Arindrajit Dube on Wages - Paul Krugman
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Arindrajit Dube on Wages
Labor economics you should know about
Jun 20, 2026
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I often think of labor economics as a role model for the field: a subfield in which theory is disciplined by evidence and (most) researchers are willing to listen to that evidence even when it challenges their preconceptions. And hardly anyone does modern labor economics as well as UMass Amherst’s Arindrajit Dube, who has an excellent new book out. I talked with him about that book and the state of labor more generally.
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TRANSCRIPT:
Paul Krugman in Conversation with Arindrajit Dube
(recorded 6/18/26)
Paul Krugman: One of the most satisfying parts of economics, which doesn’t get as much attention as it should, is labor economics. It’s obviously important. Most of us work for a living, or at least pretend to work for a living. But also it is a field, a subfield you might say; more scientific than almost anything else in economics, really evidence-based. You’ve had multiple revelations where the data have actually changed the way people, myself included, have thought about stuff. And among the most effective, prominent practitioners of modern labor economics is Arin Dube, who has a new book called The Wage Standard. And I thought we’d take a break from all the other stuff going on and talk about Arin’s work. So hi, Arin.
Arindrajit Dube: Hi Paul, nice to see you.
Krugman: Yeah, welcome to my virtual studio. Why don’t you talk just a little bit about The Wage Standard and what you’re trying to do, and then we can get into the broader labor economics issues?
Dube: Yeah. So, I wrote a book. Here it is.
Krugman: By the way, we mostly don’t do that in economics; we write 5,000-word articles.
Dube: Exactly. Paul, of course, you’ve written many amazing books. But economists don’t usually write books. We publish articles.
Krugman: That’s right.
Dube: And so it was actually a big deal for me to sort of think about, did I want to write a book? And I kind of went for a number of years and I said, like, “Oh, well, I’m not writing this book for other economists as a main audience,” though of course, I’m very happy for other economists to read it, but I wanted to try to have a broader conversation, and I needed to be clear that I wanted to know what I was going to say in that conversation.
And so here’s basically the main point of the book. The main argument is that Americans deserve a raise, that most American workers actually could get paid more and should get paid more. And there are really good reasons to think that. You know, the market has not delivered what could be a sustainable but higher wage for those in the bottom and lower part of the income distribution. So that’s basically the core idea. And I try to bring in what we know about the research that I think has really blossomed in the last decade or two decades on a bunch of topics when it comes to understanding the labor market.
I was writing this book at the beginning of the pandemic and especially 2021. And it was really interesting because this was one of the more remarkable episodes in the labor market that really highlighted a lot of things that I was actually talking about in the book. Of course, it did it in a very messy way, because there were lots of things happening during that time. But it made for a very interesting process where I felt like I was writing the book and the world was writing itself outside, which was both exciting and challenging.
Krugman: Okay. I said that labor economics has been revelatory. When I was not young, but younger, I think most economists circa 1990 would have thought of the labor market as just being a market of supply and demand. And where they crossed determines wages, and there’s nothing much you can do about it. And if you try to change it, you do so at your peril; bad things will happen. And as you say in the book, and in many of your writings that I’ve been following on all this stuff, that’s something that really, really changed. You want to talk about what happened?
Dube: Yeah. So, one really interesting thing is to think about how wages are set. And we could start with the basic supply and demand story, which basically is that there’s demand for workers of different skills and then there’s supply. And depending on the supply and demand conditions, you’re going to have different wages, a different skill price. And let me be clear, I think there’s a lot of important aspects of that that actually matter, but it’s also incomplete. Because here’s the thing: if the market really worked like the textbook supply and demand story, basically workers of a particular type would just get paid the same—that’s the skill price. But in reality, it turns out companies have a substantial degree of discretion in setting pay. And you can start to see this by just looking across companies hiring similar workers, but choosing to pay someone different.
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. UPS has maybe 37% of the workers; a few years back, they were paying less than $20 an hour. For FedEx, it was more like 60%. And so, of course, that’s just one example, but you have others. Like, look at Walmart versus Target. It turns out that Walmart tends to be paying somewhat lower than many of its other similar, large retail competitors. And the list goes on. But this is not a new observation. Labor economists who were studying this in the mid-20th century had gone and collected surveys and understood that, you know, factories in the same labor market could be paying different wages.
But here’s what was not fully convincing: how do we know that it’s not maybe somewhat of a different skill mix? Maybe these companies are similar, but they’re hiring somewhat different types of workers the pay difference reflects that. So that argument held sway for decades until we had better data. And this is where what you say about labor economics, I think, really is right. And part of that has been our ability to really get much more granular and high-quality data, including administrative data linking pay for virtually most people in the labor market. And you can track them as they go from company to company. So you could say, “Hey, actually, what happens if the same person moves from Walmart to Target? Do you see they’re getting a higher pay?” Because you’re holding their skill set constant there. And so this kind of data and this sort of research design helped establish that actually, no, it turns out there is a substantial amount of variation in pay that comes from companies choosing different types of pay policies. And that’s a big part of the argument in my book, more broadly, that there are choices we have made.
You know, if we wanted to go back and look to see what’s happened to productivity and what’s happened to wages since 1980, productivity has grown much more strongly than wages—maybe not as strong as it did in the postwar era, but nonetheless, it grew a lot more than the pay for the typical worker, certainly pay for those at the bottom. And one of the arguments that I make is that this reflects choices made in a variety of places, and that starts from choices at a corporate level, different companies choosing different pay policies, all the way to policies that are being made by state and federal government. But the core part of it is like, why does that make any sense? It doesn’t make much sense to talk about companies choosing pay policies if the market is just your supply and demand. There’s no role for saying, “Are you doing the high-wage strategy or a low-wage strategy?” That’s a nonsensical question in a perfectly competitive market. But it’s an absolutely sensible question to ask when companies have some degree of wage-setting power.
You know, economists have a funny word for this, right? Monopsony. It’s a funny word. But the basic idea is really straightforward. You know, companies are making a choice there. You could go for a higher wage strategy or you could go for a lower wage strategy. Now, if you’re paying lower wages, you are going to have some more people quit and you’re going to have a somewhat harder time recruiting new workers. But the key thing is, it doesn’t mean that if you pay below a hypothetical market wage, everyone bolts, right? So you actually face a meaningful tradeoff of exactly how much more to pay or how much less to pay, and different companies end up choosing different amounts.
And this is also where—and this is even more recent, really in the last, you know, 5 to 7 years—we have seen a really big increase in research on the topic of monopsony, so we can really better understand exactly how much wage-setting power companies have. And it just sort of turns out that if a company’s choosing to pay, let’s say, a 10% lower wage, they’re going to have higher quits. Maybe about 14% higher quits. I just finished doing a review for the Journal of Economic Literature, and that’s basically where it sort of lands, and the quit rate is just not super sensitive to wage. So this gives employers a degree of discretion. And they’re going to do a couple of things that are important. First, different companies may choose different strategies. That is what creates these differences across companies. And the way companies have made those choices has really been different in the arc of history.
Krugman: Okay. So that’s where actually I came in on this topic, which was a classic paper by Claudia Goldin and Bob Margo. You know, I grew up in a world very different from the world where you grew up, with much more equal wages than we have now. But it turns out that wasn’t something that gradually evolved. It happened in a few years, basically during the New Deal and World War II: the Great Compression.
Dube: Absolutely. Yeah. And so that’s a story that has been told. But I also tell it with sort of a labor market focus. And a key part of that was actually creating a set of collective bargaining institutions, starting with the National Labor Relations Act; we had an upsurge in union organizing. And I highlight some more recent work that has been really careful to try to actually understand the causal effect of that unionization, for example, on the wage structure—work by Henry Farber and coauthors that really documents this very carefully. And it’s not just in the National Labor Relations Act. It’s also during the war. The Roosevelt administration actually helped encourage an increase in unionization. And that had a lasting impact on pay setting.
So this is basically where, after the end of the war, we had what is called the Treaty of Detroit, which was the landmark agreement, as coined by Fortune magazine, between United Auto Workers and the big three automakers, which spills over into the nonunion sector and other parts of the economy through this pattern bargaining process. But all of that created something very different than we had in the early 20th century. It basically created a set of mechanisms that helped ensure wages stayed relatively well tethered to overall productivity. And wages, both at the bottom and the middle, stayed tethered to the top. There were lots of issues. I don’t want to romanticize the 1950s or early 60s. But when it came to how wages were determined, it just meant you had broader based prosperity.
Krugman: So in the wage structure there are social institutions that set norms and so that’s part of it; the thing is much more sort of a surface on which you can move back and forth based on institutions. That was one of the lessons I took from the Great Compression. And now you’re saying that there’s much more of that. And also that you can get away with it. I would say that if somebody now proposed something like what happened during the New Deal and the war, The Wall Street Journal would be running nonstop, fire-breathing editorials about how this will destroy the economy and lead to mass unemployment. And your point is that it doesn’t, because of the range of discretion that companies have in setting wages.
Dube: Exactly. And those range of discussions in some cases evolved and were forged in the fire of union organizing and militancy in the ‘30s and ‘40s, and other times. There are ones that come up in an era where it’s largely nonunion workplaces that are expanding—for example, Walmart in the 1980s—and in an era when there’s very different ideologies about how businesses should behave.
So the entire shareholder primacy revolution that sort of happens in the ‘70s and ‘80s, turns out had a real impact on how wages were set. I talk about this in the book. Research by Daron Acemoglu from M.I.T. and coauthors find a really interesting fact. So it turns out that actually, most businesses are not run by people with a business school degree. I actually didn’t know that. Even today, that’s actually the case. But the share that actually have a CEO with a business school degree has been rising quite, quite steadily. So what happened, for example, in the ‘80s or the ‘90s, when a company moved for the first time to a CEO with a MBA? Sometimes it’s because maybe someone retired or even died, you know? It sounds kind of grim, but actually it makes for a good natural experiment where, almost like by random, you introduce a CEO with a MBA for the first time. And what’s really interesting is that it leads to a very clear reduction in pay: about a 6% reduction in pay for workers overall, and about a 9% reduction for blue-collar workers. So the labor share falls by about five percentage points. That’s the amount of money going to workers versus owners. And of course, CEO pay rises. Now you may say, well, maybe that happens, and that’s just like the cost of running the business better, right? MBAs probably raise productivity. Wrong. It has no effect on productivity compared to comparable businesses. So it’s purely a rent transfer, as we say. Meaning, you’re taking money from one group and giving it to the other. In this case, the money is going towards owners of capital and high-income managers, and away from the workers, especially blue-collar workers.
