Medicaid, a separate set of about 20 million people. So, the programs that covered about 44 million people total, at least before the damage, are what are affected.)
--
On the first--the lapsed expanded subsidies:
There is information is that the observed coverage drops are high (3 to 5 million of about 24 million covered in 2025), that the information on the numbers of drops seems to be being delayed by the administration, and that misleading claims from the administration that the large drops are due mainly to the administration's successful reduction in fraud are forthcoming.
So, there was a pretty comprehensive look at this from Jonathan Cohn of a few days ago, here:
The posts (Jonathan's and mine) are is on the coverage drops now showing up, with a lot of other information on what seems to misleading statements coming from the administration, which are still in process.
A lot of the information in his post and mine overlaps. Some is in one or the other, but not both.
The information in mine, is:
The coverage drops from data gradually rolling in,
The apparent non-release of some data by CMS with the drops,
The leaked-from-CMS information that the administration is planning a response falsely indicating the coverage drops are due to the administration's successful cracking down on fraud
The current, kind of weak, propagandistic response from the Washington Post editorial department using a report from the Paragon Health Institute. (The president himself seems not to have directly made a statement on this yet. It may be that the large coverage drops have taken the administration by surprise, and, as well, the Paragon report really doesn't support any substantial reduction of fraud, even though it is a pretty propagandistic document. It will be interesting to see if the president tries to delay all data release until after the midterms.)
We also both cover some of:
The history of the deception, and lies, and apparently weak research that the Republicans used last year to justify not extending the expanded subsidies.
(Between my post and Jonathan's, many of the same, and some different details are covered. Jonathan probably has a bit of an easier to read, polished style. If you read Jonathan's, and you want to really suck up all the details he has, I suggest clicking on all of his links, and reading all of his footnotes.)
---
On the second--on the OBBB damage to mainly expanded Medicaid starting beginning of 2027:
It seems the administration has prepared highly questionable research indicating a large coming reduction in poverty due to the work requirements for expanded Medicaid, by them making a lot of people get out of poverty by choosing to work.
Jonathan links to some non-paywalled analysis of the issue by a pair of health economists here, for those interested:
focusing very much on the chaos that is likely to come as 51 state+DC Medicaid agencies struggle to manage handling the technical complexity of the coming work and other requirements.
I have my own non-paywalled post that hits some of this:
(As I actually have some experience with the ACA, where, before aging into standard-Medicare-for-Me with my medigap, I had 8 years on the ACA / expanded Medicaid system in Massachusetts. So, the insurance system we have, including the ACA and expanded Medicaid, has such byzantine complexity that without absolute computer geniuses designing the computer systems at each and every Medicaid agency, much will go wrong, and much does.
Thus, in Massachusetts, which is a state that actually wants the ACA to work, in the eight years I used the ACA for coverage, though I did everything correctly, and was always eligible for coverage, I was placed in primal fear for either my health, my finances, or both, no less than five times.
And now, significant complexity has been added by OBBB, for each of the 51 Medicaid agencies, and actually, the federal and state exchanges as well, because expanded Medicaid ineligibility is required for on-exchange ACA eligibility. What a mess!)
A contributing factor in the US to wage inequality is employer paid health care. This phenomenon ties people to their job and prevents job movement to higher paid openings.
I was hoping to find a discussion of what an increase in minimum wage did to prices. Did it result in localized inflation? Was it absorbed at the corporate level? What is the impact on the next tier of workers? For example the McDonalds shift lead? Is there a compression of wages and the shift lead is not making more money but paying more due to localized inflation?
At a Fortune 50 we brought in a pay consultant (30+ years ago). He told us about a study showing that achieving employee turnover of the lowest performing employees (eg 5% or 10% or 25%) would improve profits. Even if they were spectacular employees. His recommendation was to incentivize performance (bonus as high percentage of pay) and set some work goals we knew couldn't be met - thus justifying continuously letting go of employees. Studies also said that justifying replacement by "underperformance" against goals would incentivize other employees. And as employees became higher performing and took on more base pay there should still be unachievable goals, so that when the pay became high we could let them go and have others to replace them and take over their duties/accomplishments for lower pay. Of course, we implemented it, and hiring and firing became continuous. (And AI? Just read Machiavelli. It will simply define another form of power. Along with weapons, wealth, media, money, government, etc. So the constraints we self-impose to think about it as business people, or economists, or politicians are simply absurd.)
If you had a team of superstars, the idea was to get rid of the lowest performing superstars and try to replace them with better people. Apparently, research has shown that this strategy improves profits - even if it is only because it motivates those who remain. Think about how senior managers are all judged by hitting quarterly goals. When other senior managers see them fired then they do whatever immoral things might be required to hit those goals. And, who knows, maybe you do recruit better people. The continuous employee churn, statistically, will result in better outcomes for the company. (One company where I worked was under Steve Jobs. We fired superstars all the time - usually by putting them under horrible managers in order to "motivate" them to find new jobs.)
No one ever wondered what they were doing to other human beings? Not to mention their wives, children? Making profit was the only thing of importance? Also the cost to society was seen as not important? Is the idea that happy people cannot design good products?
And all of this assumes that management is any good at all at judging performance in the first place. Which at least in tech companies simply isn't true. Larger tech companies start using metrics that have little relationship to usable product output - lines of code, number of commits, etc.... Which makes the "remove low performers" mostly just a weapon to be able to constrain or worry the remaining workers - and when that really happens, the very best leave to go work in a startup as they find that kind of "policy" to just be stupid.
After my time in Fortune 50 management I don't see things the same way. First, we had well understood competitors, a list of Fortune 500's we made most of our money from, and markets with a wide variety of barriers to entry. Our tech employees were 99% interchangeable parts to us - and when they weren't we needed to restructure to make them interchangeable parts. The 1% who were R&D or innovators or understood management were few and far between, and we would pay them anything until we got to a point where we could make them interchangeable parts too. So losing "the best" was seen as something we, as a company, needed to be able to handle. Our processes needed to be scalable and flexible. Just a whole different mindset once you work at a place with tens of thousand of people and you generate hundreds of millions of dollars. We would buy innovators and innovations, then dump the people once we had patents and understanding of the tech. (I should add that I'm a tech guy who transitioned to management and then back out to tech again.)
This needs to be an article in itself. I worked at a very large defense contractor, which operated in a similar way. Once a company is big enough, everything turns into a rent-seeking operation. Cash flow is maximized, innovation, etc., is irrelevant. The cash flow is perceived of as a product of a process, not of people. I used to joke that HR hired engineers by the pound.
As Chris noted, this could be an entire long article in itself. IMO, any place that had 99% interchangeable software engineers usually produced software that has security holes and tech debt and long term maintenance issues (and yes, I have worked in very large companies with tens of thousands of employees although I tried to avoid it). And yes, with sufficient barriers to entry, companies can get away with a lot of slop and rent-seeking.
