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Low Wages = Low Productive Economies?

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Sounds obvious doesn't it but just done a spot of "consultancy" recently for a local "online" reseller shipping furniture and this got me thinking.

They got two foreign national graduates from what I would call from a "low wage culture" to implement their stock inventory system and order processing.

Not a massive job and largely non techie as the software used was largely non techie and click and point designed for Ebay traders to list and automate their online operations, cheaply and simply.

They took four months, and created an enormous paper trail, and managed to totally de-automate all the automated features, as well as confuse the hell out of the sales staff.

Their thinking seemed to have been to create as much work as possible, whereas Western thinking is to automate, automate and automate. I'm sure that wasn't conscious thought, but sub consciously maybe. The Eastern "psyche" is still geared to cheap labour and low productivity.,

Which got me thinking. Are high wages, and high land costs (via rentierism, debt slavery,etc) neccessary to create a modern high productivity economy?

I also got to experience the nature of Chinese output. Basically high degree of manual labour whereas Japan/HK etc are automated and tooled, but they are learning fast as Western retailers feed back to them what the market and quality requirements are.

Discuss!

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Its the knowledge economy....its designed to pay masses to everyone.

Of course, what is forgotten, is the knowledge may be there, the engineer may be able to automate, but is he incentivised to do so?.

Why take a week to do something that you can, with your "qualies", make last a year.

the stupid have no way of knowing you are scamming them.

Unis have lots of things like take two of our students and let them take on a task for you...very cheap and you can get a grant ( so do they).

I did an excel front end for a client years ago so he could automate his quotes ( supercalc 4 originally). He got these guys in on such a scheme 3 years ago to improve the thing I did in a day 10 years ago.

£2000 later, he is still using the spreadsheets...

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Was there a proper briefing with targets and requirements as for the result or was it "Just get on with it" approach.

Most of the time I meet graduates (any origin) they are thrown into the deep blue with no support or given mundane tasks to bore them to death with no clear targets or guidance. Being depressed and left on your own devices does not help productivity.

Lack of training on how to use a piece of software does not help achieve targets. Even a simple thing like MS Paint can benefit from 5 minutes quick lesson to reveal full potential. If you tube MS paint you will find people doing amazing things, but try it for yourself and report the time it took.

I am curious why there was no performance review in the four months. Surely with the huge paper trail someones desk must be bending from the weight of all the forms.

Most graduates will do as they are told, not many take a bold initiative without discussing it first.

BTW, on the avatar picture its me showing one of the workers how to take down tiles off the wall. He could be classed as graduate, just got in as a general operative, genuine local workforce. He was poking with the breaker square at the tile and was curious why there is no progress at all. "it doesn't work, gov" he told me. In one minute I took more than two square meters. Following the example he did well.

Edited by bulboy

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Was there a proper briefing with targets and requirements as for the result or was it "Just get on with it" approach.

Just told to get on with it. Directors clueless about systems and online sales but have established a decent business by adopting a "throw money at it" and brute force approach.

To be fair not the graduates area of expertise but this software/system was designed to be used by non techies (apart from more detailed conditionality rules to automate certain procedures).

Directors seemed to have been woo'd by employing graduates for less than £8.50 p/h even though they lack a basic common sense approach.

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Just told to get on with it. Directors clueless about systems and online sales but have established a decent business by adopting a "throw money at it" and brute force approach.

To be fair not the graduates area of expertise but this software/system was designed to be used by non techies (apart from more detailed conditionality rules to automate certain procedures).

Directors seemed to have been woo'd by employing graduates for less than £8.50 p/h even though they lack a basic common sense approach.

IT people are expected to know everything about IT.

Client of mine asked me to make one picture bigger on a very complex website...drag and drop he told me.

I couldnt do it so got a couple of mates to take a look, both into web design...they agreed, to make the "small change" would mean a serious rewrite of the reports on all the pages.

client couldnt beleive it...still insisted his mate told him it was drag and drop....I suggested his mate go ahead and do it.

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http://www.ft.com/cm...l#axzz2REapziyt

UK trails in march of the robots

I would say that supply side reforms regarding labour has hindered investment in technology dragging us down into a quasi third world style of business.

It was a big theory in Harold Wilson's time (native of your manor) and the 'white heat of technology' - if you get wages up then companies would be forced to update their practices.

Yes but I've worked for various ISP's and their mantra was automate, automate and automate. The only grunt labour being first line tech support and customer service.