Krugman: Wow. I always thought that the Harvard Business School was evil, but I didn’t realize it was quite that evil. So that’s pretty impressive. That’s really a significant impact on sort of the nature of our society that comes from almost an academic doctrine.
Dube: Absolutely. This is sort of like ideology. It’s ideology, not skills that is explaining this important change here. And, in fact, this turns out to have played a non-trivial role in the fall in the labor share in the United States, for example.
Krugman: That’s a really funny thing for me. Economists are supposed to be hard-headed, but in fact, if you really look at the data, and really do economic science, it says that ideology matters a lot.
Dube: That’s right. And that’s one of the most important things. The late economist Alan Krueger once actually told me—well, he told us on Twitter in a conversation with me—that the idea that core theory is falsifiable and testable is a really big idea. And that is exactly right. Because if you start with saying, “Well, I’m pretty sure the labor market works this way,” and then I come and tell you, “Oh, actually, you know, it turns out this MBA CEO comes in and pay falls,” so you’d say, “Well, there’s got to be a really good explanation for that that is consistent with my model.” But it’s certainly not because the model is false, because it can’t be. And that basically highlights, in some ways, the conversations we had about the role of the minimum wage, which is something we could talk about as well.
Krugman: I want to come back to wage structure for a second. When I say that labor economics is especially good or virtuous, or in some way special, it’s because there’s really this use of natural experiments where something happens and just looking at it—at least on a couple of major occasions—it has contradicted what most economists believed. And I do want to come back to wage structure, but minimum wage is the classic. It’s an extraordinary story. You could probably tell it better than I can. To some extent it’s where you came in, but it’s definitely where Alan Krueger and David Card came in. So let’s talk about that.
Dube: Yeah. So maybe one thing just as a background for listeners: the United States, of course, introduced a minimum wage as part of the Fair Labor Standards Act in the 1930s, and during the ‘40s, ‘50s, ‘60s, and even ‘70s, the minimum wage was updated fairly regularly. You could have a Republican president or a Democratic president, or Congress, but it was generally updated and kept up with sort of like the typical or the median wage and even overall productivity and so on. That all changed in 1980, when Ronald Reagan came into power and he didn’t increase the minimum wage; he refused to, because he thought this was a bad idea. And this was also a time in the early ‘80s when, of course, we had real, still high inflation. So the combination of the fact that the nominal minimum wage just stayed put and there was inflation meant the actual real value of the minimum wage fell a lot. And so that had a really important impact on wage inequality at the bottom. It reduced pay for roughly the bottom 30 to 40% of the workforce. And so we went for basically a decade almost at this time without raising the minimum wage.
And we have now had several of these long stretches. The most recent one is particularly long: it’s 17 years since we have actually raised the minimum wage. And so that’s a very dysfunctional way to set policy. But here’s the silver lining. The silver lining of dysfunctional policies is that you have natural experiments. So what happened starting in the ‘80s is that states started to come in and raise their own minimum wage. And so you started to create all of these little natural experiments. And this is really what began this literature—it’s called the new minimum wage literature—which started to look to see, ‘hey, New Jersey raised its minimum wage in 1992, but look, neighboring Pennsylvania did not. Eastern Pennsylvania and New Jersey are not super different; they’re right next to each other. There’s a lot of similarities, maybe sharing similar types of economic shocks and so forth. Why don’t we compare to see what happened?’ And this is exactly what Alan Krueger and David Card did. They went and surveyed fast-food restaurants on both sides of the state border, and then went back a year later and said, “Well, let’s take a look. What happened? Didn’t we actually see a lower number of jobs in New Jersey?” And what they found really shocked the profession. It turns out, not so much. In fact, not really anything we can see. And, you know, this was really kind of an earth-shattering discovery, because it challenged the core model of the labor market: the labor market is supply and demand, that’s it, there’s not much more to it, just like any other market. And this was really hard to square with it. And I think this led to kind of an emergence of a whole literature.
And there are also things written that are very critical and, you know, not very polite about Card and Krueger. But, you know, it led to a lot of debate and also follow-up work, which is the way science progresses, if it’s doing the results that they’re replicated—
Krugman: Yeah, the results have been replicated now many times, and you’ve done a fair bit of that. Because there are so many states and so much asynchronous minimum wage increases that you get results. And people might say, “Oh, it’s just fast-food workers in New Jersey.” But it turns out that we have now lots and lots of evidence that says, hey, these minimum wage hikes do not actually seem to cost jobs, or at least not significantly. Right?
Dube: Yeah. So I think that my sort of contribution to the literature in our 2010 paper could be probably summarized by the word “many.” We see many of these and for many years, not just one short impact. And what we found was very much along the lines of what Card and Krueger had found. And even more recently, we updated that with more data, and we’re continuing to find very similar effects. In fact, just a couple weeks ago, I put out a Substack post that really sort of leverages, in some ways, an important fact related to what I said—that we’ve not raised the federal minimum wage for 17 years, and that means 20 states have today a $7.25 an hour minimum wage, which economically is sort of equivalent to not having any minimum wage. It’s so low that it barely affects anyone. So we’re running this basically just more than a generation-long experiment where you have about half the country—a little less than half the country—with essentially no minimum wage, while the other half raised it sometimes quite substantially, or comparable to some of our European peer countries. And that creates this very sharp divide.
But it also creates a divide that makes it very easy to see what is going on, because you don’t have to do a lot of fancy, you know, econometric statistics to really tell. Just plot, for example, as I do: what’s the restaurant wage in these two groups of states? Well, it turns out there’s a big gap that’s opened up, like maybe an 8 or 9% average earnings gap for restaurant workers. What happened to restaurant employment? It looks pretty much like a flat line. They’ve been growing very similarly. Per capita, restaurant employment has been very similar. And that just makes it very hard to look at that very simple fact and say, “No, I’m pretty sure it’s killing a lot of jobs,” because where is (the data that proves) it?
I do a bunch of other things, but this sort of highlights how, for a very long, long stretch of time, we’ve split the country in some ways in half. And by the way, some of these states that have raised the minimum wage have also been more Republican-leaning. A lot of times when the minimum wage is on the ballot, it’s in red and purple states. In fact, this week in Oklahoma for a variety of reasons it didn’t pass, but it has passed in Nebraska, Florida, Arizona, and so on and so forth. So I think this sort of highlights, in some ways, one of the partial successes because we have been able to raise the minimum wage in about half the country. And as we have learned more, I think it has led to policymakers actually experimenting with potentially higher minimum wages. And that has, I think, helped create and raise wages at the bottom, partly offsetting the growth in inequality that had occurred over decades after 1980.
Krugman: So I read the Substack post and I noticed that you had some, I would say discreetly acerbic comments for some of the people who refused to believe it. Or maybe it was a later comment of yours. But there have always been some economists who keep on insisting that this cannot be right, either because they believe in Econ 101 and that demand curves slope down, or at least implicitly, a little bit of a political critique because obviously a pro-minimum wage argument or something that seems to say that raising the minimum wage is okay has a kind of political side. But what’s actually striking is how little of that there is—that labor economics makes economics look good in the sense that if you have kind of overwhelming empirical evidence that contradicts people’s preconceptions and maybe even their political slant, people actually mostly go with the evidence. Am I being too idealistic?
Dube: I think that’s generally right. I think in general, people have certainly updated their views. It’s not that there’s only a single answer to what does the minimum wage do, regardless of how high it is or something like that; it’s going to differ. And so, there are disagreements like, “Well, where is the turning point?” But that’s part of good science. But to be clear, there will be studies that claim that no, actually the minimum wage always causes job losses. And even just this week, there was one that sort of argued that if you don’t control for population differences, if you just look at the number of jobs, well, the number of jobs in California has grown less than Texas. Most economists, of course, look at what share of people are actually working—that’s the employment rate. But if you simply look at the number of jobs, that actually might suggest that it’s falling.
Now, here’s the thing: it has been falling in these minimum-wage-raised states compared to the 20 states that haven’t raised it for four and a half decades. That’s largely driven by college-educated workers, because, of course, we have more college-educated workers moving to the Sunbelt. So, I think this is sort of a silly argument, but it is an argument that has been made. But it goes to show that there will always be studies. But if you look at the body of evidence overall, it suggests that the typical study finds very small employment effects, and especially in studies published in the last ten years, it’s basically around zero. And I think that has had an impact.
And I think economists have sort of updated—I would say probably especially younger scholars. Sometimes, you know, as we get older, maybe it becomes harder for some of us to revise our priors, but younger scholars are therefore really important.
Krugman: Yeah. I occasionally find people digging up some old quote of mine where I said minimum wages reduce employment, and it’s a 30 or 35-year-old quote, and I get to use the line, “When I see new evidence, I change my mind. What do you do, exactly?” There was a flurry of stuff showing up in my inbox claiming that California raised the minimum wage and it’s a disaster, and the evidence is in. But I guess the evidence actually goes the other way now, right? So what happened in California?
Dube: Yeah. So here’s the interesting thing. California established a sector-wide minimum wage for the fast-food workers, higher than the overall minimum wage. So this is a case where this is applying for larger chains with 60 or more locations across the country to have a $20 minimum wage. And at that time, I think the minimum wage was $16 overall in California. So what’s interesting is this is much higher. And it’s also partial coverage, meaning, you know, only part of the low-wage workforce is covered. So you could actually imagine there’d be more theoretical reasons to expect a more negative employment effect, because you can switch—maybe you can relabel workers who are delivery workers as, like, outsourced and so forth, and not covered. So anyway, well, you’ve now had about five studies that have looked at it, including one that I did. And, you know, there are some differences across the studies, but really, it turns out a big part of that is what kind of data is used, in a really surprising way.