Ah yeah this is the post Gates Microsoft strategy (anx I guess Apple). That makes sense though unclear as written (lowest performing referring to relative rather than absolute performance)
The law of supply and demand is an academic attempt to make capitalism sound like science. Capitalism is a wealth concentration mechanism, that relies on privatization (theft) of public property, including land, natural resources, knowledge and labor. There is no way to justify private ownership anything that belongs to the people. Capitalism, like racism, based on race and proven to be culture by the mapping of the human genome, are two pillars of the culture wars.
When I took business and economics the main point was that labor is not very mobile which helped to explain why a free market is not always good at setting wages, especially minimum wages.
A worker working almost 24/7 for dirt poor wages cannot choose to leave since they have no time or money to look for a new job or to gain new skills.
It is not just supply and demand that causes a free market to work, it is also choice.
The GOP like to ignore choice as a factor.
A free market system assumes buyers and sellers can choose to sell, or not sell, or buy, or not buy, at certain prices, and this system can break down with things like wages where an employee gets locked in without good labor laws and if monopolies are allowed to exist.
It also does not help with some survival necessities, like if there is a shortage of housing, or in healthcare where the only workable option to treat cancer is a single option and there is no choice.
No one is going to choose dollar store care for cancer, so there is not another choice or alternative for a free market to set prices in this case and allocate needed resources.
However, culture is also a large factor in wages, as well, as is mentioned here, so I 100% agree with that. If a culture believes some workers should be low paid, or highly paid, it can have a very large influence, as we still see today. For example some have no problem with unions for male dominated blue collar jobs, but seem to have issues for more female dominated ones like hotel workers, or retail, or childcare, etc.
Why?
Labor is labor assuming here minimum training and skills, so the reason must be tied to culture and our culture seems to accept and expect lower pay for female dominated occupations.
Now I did not go to Harvard, but my business school did not create a culture of what is talked about here. So it is hard for me to agree with that part.
That culture was largely created by Reagan and Hollywood and GOP mythmaking, not actual business schools, that I am aware of anyway.
We also learned that a well paid public was good for businesses and the economy - not low wage workers
They taught the opposite of what is being implied above where I went in the late 1970s and early 1080s. so I think it was the culture post-Reagan was the main factor, not more business majors in executive positions although "some" may have had a "bro" mentality that also infects highly paid tech people, as well - also cultural. The 1980s and 1990s also saw a larger share of grads in the workforce than prior so the statistics mentioned may be a simply be correlational factor and not the cause.
When I read some CEOs take on political issues, it often does not side with the GOP mindset at all, although of course there are a "few" well known, others, who do agree with them, but they seem to be the exception, and not the rule, so we often know their names.
Sadly, we have seen some those types these days kowtowing to Trump and it is like watching a parade of nonsense in full display. Maybe some of them do not believe in the nonsense, but put greed above the good of society, beats me, but they are not the majority, just very visable.
Labor isn't a perfect fluid. People have a lot of reasons to stay put and not move. The cost of housing is a major factor in a decision to move. However, many people simply cannot afford to move. They form a captive labor pocket that can be exploited.
Wages of highly paid professionals isn't where the biggest problem is. It's in the low skilled sector. Those jobs don't take a lot of training - just higher birth rate.
That is a choice the US made, High School for Everyone. In Europe flexibeler systems exist, e.g. in The Netherlands. Like trade schools split in lower - middle - higher level, with options to "level up". Young adults in countries with this system can usually start working at 14 (or 16) years old, while continuing 1 or 2 days of education a week. I met at university students who had gone that route. They were a bit older and usually working (or had a business). Several of them ended up in our Cabinet or in other high positions.
For every job there is knowledge, skills, needed. "Unschooled" labor does not exist. That is why every needed worker, whether for lower level work or for high tech employment, should be issued a Green Card.
Why would you need higher birth rate? We have enough people, in fact more than enough, om this Earth. I was not allowed to work here because jobs had to be reseved for US workers. I recently discovered that in the period I arrived here, Mr. Greenspan was worried about the low unemployment numbers. In short: we could have worked and it would not have destroyed the US economy.
People at the bottom of the labor market are there because they have no leverage. At will contracting kills employee leverage. Do these ideas change that?
Extremely interesting . . . especially since Dube both acknowledges the importance of supply and demand on wages (this is why tight labor markets are important to increases in wages), but also the importance of policy choice, either at the company level or the political/societal level, in labor share as well. Will have to read the book.
So, what do they teach in business school? How to exploit people and get away with it?
I taught in the MBA program - my point of view ( unlike the Chicago School where shareholder value and quarterly earnings per share targets were central to their version of the purpose of the business ) centered on the concept of treating employees as allies . If you get the right employees and take good care of them , they will provide a good product to the customer . If the customer likes the product or the service the customer will return ( and tell others ) . Then sales will grow over time and profits will follow . When short sighted companies put profits first and foremost , and treat the employees as costs to be minimized , the product of service suffers and the customers will leave and profits will decline .
Unfortunately , many of my university cohorts reject that idea , and claim that the only way a top manager can survive is to hit the quarterly earnings objectives set by some arbitrary third party on Wall Street . So far - the compensation for the top executives and the gap at the lower wage levels seems to indicate that treating employees as costs to be minimized works -
Frankly - it makes me sick
You be the judge
I've worked at a couple of companies where they hired every Harvard MBA they could. I've literally worked with hundreds over the years. I'm convinced that Harvard is like AI - it provides information, and information is power, an enabler. So those who didn't care about society had the information to benefit themselves at the expense of society, while those who did care about individuals and society also had the information to use or not use as they saw fit. This aligns with the study saying that those who took the Harvard ethics class learned how to game the system, and became some of the least ethical business leaders.
greed is good as once famously said
From that great American Gordon Gekko. I don't see any stopping AI running amok as long as the current Adm. is in power. All businesses want to increase their 'productivity' meaning profitability. Stock market loves it.
What better way than shed those pesky human employees and replace them with AI? I think us Baby Boomers were born at a good time in history, our opportunities were boundless. But I fear for Gen-Z and the problem of troubled young males is practically epidemic.
I think the causes of the so-called "troubles" of young males are being manufactured and exploited by the GOP to create resentment so they do not have to come to terms with some needed self-reflection and that self-reflection would involve getting help for a serious gaming and media addition that is keeping them from achieving what they feel is expected of them.
It is not "women." It is not "minorities." It is not "DEI." It is not "woke." It is not "liberals"
It is an addiction!
The GOP (and some predatory media personalities) seem to hope they will stay addicted and angry and deflect blame onto whoever the GOP say they should deflect blame onto so they will vote for them instead of simply accepting responsibility and making life changes.
The GOP are like drug dealers keeping them on a string in that respect with all of this manipulation and their manipulation always seems to be trying to find the right grievance that they can exploit and distort and manipulate.
Young men ARE suffering, but it's not women, minorities, DEI or "woke" causing it. And their suffering IS being USED.
Honestly, a lot of the young men I know are being eaten alive by porn and video games. They are being consumed by entertainment and it's preventing them from becoming anything much of what they could be.