So there are two kinds of administrative data sources that are really government data accounting based on actual payroll records: the QCEW and the QWI. And I know this is going into the weeds a bit, but it just turns out that one better captures the number of jobs at a point in time, and then the other looks at how many people are in a particular pay period. Now, this increase in wages also raises turnover because these are much better jobs now, so you have less people cycling through the same number of positions. And so there’s one data set that looks at a whole pay period; it seems to find a small reduction in employment. The other looks at a point in time and finds no change. And it turns out this is driven by the fact that these jobs begin so much better: people are not quitting so there’s just a lot lower turnover. But generally speaking, the overall range suggests that the employment effects were quite small—small positive in some cases, small negative depending on exactly how you do it—very large wage effects, and a very sharp reduction in turnover. So even in this very specific and very sharp and high minimum wage increase that serves as an experiment, if you will, it doesn’t show any clear predictions and projections about job losses so far.
Krugman: Okay. I want to cycle back just for a couple of minutes to the wage structure issue, where, again, there’s this kind of historical story which says that the United States became relatively egalitarian because of New Deal era and 1940s policies, and then became a lot less equal. It’s funny. I always blame what happened after 1980 on Ronald Reagan, but you’re saying it’s partly the Harvard Business School, but there’s also cross-national comparisons. Talk to me about Sweden and then maybe I’ll weigh in.
Dube: Well, I think we’ve both been writing about Europe and both visiting there. And so I was in Sweden for a while and partly talking about this book and also doing some of my research. What’s really interesting is that Sweden, of course, has been historically held up as sort of an egalitarian country, but it’s also gone through quite a bit of reforms in the ‘90s and 2000s, including scaling back partly some of the welfare state. And so I was really curious, like, where are they in terms of inequality? And it turns out that, yeah, if you look at their tax and transfer, they actually redistribute less than they used to. But the starting point, which is how much inequality do you have to begin with from the pay structure, that is still much lower than most other high-income countries. And the United States, of course, is the other extreme.
So, just one example: the gap between someone at the 90th percentile and the 10th percentile—that kind of is a good measure of wage inequality—between like the early ‘90s and today, it went maybe from 1.8 in Sweden to 2.2, a little bit of an increase. In the US, starting off much higher to begin with, it went from like 3.7 to 4.8. And it actually increases even more if you look at a broader time horizon. So it’s just a really important thing to understand: like, why is that? And we can go back to, well, is it because the Swedes are just a lot more similarly skilled between each other? Because that would have to be the reason. Or is there something else? It turns out it’s mostly something else, and that has to do with collective bargaining. And this is also a really important aspect of where people don’t fully also appreciate one really interesting and important fact, which is that in the United States, when we ask, “Is your job covered by union contract?” that question is almost the same as asking, “Are you a union member?” And of course, union membership in the US, maybe in the private sector, having something like, you know, 35% back in the ‘50s, is today like 6%. And so barely anyone overall is covered in the private sector by a union contract.
But here’s the interesting thing: if you went to France and asked what share of the workforce are union members overall, it’s like 10%. But 98% of jobs are covered by a union contract, right? Because what you have is sectoral bargaining. And this is a key thing which I talk about in the book. Sectoral bargaining was something that the US never really had. We basically had organizing and negotiating between the union and the employer at a company-by-company, sometimes store-by-store or factory-by-factory level, versus in a lot of our peer economies, what happens is workers and their representatives bargain with the employer and their representative at a sectoral level and at a national setting.
Krugman: Basically, sectoral level means that instead of getting a wage agreement with XYZ contractors, you got a wage agreement with the whole construction industry. And so even workers who are not members of unions, even workers who work at companies that have hardly any union members get the benefit of the negotiation. And so, Sweden’s an interesting case where they actually have high union membership.
Dube: Yeah. And Nordic countries generally, partly because of the way unions help provide some additional benefits, including unemployment benefits—that makes it more rewarding to actually join a union. But their coverage rate is even higher. And in countries like France or Austria, the coverage rates are substantially higher. So as a result, we have seen wage inequality not rise as much in a lot of other countries. And in Sweden, it’s actually been particularly low, and they’ve actually been able to retain it. And so that is a really important contrast.
So one of the things that I talk about in the book is that we can’t get to sectoral bargaining at the national level without a substantial change in labor law. And look, the reality is that past attempts at changing and reforming labor law have not fared well. But the good news is that we can actually get to pay standards at the industry or sector level state-by-state. And what’s even more interesting is we actually have started to see some of this already, and this really leans on a model that actually now comes from a different continent: Australia. Australia has basically a national-level setting of wage floors by industries and, within industries, by different types of jobs. And that’s done not through collective bargaining—they have collective bargaining on top of that—but this is basically a sector-wide floor that’s set. And again, Australia has lower wage inequality, substantially lower than the United States.
So, I talk about what the U.S. might look like if we had states do something similar. And like I said, I started to write this book in 2021. I actually had put out a survey proposal back in 2019. But in the last five years, we have a number of states that have started to implement some of this. For example, Minnesota has a sector-wide board that has representatives from workers and employers and the government to set pay in the nursing home sector. We have California that has a healthcare-wide minimum wage. Even more recently in the state of Washington we have a childcare sector board that just in the coming months will be issuing a set of wage floors in that sector. So we’re starting to see experimentation like this. And that’s important because if we’re trying to rebuild wages, not just at the very bottom that the minimum wage can really hit, but also those towards the middle, especially in the childcare or healthcare sectors, these kinds of jobs, you can actually raise pay there through these sectoral initiatives.
And I’m very excited to see more being done along these lines, especially because, you know, I don’t know what can be done in Washington, DC right now. But we don’t have to necessarily wait around for a better day to come in DC. We can actually start doing some of this now, more or less.
Krugman: So, it’s like the minimum wage is where half the states can do a lot on this broader issue of a more equal and better wage structure, even if things are totally stymied in Washington.
Dube: That’s right. And that’s one of the nice things about federalism in the U.S., that we do actually experiment at the state level. And in the best cases, some of the better experiments actually get adopted. It could also be that some not-so-great experiments are done and get adopted. But that’s the nature of democracy.
Krugman: Yeah. One of the areas where you really did a lot of the research and it was revelatory, but also, in a weird way, something where I found a lot of my sort of lefty friends not willing to believe it, was about wages post-COVID. So, let’s talk about that for a second. What happened?
Dube: So, around 2021 and 2022, of course I looked at wages like any labor economist. I started to look around and find something that was puzzling because, as we’ve known for a long time, wages have been rising faster at the top than the middle and the bottom. And this is the growing wage inequality story. But it was looking like wages right after COVID, when we were reopening, a lot of people didn’t have jobs, especially in the hospitality sector—we’d sort of shut down part of the economy.
So if in January 2020 someone said, “We are going to shut down some parts of the economy for a while, especially with low-wage workers, and then we’re going to reopen,” it’s like—here’s your quiz. If I could have given my class this question, like, “What do you think? What’s your prediction about what will happen to wages for low-wage workers?” I would have said wages would probably fall due to lower demand. And instead, it looked like wages were rising more at the bottom. And so this is what David Autor—my coauthor on this along with Annie McGrew—and I called The Unexpected Compression, meaning the compression of wages, reducing inequality—which is exactly what happened in the aftermath of the reopening after COVID, and led to a surprising amount of wage growth at the bottom. And it reduced maybe a quarter to a third of the increase in wage inequality that had occurred between 1980 and 2019.
And so this was really very, very striking. And we asked, well, why? And the reason is because we had a very tight labor market. There were a lot of job openings chasing workers and, as a result, it increased workers’ leverage. And it’s not just that there was more demand for workers—that’s true—but we also saw people leaving jobs. So we had quits from particularly low-paid jobs. This goes back to the issue of different companies with different pay policies: well, companies that were actually going for a low-wage strategy found it harder to hold on to those workers, and wages actually then rose more there. And this is the increasing of intensification of competition in the labor market that actually really helped boost wages.
In many ways, this was like: if we want the market to actually work well for workers, you need the market to be relatively tight. And in writing the book, what I’ve found was that, it just turns out between 1980 and 2019—up to just before the pandemic—there were about seven years of a tight labor market. We used to spend a lot more time with tight labor markets in the postwar era before 1980 than we did since. And this turns out to be another important part of that equation of: what did it take to have broad-based wage growth? Those seven years—if I just, like, snap my fingers and just erase those like some evil genius villain, what would happen? Well, if I went to the top of the pay distribution, it would make very little impact; the average wage growth would fall from 1.1 to 1%. Not much change. At the bottom, it would go from already a small 0.3% average real wage growth to zero. So the entirety of the wage growth at the bottom between 1980 and 2019 happened in a handful of years that was basically close to full employment: the late 1990s and the late 2010s. Under Trump I, those years also saw significant compression.
And this is why the post-pandemic period was a really important one. But it’s also very messy because, as we know, this was also a time of a large increase in inflation, a chunk of which was, by the way, global in nature. But nonetheless, people were very reasonably unhappy about it. So it makes for a difficult thing to extract the signal from noise. And this is why in the book, I really highlight also why even these other periods in US history were so important in actually raising wages, highlighting really the critical pillar that full employment plays if we are trying to rebuild the wage standard.
Krugman: Okay. What do you see happening now? My comment sections are full of, “Oh, it’s a K-shaped economy —the top is rising, the bottom is falling.” And people really refuse to admit that the compression ever happened. But also there are all these fears about AI. Everybody wants to know what AI is going to do, and nobody can honestly say that they know. But do you have any views on where we’re going right now?
Dube: Yeah. So the easiest part of that to answer is just to start with wages. The good news is that much of the compression that we saw has remained. The bad news is that the last year and a half has seen some take-back. Basically we have seen lower wage growth at the very bottom. The particularly bad news is, of course, from this year, when higher inflation has erased, as of now, pretty much the entirety of the real wage growth since Donald Trump took office. And so, that’s really bad. That’s not just at the bottom, but just generally. And so I think wages are not doing great right now and that part is largely just an unforced error of where we are today with having raised inflation, literally having caused a supply shock—inflation purely out of discretion, right?
But yeah, the other part—and this is the longer part and harder to say—is what we see not within pay, not wage inequality. Wage inequality has been an important part of inequality overall in the last 50 years. But wealth and the division between capital and labor. And looking into the future, that’s where my worries lie: where are we going? And I guess, the worrisome part of me thinks that, broadly, there are two possible ways that the current AI structure can go. My modal view is probably that I think it’s going to lead to moderate productivity gains. And how well that translates into wage growth partly depends on what we do in our other policy and institutional choices. But I think it can potentially be a source of possible wage growth.