When I went things were different so I do not agree with some of the points made in this post although I agree with other points.
They point out the CEOs with business degrees in the 1980s instilling a culture of lower blue collar wages, but that was largely the culture that grew out of Reagan and the whole "greed is good" thing which they also mention, so that came just a bit later. It was not taught in business classes when I went and certainly not in economics classes, either.
These wage myths are what many Americans sadly, simply believed, partly thanks to Reagan and Hollywood even though it was not supported by economics or even business teachings back then, at least not where I went.
The GOP has since spent decades with myth making trying force the square pegs of this false ideology, regarding greed, profits, and wages and "trickle down" into the round holes of reality and it still does not fit, so their pretzel-like logic keeps getting more and more twisted.
Thus, I would not argue that it was due to college graduates taking charge that caused the shift, but simply the change in culture that let those who more often had this false ideology to get hired and promoted, combined with the fact that more and more people were simply getting college degrees at that time. Because most were still being taught with pre-Reagan course materials and by older professors.
Correlation vs causation, I think, with there simply being more college educated people at that time when it comes to more business educated CEOs.
When I went to business school, and I started prior to Reagan getting elected, I took economics classes that were based on books that Krugman also likely studied from, although I did not go on to get a PhD in economics.
My professors, including business professors, made fun of Reagan's nonsense daily. He was laughed at by that learned set as much as Trump is now laughed at by most of the whole world.
Because it is, and was, simply all nonsense.
Plan and simple.
That was not what they taught in business school, at least not when I went.
Anyway, my point is that most CEOs with business degrees may not have been taught badly but that those with bad behavior and a greed mindset were promoted and hired by those who bought into this same culturally promoted nonsense at that time and those who hired the bad actors and nincompoops may not have had business degrees.
Those who approved of "looting" profits from worker pay (and often even shareholders who may have been unaware) at the expense of retaining an experienced work force and the long-run health of the company were being hired by others who bought into this same ideology and the public and maybe even some of those same blue collar workers also bought into this culture of nonsense. (Why some blue collar workers still vote against their own interests may be because they were raised in thus culture - so it is not just CEOs it was the culture at the time)
However, this is certainly not what was being taught at the time at least not in the 1970s and 1980s in college that I am aware of, so I assume some who bought into this may have either simply thrown what they learned in the dumpster to make big bucks or were "bros" who cheated their way though and had "old boy" connections.
This is the only way I can explain it based on my learning and experience.
I think one is pointing out correlation to culture rather than causation by those with business degrees being hired as CEOs, because when I went, many decades ago, they never taught things contrary to economic thinking and it was similar to what Krugman talks about today.
don't u think that in addition to the voodoo economics of Raygun, the chicago school and milton friedman were to blame for the 40-50 years of neoliberal policies?
They are talking about people hired in the 1980s, but they were trained on largely what Krugman talks about on a regular basis.
It was later, post Reagan or during term 2, that some tried to pretend Reagan was right and came up with some nonsense excuses and theories about trickle down and tried to mainstream it into academics.
Now, I did not go to Harvard, but they are not exactly a "fresh water" school of thought that I am aware of. So, I do not know what was influencing there or what they are referring to, but i did not see it where I went.
I do agree that the culture of the late 1980s and 1990s and post Reagan caused a lot of the nonsense and bad behavior.
So, I think they are spot-on there in this discussion about culture.
In addition, except in a few cases, what I read from more college educated CEOs does not match the GOP ideology at all, although there are some few exceptions who make headlines. Now, that does not mean they are not all getting bizarre pay packages, but they do seem to not be on board with most of the GOP nonsense.
John,
Agree with the addition of billionaire oligarchs.
Great article on labor economics with these comments
(1) Politics supported by lying and complexity determines wages not the simplified model in Economics 101 of Supply and Demand, (2) When politics in the government are determined by lying and greedy billionaire oligarchs who control Republicans, politics as policy increases their high income by increasing profits from businesses which increase stock prices and income from their investments in stocks, while decreasing tax rates on their income increase their income and their income from capital investments which gets privileged treatment in taxes and income from wages for labor gets screwed as does R&D, (3) what shareholder capital says about growing the economy is that government policy must direct the supply of money to investors in businesses and directly to businesses with legal policy that screws labor and R&D while minimizing government expenses including social support and R&D, (4) what business schools like Harvard and consultants teach as economic, business and government policy comes from the ideology of maximizing profits.
On a Business Profit and Loss (P&L) statement, labor and R&D expenses directly reduce profitability in the current time period. In contrast, capital investments do not hit the P&L immediately; instead, they are recorded as long-term assets and slowly lower your profits over time through depreciation.
1. Labor Expenses
Labor costs are the operational backbone of most businesses and impact profits in two distinct ways:
Cost of Goods Sold (COGS): Payroll for employees directly involved in creating your product or delivering your service is factored into COGS. This lowers your Gross Profit.
Operating Expenses (OpEx): Payroll for "indirect" staff (like sales, admin, and management) is categorized as an operating expense, which reduces your Operating Income (EBIT).
2. Research & Development (R&D) Expenses
R&D costs are treated as day-to-day Operating Expenses in the period they occur.
The Immediate Impact: Because they are fully expensed as they happen, heavy R&D investments will cause a significant, immediate drop in Net Income.
The Strategy: R&D is designed to generate long-term value, but accounting rules require companies to take the hit upfront in the P&L rather than spreading the cost.
3. Capital Investments (CapEx)
Capital investments (such as purchasing machinery, vehicles, or software) do not show up as a single, large expense on your P&L. The Balance Sheet Shift: The money spent is recorded as a long-term asset on the Balance Sheet rather than the P&L.
Impact on Profits: Because assets wear out or become obsolete, a portion of the asset's cost is recorded on the P&L each year as an expense, known as depreciation (or amortization for software/patents). This spreads the financial hit over the useful life of the item, protecting your current-period profits from taking a massive, singular hit.
The result of these political, legal and economic policies is (1) business go bankrupt especially businesses like Kodak that don’t properly invest in transformation innovation driven by R&D, (2) wealth inequality, low wages, a lack of good paying jobs, and poor affordability of food, energy, housing, healthcare, education and childcare, and (3) monopolies who raise prices, (4) voters who are pissed off become fools who elect Republicans led by Trump, and (5) a lawless, fascist autocracy that kills democracy and equal justice
I always do enjoy watching one person say “this careful study says that when X happened, Y happened” and then someone else comes along and doesn’t read the study or even a good summary and just says “my anecdotal evidence OBVIOUSLY proves that your ideas are flawed”.
When "X happened Y happened" whenever not done in a scientific setting and whenever not using the scientific method even in a careful study, one always arrives at an assumption, and even if it is a good assumption as to cause, this is the stage where hypotheses are formed, not proven.
One can only assume it is causal or correlational, even if the assumption has a lot of evidence to support it. One can not apply controls to past occurrences or control variables.