The other—and these are two very polar cases—well, this is going to be the singularity. I tend to be skeptical of that view of an artificial general intelligence that really just dramatically transforms the world as we know it. It’s possible—anything is possible—but the other possibility is that actually there’s a bubble and then it bursts, and that leads to a downturn. And that downturn could be harmful. So, there are all of these possibilities and I, of course, don’t know which it might be. But there are risks on both ends where what I do know—and this is what I sort of talk a little bit about in the book—is that, again, it goes back to the word “choices.” I don’t think we need to think about what AI does as something that just happens to us. We can choose to have institutions and a governance structure that can regulate that.
You know what’s interesting, going back to Sweden, I was talking to folks in the labor movement there, and they, of course, have contractual language that requires negotiations over technology, and that includes AI. Where that goes is unclear at this time—it’s still early days—but that’s the kind of thing that we need to think about. So imagine having sectoral boards in the health care sector that, among other things, also sort of has regulatory language around how AI is used and how it can affect the workforce. So we need to think creatively, of course at the national level, but even more locally if necessary, about what that governance looks like, and understanding that this is part of the choice that we can make and not simply, you know, take the technology as just a force of nature that we just have to live with.
Krugman: Okay. So, choices. We can actually shape our future. Probably won’t, but can. Anyway, thanks so much for talking to me. And I’m sure we’ll want to come back in a couple of years and see how all of this played out.
Dube: Sounds great.
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So, what do they teach in business school? How to exploit people and get away with it?
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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
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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.
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greed is good as once famously said
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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.
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4d Edited
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.
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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.
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4d Edited
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.
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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?
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4d Edited
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.
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4d Edited
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
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You seem to have responded on the wrong reply bubble. I am not John.
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4d Edited
You are not, but John Augustine is - and he is in this "bubble". Some answers do not land in the proper spot. Confusing indeed. Bytheway, I found (again) interesting what you had to say.
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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”.
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3d Edited
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.
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4d Edited
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.
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Maybe someone should use the Citizens United case as an argument to sue owners and managers of companies, to see what the new excuse is.
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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.
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it is designed that way
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4d Edited
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.
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We "cut the cord" about two years ago. For news we have Haystack.
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Thanks for the tip.
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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.
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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.
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you just explained Costco
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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.
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Bring back Lina Khan!
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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.
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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 .
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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.
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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.
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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.
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Ah. Rather than enshittification of the product, you saw enshittification of the labor environment.
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2d Edited
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.
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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.
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Good work matters
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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.
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Visit Coal Mine No. 9 of the Carbon County Coal and Navigation Company Museum in Nesquehoning PA and learn something about exploitation.
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16 tons, great song.
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Exactly. Succinct, true, informative, entertaining.
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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.
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'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
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3d Edited
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.
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15h Edited
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.
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Apparently pissing away $400,000,000 in multiple bankruptcies and then getting $ shoveled to you from Putin is the way to great success.
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Side note: Ayn Rand's books are distributed for free to students at universities.
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4d Edited
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!)
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Enshitification.
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What you suggest here is that incompetent (thought to be uunnecessary) workers could be replaced by incompetent (uncooperative) AI. Facebook beat you to it
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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.
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4d Edited
Do note that one expert economist brought up the single example case FedEx vs. UPS, with the text I quoted from the post:
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.
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Yup!
By my experience, FedEx misdelivers about HALF their packages, UPS about 5-10% and USPS as close to 0% as I can tell.
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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 .
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Unions unions unions?
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Employers use their collective power, often in cartel-like "associations", why shouldn't we?
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Absofuckinlutely. See my comments below.
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Unions happen when management treats labor inhumanely. That is the last best option.
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Mgmt will always treat labor inhumanely. Mgmg are Republicans, and that’s their nature. So, yes, unions unions unions.
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4d Edited
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.
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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.
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Insightful about the world of work. I still hold the Cor-Pirates and Wall Street Greed Supported by Anti-Labor Politicos and Scotus as the obstacles to Equitable Wages in America. Americans are hard workers and deserve more!
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I like 'Cor-Pirates'!
The dominant economic fact of the last 50 years is the transfer of all the gains in productivity, also roughly the entire value of all US stocks, from the 90% to the 1%- $79 trillion at last measure.
This, IMO accounts for the low Michigan Consumer Sentiment Index, the 'Deaths of Despair' documented by Case & Deaton, and the huge enthusiastic crowds at AOC/Sanders 'Tax the Rich!' rallies across the country, including Red states.
The average person has become aware that 'something's wrong', even if they don't know what it is. Corporate media should be telling ppl about this every day.
They don't, because the media are mostly owned by billionaires.
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Remember the long storied tradition of the Supreme Court ruling against regulating hours worked and against parts of the New Deal. And expanding Medicaid, which could have been a great way to get away from employer supplied insurance.
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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?
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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.
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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.
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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.
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Remote work, sometimes spread across the globe, puts a very different flavor on those possible choices.
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4d Edited
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.)
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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.
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So what accounts for the gender gap in wages?
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Sexism and corporate immorality because (as monopsonists) they have too little competition.
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Differences in education, experience and time out of labor force for pregnancy/child raising
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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?
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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
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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
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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.
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4d Edited
The headlines frequently refer to equivalent jobs, but many of these studies are based on the idea that all jobs with similar education are equivalent. In practice, a BA in liberal arts doesn't pay as well as a BA in an engineering discipline on average.
So the headline numbers need to be controlled for how many fewer women are in high paying careers, such as STEM, management, or skill premium trades (eg. electrician, welding, plumbing).
Of course there are sexist reasons that make these roles harder to enter or keep for women, but the wages in the roles are much closer than the loudest equal pay advocates imply.
After that, many women run their careers differently.
The result is a 1% to 10% gap depending on the career. That is mostly old fashioned sexism.
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4d Edited
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:
- 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.)
- 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!)
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Thanks for documenting the facts we knew were behind the fog of MAGA lies.
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Gemini summary:
1. Distortion of "Real Wage" Metrics
CPI Blind Spot: The Consumer Price Index (CPI) does not track changes to means-tested subsidies.
Hidden Costs: The expiration of expanded ACA subsidies on January 1, 2026, raised premiums and copays for 24 million people. Because CPI ignores this, the standard measure for "real wages" is artificially inflated and does not reflect workers' actual financial strain.
2. Immediate Impact: Subsidy Expirations (On-Exchange Coverage)
Mass Coverage Loss: Early data shows that 3 to 5 million people have already dropped their healthcare coverage due to the expired subsidies.
Administration Cover-up: Leaks indicate the administration is delaying the release of this data and plans to falsely claim the drops are a positive result of "cracking down on fraud."
3. Future Threat: Medicaid Work Requirements
Coming Cuts: The One Big Budget Bill (OBBB) will introduce strict work requirements and restrictions for expanded Medicaid starting in 2027, threatening 20 million recipients.
Flawed Research: The administration is using highly questionable data to argue that these cuts will reduce poverty by forcing people to work.
Systemic Chaos: The author notes that Medicaid eligibility dictates on-exchange eligibility. Adding complex work requirements will overwhelm the byzantine computer systems of 51 distinct state and DC agencies, causing severe administrative failure and wrongful coverage losses.
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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.
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3d Edited
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).
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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.
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Whoa. Way too much for an online post. Informative. Challenging.
I’ll have to buy the book.
Thanks.
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I’m old enough to remember
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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?
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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.)
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“Lowest performing” or “spectacular employees”, which one was it?
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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.)
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3d Edited
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.
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4d Edited
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.
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4d Edited
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.)
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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.
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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.
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The defense industry is the perfect example of barriers to entry. It's interesting that relatively few people have commented on how SpaceX could come out of nowhere to grab the rocket business from Lockheed/Boeing, a market that they absolutely owned for decades. SpaceX should have been crushed by the incumbents. It looks like Lockheed figured the launch market wasn't even worth defending. Presumably, their margins are better elsewhere.
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That was and is a mystery to me too.
Did it happen in the period that Boeing top mangement re-located from Everett, WA, to Chicago, IL?
Did someone write an article about it? If so, do you have a link?
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I haven't seen anything yet. However even at Lockheed the economics of launch services were viewed with some suspicion, in particular, heavy lift. You get a couple of orders, the satellites go up, then the satellites last 10 years plus, during which time, there are no more orders, but you've got a standing army of people on the books being paid to not produce anything. Spacex may soon discover this.
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3d Edited
As I understand it, Mr. Musk is writing his own orders and will not stop until a whole web of satellites is located around the earth. These need to be maintained, replaced. People who "do satellites" are unable to do anything else? How about designing small dwellings that can defy storms, rain, hurricanes, floods, etc. also usable on the moon.
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Worse, they cranked open tins from India filled with H-1Bs.
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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)
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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.
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4d Edited
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.
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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.
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Similarly, unlike increasing the production of widgets, increasing the supply of (for example) doctors takes a decade or so.
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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.
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Which also takes a generation. Increased immigration is the other option… it of course we aren’t doing that anymore.
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The natural time scale for the pendulum swings is measured in generations, not election cycles.
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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.
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I have heard that same story from some Danish friends and others I have met from Sweden and Finland.
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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?
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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.
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If only this sort of discussion made it into the main stream media, TikTok, Facebook, etc. Its really great to see a facts based discussion, and this one was particularly timely and interesting. The chances of any of this filtering into the the general media environment, or Fox news (yeah, right) are pretty slim.
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An important topic. And, WOW, what a guest! Not just facts, but succinct explanations of the evidence behind his learned statements of fact.
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I wonder how much the attitude of the generation that fought in World War II has to do with it. Essentially the entire country participated, one way or another in that war. The Black soldiers came back and the Civil Rights Era began. The GI Bill provided millions of people who previously had been excluded the opportunity to go to college. The wake of the failure of the proto-Epstein Class in the Great Depression found the empowerment of average Americans in the War.
But if we guess that average birth year of Tom Brokaw's "Greatest Generation" was about 1920, they would have been retiring en masse and leaving the workforce through the 1980s ... which is also when the Epstein Class started to reclaim control over the federal government.
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Please reread Frederick Taylor's Principles of Scientific Management. How workers are treated matters. That affects employee loyalty and wages.
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Ah yes, unlike other markets, the units of labor can protest and politic and even unionize. How would anyone expect it to operate as simply as a commodity market!
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Harvard Business School???
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Ok, that is what Paul Krugman said.
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Truly amazing discussion. A privilege to have access.
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I wish my 1970 Economics course were half as clear and interesting as this discussion. I might have been able to stay awake! Who knew?
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I loved economics. I studied it in late 1970s early 1980s but maybe I simply had good professors who challenged us and made it fun. It was kind of like what you see in movies about law school where they asked hypotheticals about the scheduled reading and you had to argue your position. They also did this in business law, so it was fun. It was so much fun that I still think about economics every day. So, I was thrilled when internet made things available like Krugman on NYT and people could chime in and debate and express their thoughts on those issues. Now we get to do it here too. Big fun.
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Lincoln Electric, a large international welding machine manufacturer, is an interesting case for its approach to compensation.
The average worker makes more than the average industrial worker in wages and, based on performance metrics, LC 33% of pre- tax profits with all employees. Turnover is low and the company does not have to rehire and retrain after crashes like 2008. It is not unionized and uses a piece work model.
It is, unfortunately, unique. Even after a book (Spark: How Old Fashioned Values Drive a 21st Century Company) told the story and was on Princeton's top 10 economics books in 2010...the then President told me that not a single CEO called him for more information about how LC successfully pulls this off.
Perhaps because the executive income - lowest worker compensation spread is smaller.
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This targeted the large chain fast food restaurants, but how did the raise impact small businesses? Also, was inflation higher in the states that had a higher minimum wage. Loved this discussion, just know that these two arguments will be used against raising the minimum wage.
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An excellent and important discussion. Much of Republican ideology today consists of zombie ideas and policies that don't work, but won't die, kept alive by selfish, greedy, ignorant and none-too-bright ideologues who are immune to science, research, good ideas, and policies that both work and help people. Yes, Republicans are willing to help some people, but they just happen to be the same wealthy people who are trashing the planet and wrecking this country.
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Thanks for this column.
Here’s a dad joke that kind of fits: “The past, the present, and the future walked into a bar. It was tense.”
Happy early Father’s Day’, if it fits!
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Unfortunately, research and evidence don’t mean anything to the American right. Economists may Unfortunately, research and evidence don’t mean anything to the American right. Economists may have “updated their ideas,” but Republican politicians, who are the ones who vote on setting the minimum wage, don’t rely on research or evidence. They have ideology and that seems to be all they need. The American right is opposed to unions and the role that unionization played in creating the middle class means nothing to them. As union membership has dropped and the wealth disparity in the US grown, the policies of the Republican Party favor increasing wealth disparity.
One “updated their ideas,” but Republican politicians, who are the ones who vote on setting the minimum wage, don’t rely on research or evidence. They have ideology and that seems to be all they need. The American right is opposed to unions and the role that unionization played in creating the middle class means nothing to them. As union membership has dropped and the wealth disparity in the US grown, the policies of the Republican Party favor increasing wealth disparity.
One
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Expanding on a comment thread below - in software engineering, the range of productivity is far higher than the range of salary - at least a factor of 3 for complicated projects (and sometimes far more). The best choice a company can make is to have a small team of very good engineers (not junior engineers) - far more productive than an equivalent mixed team of levels at the same total cost.
But almost every large company forgets this and tries to make up with bodies ("mythical man month").
The point is that companies often aren't very good at even assigning productivity vs wages. Often a "low wage" strategy is self-defeating, but can persist in the right power dynamics - at least until the company collapses under its own output crap quality.
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Truly enjoyed this program and thank you for bringing wage information to the forefront. I chose an MS over an MBA at Northwestern. Im inclined to believe that those who obtain MBAs, especially from the better known programs, come out with inflated egos resulting in devaluing workers. Clearly there is absolutely no reason that CEOs and other executives are paid so much more than the people who do the work. Reagan ruined the American economy for labor in so many ways and now we have oligarchs trying to wrest away our democracy.
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I've always wondered how much labor economics plays into Federal Reserve decisons/policies. The board seems to be made up of bankers that I would think have a background in monetary econ or maybe business administration. However, the Fed's job also involves decisions concerning the labor market. In short does labor have any kind of serious seat at the table of the Federal Reserve?
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Shareholder primacy is profoundly anti-American. It divorces the interests of the business class from the rest of the country. They should be made to understand this by any means necessary.
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And let's not forget the economist, Milton Friedman, who said that the sole social responsibility of a business is to increase its profits and maximize value for its shareholders (per Google). This basically, gives owners and managers free reign to keep wages low. This also moves some of the business' responsibility for wages over to taxpayers who pay for the social safety nets. Anecdotally, I'm a retired academic (accounting) who also taught ethics in the MBA program. When discussing a case that involved damaging the environment, or testing on animals, most MBA students were appalled and wanted the damage stopped. If the case involved firing 10,000 employees to boost earnings, most MBA students didn't see an issue. I had to give hypotheticals of employees who no longer had incomes and how that loss of wages impacted everyone, and everything around them, i.e., stakeholder theory. Most MBA students couldn't see beyond the direct impact on earnings because the ripple effects were not discussed in their other courses.
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Something that often bugs me is implicitlly assuming something that doesn't exist. "Assume a subatomic particle at rest on your inertial frame with the mass of a bus." Hah!
when you say "Market" you automatically imply a mechanism where buyer and seller are equally matched in information and power. So, in that sense there is no real labor "market." One can come closer to that ideal if the seller is a labor union. Atomized individual workers lack both criteria to constitute a true market. Consider non-economic forces at work. I maintain that the "30 Golden Postwar Years" were the Product of FEAR. Fear on the part of Capital of the return of 11MM highly trained killers from the war theaters, and with demands and a well-developed "Band of Brothers" ethos. For the first and only time in American history the government put its thumb on the labor side of the contest. If there was trouble who ya gonna call? Not the Army, because those guys WERE the Army. But when "The Greatest Generation" started retiring Capital began to snatch it all away. Only widespread and powerful unions can match the concentrated power of corporations. So to me the real question is why so many workers oppose unions. Union workers get better pay, benefits, and working conditions than non-union counterparts. My partial answer is racism. When unions were lily-white they flourished. Force them to be colorblind and support falls off.
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That explains my experiences with FedEx (FedUp)!
UPS usually (~80-90%) delivers packages correctly; the US Post Office, as close to 100% as I can tell.
FedUp misses about HALF the deliveries, once delivering 100 miles away, once delivering to the alcove where the homeless guy sleeps instead of the business office address with ppl behind the desk 30 feet away, frequently blocks away to some random address, with a photo of a door that looks nothing like mine. I had to write my apartment number on the floor in front of my door so photos of doors in my building could be disproven as deliveries 'to me'.
I now tell EBay sellers NOT to use FedUp, instead USPS.
I had a check requiring signature chase me around for two weeks as FedUp pretended to try to deliver it. It got sent back to the sender, who I told to send it by regular mail- it arrived in a few days.
FedUp is the pits, and there's a QUALITATIVE difference in their crummy low-wage service.
Have others had similar experiences?
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Can "range of discretion" be quantified? Also, can market power be quantified, and might power be positively correlated with discretion?
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This is one of the best economics discussions I’ve ever seen. However, it left me with more questions than answers. Here are a few.
How do wages link to wealth transfer and economic inequality? Are those where labor cost savings from low wages go?
What is the cost of constantly refilling low-paid positions? HR overhead, supervisory/ management distraction? Training? When does this become a false saving?
Does local competition factor in anywhere? If cost per unit is critical, that can be hard to change with people paid low end wages. They lack knowledge, motivation and commitment to do better than good work at high process speed, with few errors or delays. Large customer demands can adversely impact providers, especially those with demanding owners. This is the ten pounds in a 5-pound sack problem. It gets especially difficult when new competitors ‘buy’ their way into a market with below-cost pricing.
How long will it take before the Ronald Reagan effect dies and stops distorting economic thinking, i.e. the death of trickle down?
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I only have two paid substack subscriptions: Paul K and Tim Snyder. Between the two of them I get all the news I need - or can stand.
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what about the good and bad reputation of companies. c9stco is beloved and has a good reputation vs Walmart, for example, which is only viewed as the cheapest place to buy dog food.
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Please comment on Meidas Touch “Elon’s trillion dollar Trump enabled Fraud” from 6/19.
If this is accurate it seems the financial press should be hair on fire sounding an alarm.
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It's a really complex issue. To me the classic case of where labor is severely underpaid, and therefore workers are fleeing the sector in droves, is motherhood.
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It seems clear that when capital is allowed to organize to facilitate collective bargaining (which is in part what corporations are) while labor is forced to bargain one worker at a time, capital is going to capture more of the productivity gains than labor. Minimum wages are just labor organizing on a much broader scale. Sector bargaining again allows broader coordination of labor side bargaining, so again should increase labor’s share of the pot.
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Very interesting discussion, but I would have liked to see more mention of benefits and wages. For example, do Walmart and Target have similar benefits? Also, what about the geographic differences in cost of living and its influence on wages. Also need to expand on whether schools with MBA programs are now teaching about ethical treatment of the workforce.
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Many of those can be quickly answered by Google.
A minor note about MBA ethics classes. Yes, they exist and are frequently required. But it is clear that many MBAs see it as training in how to appear to be ethical.
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For those in the bottom wage market, it makes sense that a lack of financial intelligence would lead them to accept jobs with low pay, while similar jobs with higher pay are available. Taking advantage of ignorance sadly seems to have become the accepted norm. It is, and has been up to leadership to bear the responsibility of setting a living wage.
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Can anyone explain why/how corporations are keeping so much more of the GDP as profits?
https://fred.stlouisfed.org/graph/?g=fPLQ#
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Do higher wages attract more qualified and, therefore, more productive people that would then make up the wage difference in production? The answer is “yes, it can”, but there would be upper and lower limits depending on the job. In other words, at some point a higher wage results in no better production. That’s why a minimum wage law needs to be narrow and based on wage polling and raw math. This whole subject is really very exciting, because higher labor wages also puts pressure on management wages and salaries.
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In some fields, ex. software engineering, the range of productivity is far wider than the range of salary - especially on any complicated project. I am sure other fields may be quite different - but at least for software and high end engineers, the company ends up with a big win (even though those folks are quite well paid).