A good example is Kennedy's statement about Tylenol and autism which takes evidence that more women who took it in pregnancy had a higher rates of kids with autism, and he assumed a causal effect.
However, when more careful methods were used for analysis only a potential for a correlational effect was found, and not cause.
This means "perhaps" an underlying condition that may have caused autism also caused some pregnant women to more often need to take pain relief medicine, but that is also unknown. There could ne no relationship to autism and the need for pain relief. Maybe a correlating underlying genetic makeup causes more headaches or body aches, we simply do not know. Thus, the impact was merely correlational and not causal and any other relationship to autism is unknown to exist, but some of the studies showing more women took it still resulted in objective data, so it was a place to begin a study not end it.
I did not say he did not find a correlation between more college educated CEOs and lower wages. I simply said that one can't then assume 100% that this points to a cause because during that time, a lot more people were getting college degrees and the whole culture had significantly changed after Reagan, as well, regarding wages and unions, etc.
Under those conditions and looking at past data, one can never be sure of a cause, only correlations.
I had to take statistics for science classes and business and psychology, etc. and it was hammered home how to isolate cause and arrive at a conclusion that was statistically significant and provable and all of this was hammered home over and over.
If the culture was like it was after Reagan, prior to him, would we assume the non-college educated managers and CEOs would have behaved similarly due to culture and anti-union sentiment and a "greed is good" mentality? I simply think so, only my opinion, and they may have even been worse, in my view, because the college educated were not indoctrinated into that behavior by universities, that I am aware of, because that is not what they taught when I went. I am making an assumption, of course.
If what was taught changed in later decades, I do not know, but if it was later it would not explain the timing of the shift to low wages, mentioned here.
Most of the titans of Industry during the Industrial Revolution and Robber Baron era, did not have business or economics degrees, etc and workers were treated far worse especially prior to unions and labor laws. Culturally, this was seen as the norm, sadly, where low skilled and low paid workers suffered a lot and people saw it as a norm. They were seen as expendable as well and conditions were often also dangerous in mines and factories.
People like Teddy Roosevelt, unions and labor laws changed the culture and also likely the Great Depression, world wars with men of various social classes serving side by side as well as and FDR, etc.
Thus, he would have had to make an assumption with this type of data, just like I am doing, and I say I am assuming, as well. Even if he used good data.
This type of historic correlational data collected can never ever lead to an absolute conclusion, so I am simply saying where I see other variables that may be far more significant. It has always been the case that owners and managers have known that labor is a cost impacting profit, this is not new with modern business classes and one reason the greedy non-college educated industrialists from over 100 yrs ago did not pay well either.
Yes, even business law textbooks pointed out that the idea of corporations as "like a separate person" was only meant so they could be taxed as a separate entity and also hold liability like a separate entity as a way to ---
SEPARATE them from their owners.
So, when SCOTUS took this to mean that they were like a person meaning people in charge of them could donate, binding the two as one, it made zero sense.
This actually combines the people running the company with the entity - the opposite of the intent of the law that created a separate entity.
If they are one in the same, shouldn't we be able to sue the owners and shareholders and shouldn't they be responsible for the debts of a bankrupt company?
SCOTUS applied the intent of the language backwards, in my view.
As a customer, I HATE when I'm treated as a "revenue generator" who can be milked and squeezed with upsales and price increases. "Bundling" is also annoying and anti-competitive...Why can't I get different communications services from different companies at competitive prices?
Not coincidently it's industries with low competition.
it is designed that way
We now have more choices for internet where I am and people have diched the cable company as fast as they could due to decades of monopolistic abuse and bad behavior towards customers.
Now one can choose fiber or a cell phone company hub for their home.
Suddenly the cable company is offering deals after long abuses and playing nice.
I still use a digital antenna as well as now tubi, and although it seems to be owned by FOX, one can watch NBC and ABC news on it and I watch PBS online, as well.
So, we still have choices.
My computer uses lowe watts so I prefer to use it for viewing.
I do not do social media, unless you include substack as social media, so sort of.
We "cut the cord" about two years ago. For news we have Haystack.
Thanks for the tip.
I learned many years ago, working in the software industry, that there are two kinds of jobs. In one type, the employees are considered a profit center, creating the software that customers buy. In the other, they're a cost center, providing support for a product that (apparently) arose out of thin air, created whole and perfect.
Guess which job is better to have.
That which was a profit center, will one will day be a commoditized cost center.
Another way of expressing so many of the comments is just to recognize a basic point always hidden in mainstream - this is a financial form of capitalism, thus is NOT industrial capitalism.
you just explained Costco
Lincoln's comment about fooling ppl seems relevant.
FedEx misdelivers about HALF the packages entrusted to them, in my local experience.
Sadly, competition works only when consumers have a choice, another reason companies like to merge to escape competition, and public policy should extract large penalties (in terms of graduated taxes on GROSS corporate income) for mergers.
Antitrust is too slow and too uncertain.
Bring back Lina Khan!
I have hated Reaganomics since 1980. And it’s sadness me the business schools taught managers to be assholes. And we definitely need stronger labor laws to prevent the whole corrupt industry of drawing out negotiations forever.
That said, however, I have to ask: Starting in the 1970s and accelerating in the 1980s, didn’t foreign competition dramatically increase, making it hard for US workers to compete?
Luckily, it’s my understanding that now foreign wages have increased - better for those countries, but also giving some room for higher wages here at home.
Susan ,
I supported lowering tariffs and generally increasing trade among nations . I did not support US business decisions to close plants and outsource the entire production process to foreign “ cheap labor “ countries .
Nor did I support the wholesale reduction of the anti trust divisions in the Dept. of Justice and the Federal Trade Commission . It was a green light for merger mania which reduced competition and gave firms much more monopoly like power .
There is way too little competition in many sectors. I live in Chicago and no of only two cable and Internet companies, for example - Xfinity and RCN. For YEARS, I’ve been angry that anti-trust laws were not enforced. I was delighted to see Biden start to do that - yet he didn’t get enough credit.
i take heart in the enthusiasm of an articulate scholar participating to draw useful lessons from the laboratory of the US economy. Everything can’t be left to theory.
I taught in a business school and had a similar set of observations. Across several industries you would see the UPS vs Fedex comparison. Iconic examples like Costco and Walmart/Sam’s Club come up. That comparison gets tricky because Costco has a different mix of products and services leading to a different customer mix. The cleanest example is Southwest Airlines. Over their history they have been the most consistently profitable airline. It is a difficult industry so they also encounter challenges. But they are more profitable offering the same exact service; get me from point A to point B.
Ah. Rather than enshittification of the product, you saw enshittification of the labor environment.
Close to the beginning he mentions “shareholder value” as reigning corporate management concept in certain recent decades - which underlies the topic of the comment above, I think.
What should be clarified is that there are now many scholars and influencers who discuss this concept - mostly hidden in mainstream - that the “stakeholders” of corporations include workers and various components of society other than just the direct shareholders whose interests are measured by short term price movements in stocks.