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Paul, I’m reminded of the “Cambridge Controversies” as a grad student in the 1970s. The “win” by Cambridge Mass in the broad view of the profession looks hollow in light of the recent evidence by Dube and other scholars summarized here. Can’t wait to dive back in, starting with Arin’s book. Thanks for this excellent interview.
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I wonder if Dube and Krugman would state what increase in a federal minimum wage they would support and the rate of increase to get there. Would a federal minimum wage of $20 by 2030 be reasonable? Economists need to do a better job of publicizing the Card and Krueger paper and others that have similar findings.
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I think it important to also understand that the US Department of Labor and Industry - Wage and Hour Division only enforces to the minimum wage - $7.25 an hour - so in states without state and local minimum wage rates- there is no government enforcement unless the employees wages fall below $7.25 per hour. That means if an employee is promised $10.00 an hour but paid less but not less than the federal minimum- they have no recourse unless they are willing to file their own claim.
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The money quote (for me): "a good natural experiment where, almost like by random, you introduce a CEO with a MBA for the first time. And what’s really interesting is that it leads to a very clear reduction in pay: about a 6% reduction in pay for workers overall, and about a 9% reduction for blue-collar workers. So the labor share falls by about five percentage points."
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Hi, Canadian here, BA Econ 1974, never practiced economics professionally but keep a watching brief.
Loved this conversation. In this vein, I have long wondered if precarity, inequality and fear in the labour force are contributors to headline US economic progress - growth and productivity. This appears to be an explicit strategy of the CCP. Has this been studied?
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This substack is consistently important in pointing out what is going on in this country. Thank you.
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What does "it" refer to in the following? How are 1.8 and 2.2 connected to "it"?
So, just one example: the gap between someone at the 90th percentile and the 10th percentile—that kind of is a good measure of wage inequality—between like the early ‘90s and today, it went maybe from 1.8 in Sweden to 2.2
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Very interesting, pleasant and informative discussion here of topics that (we can see) are so closely related to much of the economic ideology / mythology that we live with in relation to the economy and workers. It would be interesting to look at sectors of professional services workers and their compensation as well as those in fast food or other daily / hourly wage-oriented sectors.
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turning point is interesting, but... it seems you think such a point should be implemented. However, even raising the min. wage further than that is needed. yes, that would cost some jobs, but so what? Are we for good living conditions or for optimal investor return? investors will be rewarded anyhow.
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Speaking alongside the Switzerland talks, he made it clear that no broader agreement can be treated in isolation from the situation in Lebanon. Any continued strikes or military escalation there, he warned, would directly erode the credibility and durability of any diplomatic outcome.
His remarks highlight a deeper structural reality in the region: diplomacy and conflict are no longer separate tracks. Every negotiation is now inseparably linked to events unfolding on the ground, where even limited military actions can reshape the trajectory of high-level agreements.
This creates a dangerous cycle. Efforts toward peace are initiated, expectations begin to build, and yet renewed violence particularly involving Israel and Lebanon repeatedly disrupts momentum, pushing the region back into instability. Negotiations risk becoming performative rather than transformative.
If this pattern continues, agreements will lose not only effectiveness but also trust. Without mechanisms to de-escalate real-time conflict alongside diplomatic engagement, each new round of talks risks reinforcing skepticism rather than resolving tensions.
Breaking this cycle requires a shift from reactive diplomacy to enforced stability. where commitments on paper are matched by restraint and accountability on the ground. Without that alignment, lasting peace will remain structurally out of reach.
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For the impacts of MBA on worker’s wage, could it be that firms hire MBA-type managers at a particular stage where wage discipline becomes more important?.
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I appreciate all of your comments! I coined the Cor-Pirates descriptor last year. I am not a bot, very human with an interest in Astronomy, thus my handle.
Best to All!
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I didn’t hear any discussion of immigration. It would seem that reducing immigration and increasing deportations would shrink economic growth but also increase competition in the labor market, particularly in sectors that rely on immigrants. Most healthcare workers I encounter are immigrants. I wonder if immigration policy could have as much effect as AI.
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As an HBS MBA ’70 who then spent 20 years as a Navy officer, followed by service on the Senate staff and two decades as an entrepreneur, I’ve watched the American wage structure shift in real time and Dr. Dube is right that something fundamental broke around 1980. But I would add a dimension that rarely gets discussed: the extreme concentration of wealth today functions like stuffing capital under a mattress. It is capital removed from the systems that actually sustain broad prosperity.
I’ve known many CEOs and C‑suite leaders across several industries, including foreign and domestic industries, including health care, where the gap between the wages of nurses, technicians, and support staff and the compensation of senior executives of major drug companies, and equipment suppliers has become astonishing. These disparities are not the product of “market forces” alone. They reflect policy choices, governance choices, and cultural choices about what and who we value.
My own career illustrates the point. I left the Navy in 1979 not because I wanted to, but because even senior officers were paid so little that I couldn’t support two sons entering college. When I joined the Senate staff, I asked for the highest salary available simply to make ends meet. Later, as an entrepreneur, to work on serious energy and environmental issues. I saw firsthand that American firms must be competitive not only nationally but globally and that the only sustainable path to competitiveness is a workforce that is trained, supported, and able to build a decent life.
That was the core lesson of HBS in my era: behavioral science, human motivation, and the understanding that people do their best work when they feel valued and can provide stability for their families. The purpose of an enterprise was not simply quarterly earnings; it was long-term capability, long-term talent development, and long-term institutional health.
What has eroded since 1980 is precisely that investment in the "commons", the shared systems that make a high quality of life possible: clean air and water, advanced transportation, safe highways, walkable neighborhoods and sustainable energy distribution, affordable health care, nutrition, and public education and childcare that allow families to function. I did not list all the commons, these mainly natural monopolies, because there are too many for this comment. However, it is increasingly evident that access to the internet and AI should be treated as a common and regulated by the public.
These commons are overwhelmingly financed and regulated at the state, county, and municipal level. Yet the capital gains that have exploded at the top rarely flow back into these systems. In many cases, the wealthiest actors secure exemptions from even paying their fair share of property taxes.
This is where the work of Acemoglu, and my old mentor Mancur Olson, whose "Rise and Decline of Nations" remains painfully relevant comes back into view. When wealth becomes concentrated enough, it organizes to protect itself. It shapes the tax code, the regulatory environment, and the public narrative. And over time, the institutions that once ensured broad-based prosperity weaken, while the returns to capital soar and the returns to labor stagnate.
We don’t yet fully understand every cause of rising inequality, Dr. Dube is right about that. But we know enough to say this: inequality is not an accident. It is the cumulative result of choices that diverted resources away from the commons and toward private accumulation. And until we reverse that pattern, we will continue to see a nation where the top thrives while the foundations that support everyone else slowly erode.
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As an absolute economic layman my contribution to the discussion is if companies want to sell or provide products and services isn't it counterintuitive to diminish the purchasing power of workers. Who's left to buy/use the offerings? The consequences, it seems to me, are there are fewer and fewer potential customers as a result of suppressing incomes.
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My father started his own company in the 60s, and today it has several hundred employees. He told me that his policy with wages was that he would always find out what was the highest available salary for any job, and then he would pay 10% more than that. This meant that almost no one ever quit, because they couldn't make any more money anywhere else. (although he frequently fired people if they didn't do the job to his level of satisfaction). That meant that he almost never had to train anyone, because people stayed with his company for years and years. He said he saved millions of dollars by paying his employees more.
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Sweden is not a really ideal example when it comes to recent economic developments, in the early 2k the Swedish gov went full on thatcher like privatization of the entire economy, SAAB/VOVLE automotive division went public, that went as far as defence when SAAB maritime system went to thyss MTS Which turned into a complete nightmare because Thyss already have a number of conflicting product which ended in the SDMA to do a hostile takeover base on National Security concern, that was not it, the Swedes sold absolute vodka to SPI………. Gosh…. The early 2k was like a massive fire sales of assets, the most controversial aspect was the freedom school, the dismantling of the Swedish Public education system, this partly collapsed the entire Swedish society, and impacted its standing as a Nordic power house for design and industrial tech, at home stage things were so bad, most of my friend went to Norway or Finland, a complete hollow out of the country in pursuit of Maggie economics, the complete deindustrilize of Sweden now created its biggest problem, the Saab j39 production hit a snare….. now more than ever when the country needed it fighters……… its short on material and personal to make em… Now there is also a catch 22 in the whole situation, Swedish income tax did not go down, it remain high, but services delivery took a nose dive, while at the same time Swedish corporation taxes went down, record profits for the privatized industries and big companies, wage growth stagnated in the early 2k as well, i saw that, a number of my friends had to move with their folks to the UK for better job opportunities. My central argument is that labour policies must focus on developing the people, since after all its the people who make up societies and economies, technological or procedural implementation should develop around people, instead of fantasying the people would change and adopt to what supposed to be in service of humanity. Ultimately it’s the people who would just give in and wither away…… thats the tragic cycle of humanity.
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So does this mean that most of what I learned in 14.01 and 14.02 (Micro and Macro at MIT) in the late 70s really make little sense today??
I always doubted that all those formulas had little to do with the real world.
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Following from this discussion, what do our academic experts think is the tipping point for when a given increase in the minimum wage is likely to cause excessive inflation and job losses? It’s understandable why academics have been more focused in recent times on simply increasing minimum wages but, as the discussion notes, don’t we have laboratories in the form of state and locally-mandated increases, and haven’t these resulted in some quantifiable price inflation (for example, an 8-12% increase in fast food menu prices in CA following the 2023 increase in fast food worker wages), and probably also encouraged more automation-related sectoral job losses?
Also, assuming for the moment (as the guest economist states) that AI won’t result in an employment apocalypse, aren’t there numerous indications that the more favorable environment of tighter labor markets will prevail going forward, now that there seems to be a consensus in favor of lower immigration levels, combined with rising ages for marriage and lower rates of child-bearing? Doesn’t this discussion appear to concede that the classic “market” for wages operates more efficiently in tighter job markets?
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Very enlightening and mostly pleasant news. But I would have liked to see some discussion of what happens when the jobs whose wages are increased by a state can be relocated. For example, a fast food worker in California cannot have their job relocated to Mississippi and still provide fast food to customers in California, but other type of jobs can be relocated. Of course, the response to that would be sectoral wage bargaining.