The elevation of the interests of (often short term) shareholders over workers, communities, etc was implicitly embedded in certain key legal changes, like the opening up of the hedge fund / private funds exemption to allow unlimited money and investors in hedge funds, some of which have enormous clout and which repeatedly impose structural changes on the companies they invest in through various shareholder proposals, board takeovers, etc.
As concerns the governing state laws one highly recommended writer / thinker is former Delaware chancery court chief justice Leo shrine, jr. who is a professor and legal commentator on topics involving corporate governance.
Agree. Harvard's approach is more callous than Stanford's or INSEAD having seen them together is a 6 week executive program and taken courses at HBS when in another grad program at Harvard.
Good work matters
It's the narrow focus on short-term profits, and the idea it's ok to ignore externalized costs.
IMO, this is a consequence of allowing companies to merge to become so big they no longer have competition, so they can raise prices and reduce value without immediate consequences.
The corollary is that public policy should discourage mergers, through higher taxes for higher GROSS income, because corporations can fiddle calculation of their 'profits'.
Antitrust suits are slow and uncertain. Unavoidably higher taxes for merged companies would preserve the competitive market.
Visit Coal Mine No. 9 of the Carbon County Coal and Navigation Company Museum in Nesquehoning PA and learn something about exploitation.
16 tons, great song.
Exactly. Succinct, true, informative, entertaining.
Then the shaft was soon shut and more work was cut
And the fire in the air, it felt frozen
'Til a man come to speak and he said in one week
That number eleven was closin'
They complained in the East, they're payin' too high
They say that your ore ain't worth a-diggin'
That it's much cheaper down in the South American towns
Where the miners work almost for nothin'
Bob Dylan - North Country Blues - 1964.
'Which Side Are You On?'
"They say, in Harlan County, there are no neutrals there.
You'll either be a Union man, or a thug for JH Blair."
https://www.youtube.com/watch?v=5iAIM02kv0g
The main Industrialists from the Robber Baron and Gilded Age did not have college degrees and labor was paid far worse and treated badly often working nearly 24/7 for dirt poor wages and in very dangerous conditions.
Then you had an era where some college educated progressive types fought against all of that like Teddy Roosevelt and FDR and things like the world wars and the Great Depression helped to reduce the class system and help people see each other as people and they strugeled and fought side by side. With this new perspective, and labor laws and unions, workers faired far better and so did our economy post GD and post WWII.
The culture had changed.
Then Reagan came along and his popularity ushered in a new era of "Greed is Good" and anti-union mentality. Of course the idea that it would make things better, was all nonsense.
This happened at the same time that there was a surge in college grads, as well, but what Reagan was saying was actually contradicting what business majors were being taught.
Thus, to me, the evidence suggests that it is not college grads that caused the new low pay issues, but the new conservative culture of the times that was ushered in by Reagan and the GOP.
Personally, I assume that if the CEOs post Reagan were not college educated, that things would have been even far worse and even more like the Robber Barons and the Gilded Age sooner, not less so, because no, that is actually not what is taught in business school (back when I went) in fact we took many of the same economics classes that Krugman did, even if at a lower level and back then it was still largely all Keynesian, so it is hard to see any of that leading to what is being described here, although I can see how Reaganomics and the culture he ushered in and all that mythmaking as being a big cause.
However, college business and economics courses contradicted Reagan, and he was not respected when he got elected by my business and economic professors who thought he was an idiot.
So, I think personally, had fewer college educated people been hired that the impact of that new greed culture would have been far worse. What surprised me coming from a liberal arts oriented family was that we were not being taught a conservative mindset in business classes, quite the opposite, and if you read what many CEOs have to say, many are as far away from the GOP and Trump as you can get. I wonder if the old boy types and the new Reaganites, who were more conservative, simply hired those college grads who were like themselves, rather then those who were ready to apply what they learned in college based on this study.
Sadly, the few who are like Trump are also the ones surrounding him and helping to make a mess. I'm not so sure how many of Trump's enablers have business degrees, not many from what I can tell, and what Trump says suggests he never actually went to a single class. There are few business graduate degrees either in those who surround him. Many in who kowtow are computer science, or law, or dropped out.
A disturbing amount of biz school coursework can fairly be described as learning how to game the system, rather than how to achieve something while staying within the rules.
Apparently pissing away $400,000,000 in multiple bankruptcies and then getting $ shoveled to you from Putin is the way to great success.
Side note: Ayn Rand's books are distributed for free to students at universities.
Aha! I quote:
"One simple example to start with is FedEx and UPS. Workers may be driving very similar routes delivering similar packages, but it turns out FedEx pays lower than UPS."
That explains things to me, with my FedEx package deliveries. FedEx must be taking a low-end approach to the business. I see it in the customer service.
So, the other day, I was dealing with AI voice as it answers the phone for customer service at FedEx, for a delivery that I had to sign for. (The driver failed earlier in the morning to read my clear, typed note, to open the downstairs door, and walk up to my apartment, and knock on the door.)
Going beyond the question of whether a more highly paid driver would have read my note, I suspect others have had the experience of dealing with the FedEx AI that answers the phone and claims to be handling your customer service problem, including missed deliveries. (I have used in numerous times, and it simply fails and frustrates the heck out of me.)
It asks you the same question multiple times. If you ask to a speak to a customer service representative, it asks you to first explain your problem again. And again. And again.
I have learned, over many months, that you can’t insist on speaking directly to a person, because if you keep insisting, without answering its further questions, which it then fails to understand, it will hang up on you.
So, I had to kill 5 or 10 minutes the other day. (Then, when my first call got me to a person, the person vanished after asking for my name, so I had to kill a second 5 or 10 minutes recalling the same number and speaking to the same AI pseudo-person.)
As well, the customer service person, when you do finally get through the AI to get a person, is obviously from another country with cheap labor.
(As well, quite ridiculously, the person, after claiming to have resolved your problem, even-though in an inadequate way, asks you to take a survey immediately after the call to report on the quality of the service.
As though the people who are designing the quality-control checks are stupid enough to think that the thing to look at is what the person told you on the phone, rather than, whether the problem actually got resolved, which would be after the delivery, or still-failed-delivery, some days later!
I don't know, but perhaps this is intentional little shenanigans by MBAs to try to indicate to the stockholders that a quality-control problem is being addressed, and shareholder value is being protected!)
Enshitification.
What you suggest here is that incompetent (thought to be uunnecessary) workers could be replaced by incompetent (uncooperative) AI. Facebook beat you to it
FedEx could be replaced by many other names and the experience would be the same. Of the retail web sites I visit at least 30% of them weren't designed by someone who thinks logically about how a retail online transaction should work or puts any thought into what customers would really appreciate.
Bill Whitten's enshitification comment is accurate.
Do note that one expert economist brought up the single example case FedEx vs. UPS, with the text I quoted from the post:
"One simple example to start with is FedEx and UPS. Workers may be driving very similar routes delivering similar packages, but it turns out FedEx pays lower than UPS."
And thus, I presented a bit of my own personal data, not from a single point in time, but from many months, about the customer-service situation at the apparent low-road low-wage of the pair of companies. Thus, being consistent with that FedEx is the low-road of the pair of employers as the one economist suggested. And I, and certainly anyone else who uses their damned system, can see the apparent results of this low-end ("enshitification" fits as well) approach.
Yup!
By my experience, FedEx misdelivers about HALF their packages, UPS about 5-10% and USPS as close to 0% as I can tell.
Fair enough. Customer service excellence, or its lack, is a conscious decision made at the corporate level. As with wage monopsony there is a calculation being made. How many customers and revenue dollars will be lost due to poor customer service? Will those losses exceed the savings in customer service wages and capital investment? How will the resultant damage to a brand name impact the bottom line over time?
Quality control and warranty service also act the same, and involve the same calculated strategy. Service, quality, and warranty are obviously much more difficult to put hard numbers to than wages. I can understand that as a challenge to economists.
As a consumer my view is that if a product or service is well executed and provided at a fair price, then the need to provide fake customer service, or to offer virtually useless warranties would be greatly reduced and one’s brand name would not be preceded by an expletive so often. It’s really pretty simple but seems to be beyond the logic of those Harvard MBAs .
Unions unions unions?
Employers use their collective power, often in cartel-like "associations", why shouldn't we?
Absofuckinlutely. See my comments below.
Unions happen when management treats labor inhumanely. That is the last best option.
This has been my concern with the whole “affordability!” discussion. In general, affordability improvements after inflation come from higher wages, not deflationary price cuts. That’s where the work needs to happen, but practically nobody is talking about actions that raise wages.
I take affordability to imply wage raises without having to say it explicitly. Running openly on a platform to raise wages seems to me to be a non-starter today.
Running on a platform of price cuts over which the government has little to no control seems to me to be the real non-starter. Reality is that wage growth needs to happen or people will never catch up, and that’s just reality. I’m a fan of reality-based campaigns.
Is there an effect of distance or locality in wage patterns? In other words, do people tend to remain at a lower pay job if it means more convenient travel to work? A job at a distance may pay more, but if there are costs for parking a car and the gas and maintenance of a car factored in, perhaps those aspects of "overhead" could make the seemingly better job actually financially worse. Are there regional lifestyle effects? Do people living in a beach town tend to put up with lower wages in order to have the benefits of access to the water for activities?
Agree. There are a lot of qualitative factors besides wages that affect the desirability of a job. These are hard to quantify in labor economics. On top of that there are transaction costs to switching adding more friction to the process.
Often, consolidation of employers means low wages across the industry, because employees have little choice of employer. (Monopsony!)
There are some good papers about this re security services companies and low salaries for their workers.
When you have a higher-paying job you tend to move to where you want to, as opposed to staying in a lower cost area. Often you move closer to work.
Remote work, sometimes spread across the globe, puts a very different flavor on those possible choices.
True - but remote work is not something that workers at McDonald's or WalMart can do. I've walked into some McDonalds on some long road trips recently, mostly to use the restroom. As a matter of fairness, when I do this I will generally buy something from the place - since I feel like I should pay a sort of fee for using their facilities. But these McDonald's I've gone in didn't have any counter workers, just stations where the customer had to input their order. Outsourcing the work to the customer (but without paying us even minimum wage. So I didn't buy anything. (And I won't.)
Wage isn't the only factor in employment. I'd bet, good work environment is very high on the list. People tend to forget the non-monetary things.
So what accounts for the gender gap in wages?
Sexism and corporate immorality because (as monopsonists) they have too little competition.
Differences in education, experience and time out of labor force for pregnancy/child raising
American women as a whole are far better educated than American men. I can’t imagine what experience differences you’re theorizing here except those that come from failure to promote qualified women. Time out for pregnancy is an illegal basis on which to discriminate, and child raising being primarily unpaid work undertaken by the mothers alone is sexism pure and simple. So tell me again why women are paid less than men?
Younger women are indeed more educated but that hasnt been true historically and is less true for older women. What really matters is occupation/major.
Im not "theorizing" anything regarding experience. Just saying that if you control for experience/tenure on the job - that is compare men and women with similar levels of experience/tenure - the gender wage gap shrinks. This isnt "theory", it's an empirical fact.
With regard to pregnancy its not about legality. Just that pregnant women take time off from market work when pregnant and right after. That makes it harder to come back to the labor force later and to find a high paying job.
Again, this isnt "theory", it's like 30 years of empirical work and studies. When you compare, for example, unmarried women in middle of their career, with unmarried men in middle of theirs, with similar education and experience, and in similar occupation, the gender wage gap pretty much disappears
How convenient then that ONLY women (and other female people) can get pregnant, and must bear the full and total burden of very necessary reproduction. Isn't it so VERY sad that NOTHING AT ALL can be done to socialize these costs across society?
/s
Im not sure why youre being sarcastic. Some of the costs are "socialized", within marriage. Theres also child care tax credits. But overall I do agree that more should be done in that regard. However, this is a different issue. The point is that the fact that the gender gap disappears once you control for the above mentioned factors, it doesnt look like it's discrimination but rather straightforward economic consideration.
Okay, so you're tracking how labor is doing, at the various employers, and in the various sectors.
And, partly, you must be relying on real wages, which itself relies on CPI.
And, some of labor has employers providing health insurance, and some have employers that do not provide health insurance.
And even it the employer provides health insurance, there is a question of, if there is a layoff, a loss of health insurance.
Which brings us the the ACA, which is supposed to cover the cases where the person has no employer-based health insurance.
So, I point out that the effects of the just-happened 1/1/26 lapsed ACA expanded subsidies (affecting and in almost all cases raising the premiums and copays for 24 the million people relying on that for coverage), and the coming cuts to ACA expanded Medicaid in OBBB, which covers a separate 20 million people, are not reflected at all in the standard measure CPI, and therefore the measure "real wage"!
(Because they are means-tested. From: https://www.bls.gov/opub/hom/cpi/concepts.htm "the CPI does not reflect changes to means-tested subsidies (dependent on the recipient’s income)".
(Please don't forget that non-reflection of the ACA cuts in real wages in your analyses!)
And, let me inform readers who are not aware of it already, that there is recent information: both data on the coverage-loss effects (of the part that already happened), and misleading information from the administration (on both parts).
The new information is in part due to some recent Jonathan Cohn posts.
The Cohn posts are on his Bulwark sub-account, behind a Bulwark Substack paywall, but I have alternative links not behind a paywall to the information. (One of those from me, actually.)
(Jonathan Cohn is a health and health-system reporter, and author of "The Ten Year War" (on the ACA), written about 6 years ago, when the war by the Republicans had only been going on for 10 years. Incidentally, he also spoke with prof. Krugman about 8 months ago, around the time of the shutdown, here: https://paulkrugman.substack.com/p/talking-with-jonathan-cohn)
The serious ACA weakenings are these two, that the Democrats fought, unsuccessfully, with the shutdown at the end of last year, to reverse:
1) ACA on-exchange coverage via 1/1/26 non-extension of the on-exchange expanded subsidies.