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This was a very informative discussion. I learned a lot from it. Thanks!
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Unfortunately, research and evidence don’t mean anything to the American right. Economists may have “updated their ideas,” but Republican politicians, who are the ones who vote on setting the minimum wage, don’t rely on research or evidence. They have ideology and that seems to be all they need. The American right is opposed to unions and the role that unionization played in creating the middle class means nothing to them. As union membership has dropped and the wealth disparity in the US grown, the policies of the Republican Party favor increasing wealth disparity.
One major contribution from the American right is the "Right to Work" state. Right to work, in this context means "right to have lower pay, less job security, and inferior retirement. What is remarkable is the worker who prefers that to unionization. Americans are remarkably ignorant about what is good for them. They will energetically support policies that are worse for the country's economic future, because they define that future is what will make Elon Musk, Larry Ellison, Mark Zuckerberg, Jeff Bezos, and other exceptionally wealthy people even wealthier. If people in their own states can't afford a healthy diet or the medical care they and their families need, that's OK.
In 2024, seventy-seven million voters elected a president for whom there was no evidence supporting the idea that he and his party would be better for either workers or the economy. As of June 2026, I see no effort being made to educate voters in a systematic way in order to enable a smarter, better informed electorate. Of course, the GOP has no desire to see that happen, because smart, knowledgeable, well-informed voters are very likely to cast ballots for Republican candidates. That is why I am concerned about the future.
The current results at the polls are not a result of the kinds of improvements that will provide for a better electorate that won't be manipulated the way so many voters were in 2024. Trump's approval ratings and the success of Democrats at the polls are not a result of an improved electorate. Voters are simply responding to how obviously terrible Trump is. They are not better informed or more knowledgeable. They are simply responding to things that can't be ignored. Brutality in the streets, incompetent economic policies that have led to rising prices, and a pointless war that has had further aggravating effects on prices across a broad range of goods and services.
Food and gas prices were key issues in 2024, and despite his ridiculous campaign promises to fix them (and pretty much everything else) "on day one," Trump has made both much worse. So, the lesson the voters are likely to "learn" is not that Republican Party policies have long been inferior in performance to those of the Democrats, but that all that matters is Trump. Once he's gone our electorate is very likely to return to its "know nothing" past and bounce back and forth in giving power to the two parties. Any good that Democratic policies might have offered will be tempered or even eliminated by a subsequent GOP administration and alternating congressional majorities.
What does that mean for the future? We'll probably get a Democratic president in 2029 and Democratic House and Senate majorities. Then, in the 2030 midterms, control of the House and Senate may revert back to the GOP. In 2033, we could see a Republican candidate win the presidency and there are some who think that person could be even worse than Trump. Names that would have been unthinkable in the past, such as Tucker Carlson and Nick Fuentes have been mentioned. Before 2016, I would not have looked at names like those two and taken them seriously. Two terms of Trump have changed my mind about who our electorate can be persuaded to vote for. Personally, I see a previously unheard of kind of candidate no longer being unheard of, so a worse alternative than Trump, may be a real possibility. Unless many millions of voters improve their knowledge and put in the time and energy to find credible sources to enable them to be reliably well-informed, this country will remain on a path to national failure. And that assumes we survive the next two plus years of Trump's stupidity, ignorance, and incompetence. In June 2026, nothing is guaranteed, but my own belief is that the electorate will not improve, because improvement will require voluntary changes on the part of millions of people who, as of November 2024, didn't consider climate change to be an important election issue, but thought Trump would lower prices. That certainly isn't an electorate I would wish on any country.
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What's even more bizarre than anti-unionism among workers in the face of the frequently heard comment from non-union companies that "yes, we paid a little higher wage to keep the union out." Why doesn't that make it obvious to the non-union workers that they are benefitting from the presence of unions?
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I've written more comments, here and elsewhere, about the poor quality of our electorate. I attribute the re-election of Trump to stupidity and ignorance on the part of voters, who lack the knowledge about history, the economy, government, and politics, and who don't devote the time and energy to being well-informed in order to make responsible decisions on election day. (Taking into account extending voting periods.)
Some of those same voters are workers and their electoral failings extend to other issues as well and often it is mindless political beliefs that "help" them screw themselves. People who can't think critically, can't think critically about elections and candidates, or about corporations and employment. Say the word "socialism" and they respond absurdly. It doesn't seem like many Americans understand what socialism actually is and tragically, they don't understand that every system is operated best based on a single, narrow philosophy. Mention "Medicare for All" and Republicans will cry socialism, ignoring the fact that Medicare is not socialism and neither will "Medicare for All." Worse still they don't understand that a capitalistic health care system is a disaster that won't optimize anything but profits for insurance companies and others who aren't patients. (Although everyone eventually becomes a patient at some point.)
It is all of the above and more that leaves me with the conclusion that unless we find a way to improve our electorate, we are headed for national failure. Anyone who becomes a better voter will also make better decisions in other areas too, such as unions.
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Great interview and discussion! Thanks so much.
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4d Edited
One of the most beneficial things that AI could do in the US is rapidly de-bug existing regulation and permitting policies that have been captured by our antiquated, centralized & monopolized Industrial Tier energy corporations, preventing us from rapidly transitioning to new, widely distributed, efficient Community Tier solar parking lot canopy Virtual Power Plants, everywhere, that dispense low-cost Electric Vehicle (EV) "fuel", store surplus energy in on-site batteries, and can tap parked EV batteries to cut peak transmission demand for shopping center refrigeration and residential & small business air conditioning. This is the quickest way to rapidly reduce ALL typical rate payer utility bills & transportation costs. France & South Korea have already mandated solar canopy VPPs at ALL existing parking lots over 80 spaces, nationwide, within 3 to 5 years, largest lots first. Note that parking lot owners get new windfall income from 25-year air-space leases on their existing non-profit parking lots. Not to mention all of the widely distributed, local skilled union-wage VPP construction and maintenance jobs.
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4d Edited
There are golfers in the US Open at Shinnecock in South Hampton, there are residents in the area. There are summer tenants. There are fans walking about and then there are the rich. The ones who buy and sell politicians and plan mergers over drinks. Talking about a wage compression is hardly practical for someone barely above the poverty level.
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Illuminating discussion. I am so happy that a family member is living in Australia!
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"Most of us work for a living, or at least pretend to work for a living." 😂
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4d Edited
So, sometimes, like in a pandemic, supply and demand in the labor market works to the advantage of workers. Particularly, I'd bet, in industries in which staffing is not optional - home health care workers, nursing home workers, cleaners.
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I have to wonder if there has been any research done looking at correlation between the business colleges and universities of the CEOs and variations in wage suppression. I didn't look, so there may be something out there. While they discussed the possibility of such a correlation, no research explicitly mentioned in the discussion.
Another thing that wasn't mentioned is that a relatively small number of people serve on the major corporate boards and a subset of those people serve on multiple corporate boards. I have to wonder if there is some correlation between wage suppression and the MBA training represented on those boards. Perhaps there is some other factor common to such boards.
All of this ignores the fact that, of course, much of the business in this country is done by small corporations with perhaps only one or two family members making the major decisions, and very likely no MBA training at all - as, I think it was, mentioned by Paul. Then from where would ideological wage bias come?
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4d Edited
The wealthy always have grabbed assets, income, and power. It's just that lately the grabbing has been so effective and egregious that the revolutionary era may be returning. AI, clearly being developed to displace human workers and increase power of the oligarchs, will only bring the revolution on sooner.
The facts being brought out by these scientists should make a difference, but we see how facts are ignored or called 'fake' by the current administration. Science itself is rejected by trump unless it somehow agrees with his 'gut'.
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One major contribution from the American right is the "Right to Work" state. Right to work, in this context means "right ot have lower pay, less job security, and inferior retirement. What is remarkable is the worker who prefers that to unionization. Americans are remarkably ignorant about what is good for them. They will energetically support policies that are worse for their economic futures. In 2024, seventy-seven million voters elected a president for whom there was no evidence supporting the idea that he and his party would be better for either workers of the economy. As of June 2026, I see no effort being made to educate voters in a systematic way in order to enable a smarter, better informed electorate. That is why I am concerned about the future. The current results at the polls are not a result of the kinds of improvements that will provide for a better electorate that won't be manipulated the way so many voters were in 2024. Trump's approval ratings and the success of Democrats at the polls is not a result of an improved electorate. Voters are simply responding to how obviously terrible Trump is. They are better informed or more knowledgeable. They are simply responding to things that can't be ignored. Brutality in the streets, incompetent economic policies that have led to rising prices, and a pointless war that has had further aggravating effects on prices across a broad range of goods and services. Food and gas prices were key issues in 2024, and despite his ridiculous campaign promises Trump has made both much worse. So, the problem the voters are likely to "learn" is not that Republican Party policies have long been inferior in performance to those of the Democrats, but that all that matters is Trump. Once he's gone our electorate is very likely to return to its "know nothing" past and bounce back and forth in giving power to the two parties. Any good that Democratic policies might have offered will be tempered or even eliminated by a subsequent GOP administration and alternating congressional majorities.
What does that mean for the future? We'll probably get a Democratic president in 2028 and Democratic House and Senate majorities. Then, in the 2030 midterms, control of the House and Senate may revert back to the GOP. In 2032, we could see a Republican candidate win the presidency and there are some who think that person could be even worse than Trump. Personally, I see that as a real possibility. Unless many millions of voters improve their knowledge and put in the time and energy to find reliable sources to enable them to be reliably well-informed, this country will remain on a path to national failure. And that assumes we survive the next two plus years of Trump's stupidity, ignorance, and incompetence. In June 2026, nothing is guaranteed, but my own belief is that the electorate will not improve, because improvement will require voluntary changes on the part of millions of people who, as of November 2024, didn't consider climate change to be an important election issue.
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‘ “Well, there’s got to be a really good explanation for that that is consistent with my model.” But it’s certainly not because the model is false, because it can’t be. ‘
Sounds like Paul “let-them-eat-riotto-allo-zafferano” Krugman discussing the current state of consumer sentiment.
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At least for AI right now, the main effect is changing the power dynamic more to capital away from labor (see many Doctorow posts). Now, a lot of this is businesses being fooled into thinking current AI is raising their productivity, so they need less workers (evidence is that this basically isn't true in any solid studies). But either way, a lot of companies are doing layoffs or just not hiring and the labor power is much more reduced than you would expect with a 4.3% unemployment.