(Data on the coverage losses from this are now coming in, the losses look large, and there is evidence of misleading information about this will come from the administration, claiming falsely that the considerable coverage losses are mainly due to fraud reduction by the administration. Detailed in linked Substack posts below.)
2) ACA expanded Medicaid via OBBB work requirements and other restrictions going into effect start of 2027
(Misleading information from the administration has also come about the effects of this, being a claim of significant poverty reduction. Detailed also in linked Substack posts below.)
(Note the former, ACA on-exchange, covered, in 2025, roughly 24 million people, and the latter, ACA expanded Medicaid, a separate set of about 20 million people. So, the programs that covered about 44 million people total, at least before the damage, are what are affected.)
--
On the first--the lapsed expanded subsidies:
There is information is that the observed coverage drops are high (3 to 5 million of about 24 million covered in 2025), that the information on the numbers of drops seems to be being delayed by the administration, and that misleading claims from the administration that the large drops are due mainly to the administration's successful reduction in fraud are forthcoming.
So, there was a pretty comprehensive look at this from Jonathan Cohn of a few days ago, here:
https://substack.com/@citizencohn/p-201946924 called "The Obamacare 'Phantom' Menace"
(That Cohn post actually mentions little old me, and also my post on mainly the same stuff, in its footnote (3) !)
My post is here, and is free (as an alternative or supplement, or if you can't get behind the Bulwark paywall):
https://normspier828307.substack.com/p/loss-of-aca-coverage-after-republicans
The posts (Jonathan's and mine) are is on the coverage drops now showing up, with a lot of other information on what seems to misleading statements coming from the administration, which are still in process.
A lot of the information in his post and mine overlaps. Some is in one or the other, but not both.
The information in mine, is:
The coverage drops from data gradually rolling in,
The apparent non-release of some data by CMS with the drops,
The leaked-from-CMS information that the administration is planning a response falsely indicating the coverage drops are due to the administration's successful cracking down on fraud
The current, kind of weak, propagandistic response from the Washington Post editorial department using a report from the Paragon Health Institute. (The president himself seems not to have directly made a statement on this yet. It may be that the large coverage drops have taken the administration by surprise, and, as well, the Paragon report really doesn't support any substantial reduction of fraud, even though it is a pretty propagandistic document. It will be interesting to see if the president tries to delay all data release until after the midterms.)
We also both cover some of:
The history of the deception, and lies, and apparently weak research that the Republicans used last year to justify not extending the expanded subsidies.
(Between my post and Jonathan's, many of the same, and some different details are covered. Jonathan probably has a bit of an easier to read, polished style. If you read Jonathan's, and you want to really suck up all the details he has, I suggest clicking on all of his links, and reading all of his footnotes.)
---
On the second--on the OBBB damage to mainly expanded Medicaid starting beginning of 2027:
A great Jonathan Cohn post came out a few days before the other Cohn post on these (behind a bulwark Substack paywall :https://www.thebulwark.com/p/donald-trump-incredibly-misleading-downright-outrageous-case-medicaid-cuts-work-requirements .)
It seems the administration has prepared highly questionable research indicating a large coming reduction in poverty due to the work requirements for expanded Medicaid, by them making a lot of people get out of poverty by choosing to work.
Jonathan links to some non-paywalled analysis of the issue by a pair of health economists here, for those interested:
https://donmoynihan.substack.com/p/the-trump-administrations-dubious , for those interested.
Also, on the OBBB damage to expanded Medicaid and the work requirements, there is an earlier Jonathan Cohn post (Bulwark paywalled):
https://substack.com/@citizencohn/p-196250677
focusing very much on the chaos that is likely to come as 51 state+DC Medicaid agencies struggle to manage handling the technical complexity of the coming work and other requirements.
I have my own non-paywalled post that hits some of this:
https://normspier828307.substack.com/p/a-new-aca-defect-created-by-the-one
(As I actually have some experience with the ACA, where, before aging into standard-Medicare-for-Me with my medigap, I had 8 years on the ACA / expanded Medicaid system in Massachusetts. So, the insurance system we have, including the ACA and expanded Medicaid, has such byzantine complexity that without absolute computer geniuses designing the computer systems at each and every Medicaid agency, much will go wrong, and much does.
Thus, in Massachusetts, which is a state that actually wants the ACA to work, in the eight years I used the ACA for coverage, though I did everything correctly, and was always eligible for coverage, I was placed in primal fear for either my health, my finances, or both, no less than five times.
And now, significant complexity has been added by OBBB, for each of the 51 Medicaid agencies, and actually, the federal and state exchanges as well, because expanded Medicaid ineligibility is required for on-exchange ACA eligibility. What a mess!)
Thanks for documenting the facts we knew were behind the fog of MAGA lies.
A contributing factor in the US to wage inequality is employer paid health care. This phenomenon ties people to their job and prevents job movement to higher paid openings.
Better (paid) jobs usually have employer sponsored health insurance in my experience.
People are more "tied" because of their house. Also because all costs related to a move are not tax deductable (anymore).
God yes. I'm looking for a new job and there are so many I can't consider due to health issues that require I have insurance.
Whoa. Way too much for an online post. Informative. Challenging.
I’ll have to buy the book.
Thanks.
I’m old enough to remember
I was hoping to find a discussion of what an increase in minimum wage did to prices. Did it result in localized inflation? Was it absorbed at the corporate level? What is the impact on the next tier of workers? For example the McDonalds shift lead? Is there a compression of wages and the shift lead is not making more money but paying more due to localized inflation?
At a Fortune 50 we brought in a pay consultant (30+ years ago). He told us about a study showing that achieving employee turnover of the lowest performing employees (eg 5% or 10% or 25%) would improve profits. Even if they were spectacular employees. His recommendation was to incentivize performance (bonus as high percentage of pay) and set some work goals we knew couldn't be met - thus justifying continuously letting go of employees. Studies also said that justifying replacement by "underperformance" against goals would incentivize other employees. And as employees became higher performing and took on more base pay there should still be unachievable goals, so that when the pay became high we could let them go and have others to replace them and take over their duties/accomplishments for lower pay. Of course, we implemented it, and hiring and firing became continuous. (And AI? Just read Machiavelli. It will simply define another form of power. Along with weapons, wealth, media, money, government, etc. So the constraints we self-impose to think about it as business people, or economists, or politicians are simply absurd.)
“Lowest performing” or “spectacular employees”, which one was it?
If you had a team of superstars, the idea was to get rid of the lowest performing superstars and try to replace them with better people. Apparently, research has shown that this strategy improves profits - even if it is only because it motivates those who remain. Think about how senior managers are all judged by hitting quarterly goals. When other senior managers see them fired then they do whatever immoral things might be required to hit those goals. And, who knows, maybe you do recruit better people. The continuous employee churn, statistically, will result in better outcomes for the company. (One company where I worked was under Steve Jobs. We fired superstars all the time - usually by putting them under horrible managers in order to "motivate" them to find new jobs.)
The tech version of Die Verelendung.
No one ever wondered what they were doing to other human beings? Not to mention their wives, children? Making profit was the only thing of importance? Also the cost to society was seen as not important? Is the idea that happy people cannot design good products?
We should make a documentary about this.
And all of this assumes that management is any good at all at judging performance in the first place. Which at least in tech companies simply isn't true. Larger tech companies start using metrics that have little relationship to usable product output - lines of code, number of commits, etc.... Which makes the "remove low performers" mostly just a weapon to be able to constrain or worry the remaining workers - and when that really happens, the very best leave to go work in a startup as they find that kind of "policy" to just be stupid.
After my time in Fortune 50 management I don't see things the same way. First, we had well understood competitors, a list of Fortune 500's we made most of our money from, and markets with a wide variety of barriers to entry. Our tech employees were 99% interchangeable parts to us - and when they weren't we needed to restructure to make them interchangeable parts. The 1% who were R&D or innovators or understood management were few and far between, and we would pay them anything until we got to a point where we could make them interchangeable parts too. So losing "the best" was seen as something we, as a company, needed to be able to handle. Our processes needed to be scalable and flexible. Just a whole different mindset once you work at a place with tens of thousand of people and you generate hundreds of millions of dollars. We would buy innovators and innovations, then dump the people once we had patents and understanding of the tech. (I should add that I'm a tech guy who transitioned to management and then back out to tech again.)
This needs to be an article in itself. I worked at a very large defense contractor, which operated in a similar way. Once a company is big enough, everything turns into a rent-seeking operation. Cash flow is maximized, innovation, etc., is irrelevant. The cash flow is perceived of as a product of a process, not of people. I used to joke that HR hired engineers by the pound.
As Chris noted, this could be an entire long article in itself. IMO, any place that had 99% interchangeable software engineers usually produced software that has security holes and tech debt and long term maintenance issues (and yes, I have worked in very large companies with tens of thousands of employees although I tried to avoid it). And yes, with sufficient barriers to entry, companies can get away with a lot of slop and rent-seeking.
Worse, they cranked open tins from India filled with H-1Bs.
Ah yeah this is the post Gates Microsoft strategy (anx I guess Apple). That makes sense though unclear as written (lowest performing referring to relative rather than absolute performance)
The law of supply and demand is an academic attempt to make capitalism sound like science. Capitalism is a wealth concentration mechanism, that relies on privatization (theft) of public property, including land, natural resources, knowledge and labor. There is no way to justify private ownership anything that belongs to the people. Capitalism, like racism, based on race and proven to be culture by the mapping of the human genome, are two pillars of the culture wars.
When I took business and economics the main point was that labor is not very mobile which helped to explain why a free market is not always good at setting wages, especially minimum wages.
A worker working almost 24/7 for dirt poor wages cannot choose to leave since they have no time or money to look for a new job or to gain new skills.
It is not just supply and demand that causes a free market to work, it is also choice.
The GOP like to ignore choice as a factor.
A free market system assumes buyers and sellers can choose to sell, or not sell, or buy, or not buy, at certain prices, and this system can break down with things like wages where an employee gets locked in without good labor laws and if monopolies are allowed to exist.
It also does not help with some survival necessities, like if there is a shortage of housing, or in healthcare where the only workable option to treat cancer is a single option and there is no choice.
No one is going to choose dollar store care for cancer, so there is not another choice or alternative for a free market to set prices in this case and allocate needed resources.
However, culture is also a large factor in wages, as well, as is mentioned here, so I 100% agree with that. If a culture believes some workers should be low paid, or highly paid, it can have a very large influence, as we still see today. For example some have no problem with unions for male dominated blue collar jobs, but seem to have issues for more female dominated ones like hotel workers, or retail, or childcare, etc.
Why?
Labor is labor assuming here minimum training and skills, so the reason must be tied to culture and our culture seems to accept and expect lower pay for female dominated occupations.
Now I did not go to Harvard, but my business school did not create a culture of what is talked about here. So it is hard for me to agree with that part.
That culture was largely created by Reagan and Hollywood and GOP mythmaking, not actual business schools, that I am aware of anyway.
We also learned that a well paid public was good for businesses and the economy - not low wage workers
They taught the opposite of what is being implied above where I went in the late 1970s and early 1080s. so I think it was the culture post-Reagan was the main factor, not more business majors in executive positions although "some" may have had a "bro" mentality that also infects highly paid tech people, as well - also cultural. The 1980s and 1990s also saw a larger share of grads in the workforce than prior so the statistics mentioned may be a simply be correlational factor and not the cause.
When I read some CEOs take on political issues, it often does not side with the GOP mindset at all, although of course there are a "few" well known, others, who do agree with them, but they seem to be the exception, and not the rule, so we often know their names.
Sadly, we have seen some those types these days kowtowing to Trump and it is like watching a parade of nonsense in full display. Maybe some of them do not believe in the nonsense, but put greed above the good of society, beats me, but they are not the majority, just very visable.
Labor isn't a perfect fluid. People have a lot of reasons to stay put and not move. The cost of housing is a major factor in a decision to move. However, many people simply cannot afford to move. They form a captive labor pocket that can be exploited.
Similarly, unlike increasing the production of widgets, increasing the supply of (for example) doctors takes a decade or so.
Wages of highly paid professionals isn't where the biggest problem is. It's in the low skilled sector. Those jobs don't take a lot of training - just higher birth rate.
That is a choice the US made, High School for Everyone. In Europe flexibeler systems exist, e.g. in The Netherlands. Like trade schools split in lower - middle - higher level, with options to "level up". Young adults in countries with this system can usually start working at 14 (or 16) years old, while continuing 1 or 2 days of education a week. I met at university students who had gone that route. They were a bit older and usually working (or had a business). Several of them ended up in our Cabinet or in other high positions.
For every job there is knowledge, skills, needed. "Unschooled" labor does not exist. That is why every needed worker, whether for lower level work or for high tech employment, should be issued a Green Card.
Why would you need higher birth rate? We have enough people, in fact more than enough, om this Earth. I was not allowed to work here because jobs had to be reseved for US workers. I recently discovered that in the period I arrived here, Mr. Greenspan was worried about the low unemployment numbers. In short: we could have worked and it would not have destroyed the US economy.
I have heard that same story from some Danish friends and others I have met from Sweden and Finland.
Which also takes a generation. Increased immigration is the other option… it of course we aren’t doing that anymore.
The natural time scale for the pendulum swings is measured in generations, not election cycles.
People at the bottom of the labor market are there because they have no leverage. At will contracting kills employee leverage. Do these ideas change that?
Extremely interesting . . . especially since Dube both acknowledges the importance of supply and demand on wages (this is why tight labor markets are important to increases in wages), but also the importance of policy choice, either at the company level or the political/societal level, in labor share as well. Will have to read the book.