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Definitely a line of economic thought and statistics that needs to be rebranded by trained political communications people in conjunction with Dube to make it a convincing and understandable weapon in the current political wars between elite wealthy parasites and hard working honest US citizens.
Fortunately the greedy, cruel and violent republican legislative agenda has become suicidal for them and the path to fairness, freedom and happiness for the hapless US citizen worker has been opened up.
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Fantastic post, thank you, had to read again after watching!
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Further comment. The annual index linking of the minimum wage to the inflation rate in Ontario, Canada, is having a real effect on the living standards of those paid wages close to the minimum wage. I wonder to what extent the state-set minimum wages in the US are similarly index-linked?
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Most interesting and informative discussion. One aspect I think needs attention is the existence and relative strength of employer organizations. Sectoral bargaining is not really possible without coherent employer organizations to bargain with sectoral unions (whether in combination, or as representative of the industry or sector). The reason, I understand, for the great coverage of sector agreements in Austria is that an employer that wishes to conduct business must first be a member of an employer association of the sector in which the business will operate. This binds that employer to the collective agreement concluded with the sectoral union. Other sectoral bargaining countries have less effective means of binding businesses within the sector, but their bargained agreements also depend upon the existence of effective employer organizations. Typically, with the focus on plant bargaining, US enterprises have resisted the establishment and requirement to belong to employer organizations. Part of the process for unions in the US to achieve sectoral bargaining will be to assist and nurture the development of equivalent employer organizations that can function as sectoral employer representatives.
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See also Critical Race Theory for a reason why US unions in the past were unwilling to argue for benefits beyond their direct membership.
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Maybe this has been mentioned already, but I was surprised that Mr. Dube used FedEx and UPS in a wage comparison. Apples and Oranges. Yes they both deliver packages, but UPS is a union shop and FedEx is not. FedEx is classified as an airline, UPS ground transportation company. Different rules and regulations. Be interesting on adding Amazon to the mix.
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I have two questions for Professor Dube. First, any significant increase in wages from the middle down to the bottom of the wage distribution will likely increase inflation. We all got to see firsthand in the last election cycle how the general populace deals with increased inflation. The result was a madman. Higher wages will also induce employers to automate or use AI. As in the classic model of wage determination, this would lead to a loss of jobs. If I’ve read Piketty correctly, he suggests that the tax code should be used to more equally distribute the gains from economic activity. I’d love to hear Professor Dube comment on these two questions thank you.
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Post-COVID, job mobility was affected by the ACA. Have you taken that into account in your statistics gathering?
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I actually could understand this discussion! So well presented for the 84 year old “1 economics course taken” college graduate… who remembers being taught positives about Samuel Gompers in a Catholic, nun-taught grade school. I see where CHOICE is the Jesus centered answer! This makes me happy.
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This was a really fascinating session.
One thing I thought wasn’t made explicit is that the failure to increase minimum wages since the Reagan era goes along with the anti-union stance of Republican administrations since that time.
We may not have “sectoral” bargaining in this country but union bargaining for even a minority of wage earners had a profound effect on the ability of workers in general to demand a reasonable amount of the increasing productivity in their sector.
The case of FedEx versus UPS which was mentioned is clearly union-related. UPS has a union while FedEx has not only not unionized but classifies its workers as contractors, thereby evading obligations for typical benefits.
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This is fantastic!!
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“I just finished doing a review for the Journal of Economic Literature, and that’s basically where it sort of lands, and the quit rate is just not super sensitive to wage. So this gives employers a degree of discretion. “
Is that a typo (IS sensitive) or did he just contradict himself?
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No, I think what is meant is that employers are not forced to pay more because not enough are quitting to force them to do so. So they do not have to respond to people quitting because they can find more workers to fill the spots. Thus, it is less sensitive and they are not forced to do otherwise. At least that is how I see it.
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If the quit rate is not sensitive to wage then it doesnt matter whether you pursue "low wage strategy" or "high wage strategy", whatever those are exactly. So no discretion.
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4d Edited
I think it depends on how one frames the argument and what action they are attributing the word discretion to.
So, we are both probably correct depending on how one is framing this.
If the quit rate is very sensitive to wages, than an employer's behavior regarding how much to pay would be more dependent and based on the behavior of employees and dependent on how much others with similar businesses are paying their employees.
To me, that decision is "dependent" on these variables and not as much at one's "discretion."
However, if there is very low, wage dependent turnover, then an employer can use their own discretion and pay higher or lower than an industry average without being confined by the industry standards or concern for worker turnover impacts.
So, I think it depends on what action you are attributing to the word discretionary, a passive or reactive decision.
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Not sure why the Walmart vs Target example is supposed to be salient. In basic labor econ wage= price*marginal product. Let's say for sake of a argument that these workers are identical in terms of productivity. You still have price(walmart)<price(target) so it doesnt look like some big mystery here
Of course you could say that labor mobility should equalize wages and we dont see that. But thats precisely evidence that these workers are not the same (and anyone whos worked those jobs will tell you that) or that there are geographic transportation costs
Kind of thin. Like a lot of this New Labor Economics stuff.
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- There's a distinction that seems to be missing in Prof. Dube's discussion: the skills a job requires vs. the skills that the employee has. A person may have skills that the job doesn't need or pay for.
Especially in the low-wage end, skills have been engineered out of the jobs so that anyone can do them. That's what permits so much turnover: employers don't have to pay to retain staff because new hires learn the jobs so rapidly.
Automation (job displacement) is the other face of engineering change, and Prof. Dube didn't discuss that either.
On the U.S.-Sweden comparison, how much of the difference in bottom-40% real consumption is due to differences between the two countries in wage rates, and how much is due to differences in socially funded services received regardless of labor income?
The three points above highlight that the research discussed in this conversation didn't get into the argument that more consumption should be de-coupled from employment.
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Paul, it was the University of Chicago that popularized shareholder value primacy not Harvard.
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Yes, but it was a very aggressive infection.
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Worth considering the impact of private equity, which can be partially recognized but difficult to sort out. Too many private equity buyouts eventually result in bankruptcy. If the business restructures, wages typically go down across the board and a lot of people lose their jobs.
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Now if you want higher wages
Let me tell you what to do
You got to talk to the workers
In the shop with you
You got build you a union
Got to make it strong
But if you all stick together boys
It won't be long
Get shorter hours, better working conditions
Vacations with pay
Take your kids to the seashore
...
This also reminds me of something J Brownoski wrote back in the 1950s about how the fatal reasonableness of Adam Smith kept economics from becoming an empirical science.
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I found this conversation quite frustrating. The so-called labor economist just left out so much related to labor. When he compared restaurant worker pay in Pennsylvania and New Jersey, and said there was no loss of jobs with lower minimum wages in PA, he didn't ask what were the quality of the restaurants. In the 1980s I lived in PA and would travel often to New York by car thru NJ. I always made sure to stop to eat in NJ because the food and the service tended to be so rotten in PA. Labor is not just what workers do, it's the quality of what they do. The post below about quality of service between FedEx and UPS workers is another example. Still another factor is how workers experience their jobs. UPS workers, for instance, have been beat up on socially by Donald Trump and others, and by other poor working conditions of their employment. They need higher pay to suffer the abuse.
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Wage inequality is the root cause of our political discontent in my opinion. It is important to get the word out that there is something that can be done about it that is also good management of the national economy. A possible political action worth considering is a tax credit per employee. This would shift the optimum employee number for a given business up a bit and nudge the economy towards full employment. Make the tax credit revenue neutral by increasing corporate tax rates.
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4d Edited
I'm confused. The article starts by claiming that the labor market is controlled by more than supply and demand and then states that the compression after the pandemic was the result of demand being greater than the supply of labor. Perhaps I’m just stupid 🙂
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Frequently when there are multiple factors involved, there are a number of single factors.
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The big question: who actually gets to make those choices?
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Great presentation! One thing I've long been surprised by is the Wegman's grocery chain phenomenon. Wegman's has always been a great place to work. (I've been a patron. Never an employee.) They pay better and provide better working conditions than their competitors. Wegman's employees tend to work there for decades rather than months or years. It seems to me that any discussion of wage effects on market presence and financial stability would want to look closely at Wegman's. My own experience with my business supported this view. If you pay equitably and treat your employees as partners, the dedication and longevity you get in return more than make up for the short term expense. The MBA disease is like aluminum corrosion on American business.
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A relative who worked for a major US food producer worked his way up in the corporation, from local marketing to one of the Vice Presidents. He may have had a college degree, but not an MBA. When he retired in the late 1980s he was making around $250k, so I was told. Base salary anyway. The guy who replaced him did not work his way up through the company, he was brought in from outside and yes, he was an MBA. And he made over $800k. Just like that.
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In Texas, most jobs are in the cities. 70% of Texas GDP is produced in the cities. The Texas cities have their own minimum wage which is comparable to California. Cities are blue. rural areas are red. Avoid talking about states.
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Goodness, that is surprising, although it shouldn’t be; it’s the same everywhere, and not just in the US. It’s a huge problem.
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does anyone know how to tell if this post is within the paywall?
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I think it’s not. Only Sunday’s posts are paywalled, and the paywalled posts often become public fairly soon, which is great.
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tks
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The problem with management (not just Harbus) is that managers are tasked with controlling risk(s) by doling out actual work hours and dollars. Since their understanding of the actual tasks and quantities is limited (school is not life, watching is not doing) their allocations are at best safely (inefficiently) conservative. The resulting "success" employs too many underperforming workers insufficiently rewarded.
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At the end of the day, what we need is a sort of “grand bargain” with employers. As a society, we would take responsibility for providing the core benefits of healthcare and retirement in exchange for full employment at living wages.
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This mirrors perfectly with the administration of Carter, Clinton and Obama.
Not that Republican administrations are better.
No that Democrats should have been moving to expand the Detroit plan.
Instead they moved to kill it and jumped on the other side.
All in an effort to capture all that rent money the CEO were stealing from workers.
Shameful but not surprising as this is how oligarchy works.
Co-opt the leaders of the workers and they will do the dirty work for them.
Think that monstrously in South Chicago will help anyone?
I have a bridge to sell you.
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Many thanks!!
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Great article.
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