Although this company had physical product they didn't have tech support, so warehouse staff instead of helpdesk.

The third world graduates basically gave the admin / backend a 19th century feel complete with 'in trays' and mountains of paperwork on shelves.

I couldn't believe it when I saw it. I guess high clerks desks, ink wells and quill pens were next.

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Low wages do not = high productivity.

Low wages = low levels of automation = higher capital productivity. Also = lower levels of quality & repeatablity, more easily disposable assets (people), easier replaceability of people and therefore greater ease in squeezing the workforce. The perfect recipe if you have plenty of people at starvation level who want to improve their lot just a bit.

Higher wages = an economy strongly driven toward knowledge and skill based activities which cannot be easily duplicated by 12 year olds without shoes. Ideal if you have a mature economy with people who want to improve their lot by a big margin. Hence why all the engineering and physics graduates end up in the City, milking the proles.

It also helps to facilitate high value exports and puts money in pockets to drive domestic GDP. Step forward Germany and take a bow. Unfortunately, because we have the wrong economic balance this means the money gets spent on Chinese made stuff and German cars. If only everyone had higher wages they could be investing with hedge funds and helping to turbo charge our economic perfomance.

Henry Ford managed to work all this out. It's a pity the halfwits running the country haven't got there yet.

Edited by Stainless Sam

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Which got me thinking. Are high wages, and high land costs (via rentierism, debt slavery,etc) neccessary to create a modern high productivity economy?

Somewhat related; there is a theory that the reason many ancient advanced societies (e.g. the Romans) didn't develop further was that they had slaves. Slaves were cheap and flexible, so why develop labour saving machines?

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Sounds obvious doesn't it but just done a spot of "consultancy" recently for a local "online" reseller shipping furniture and this got me thinking.

They got two foreign national graduates from what I would call from a "low wage culture" to implement their stock inventory system and order processing.

Not a massive job and largely non techie as the software used was largely non techie and click and point designed for Ebay traders to list and automate their online operations, cheaply and simply.

They took four months, and created an enormous paper trail, and managed to totally de-automate all the automated features, as well as confuse the hell out of the sales staff.

Their thinking seemed to have been to create as much work as possible, whereas Western thinking is to automate, automate and automate. I'm sure that wasn't conscious thought, but sub consciously maybe. The Eastern "psyche" is still geared to cheap labour and low productivity.,

Which got me thinking. Are high wages, and high land costs (via rentierism, debt slavery,etc) neccessary to create a modern high productivity economy?

I also got to experience the nature of Chinese output. Basically high degree of manual labour whereas Japan/HK etc are automated and tooled, but they are learning fast as Western retailers feed back to them what the market and quality requirements are.

Discuss!

no one starts off on high wages, it grows in line with the economy. its also not possible to pay everyone a high wage because to do so doesnt make any sense - the value of your wage corresponds to your value within an economy therefore paying everyone £100k an hour wont make everyone rich, its just a bunch of numbers.

the question is really should there be a disparity in wages or should everyone get paid the same. theres probably is some kind of optimum balance and i guess the best way to find out what that balance is, would be to let the market decide it.

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Basically, you can get drawn down the route of just going for low added value with low cost flexible labour. If you live under a sh*tty government like we have had for the last 40 years where the macro environment in the uk has been particularly terrible, if you run a business you are extremely risk averse which means not investing in capital which means your efforts become targeted towards lower added value and the low wages both follow that and foster it even more. And the path of being primarily equity based raher than family/bank based has meant that when you get to be sellable, you're gone for a quick buck.

If the government also steps aside completely because it doesn't want to be seen to try and 'pick winners' and fail, then that also hinders the development of 'risky' high added value industries. And if that government fails to put in or facilitate adequate infrastructure such that other countries get there first all the time (wind turbine manufacture, 4G, fibre optic cable, roads, ports, nuclear plant) then your onto the back foot already.

+1

Low productivity is nearly always associated with low investment. Cheap labour is then needed to take up the slack otherwise firms can not compete.

The process can also work in reverse. In the early part of the 20th Century huge improvements in American industrial production were triggered in part when immigration laws to the US were tightened and the outbreak of World War I meant the supply of plentiful labour from Europe to the US was cut off. It also saw US workers become the most productive and best paid in the world.

Trying to compete in the world purely on the basis of low wages is ultimately a losers strategy which probably explains why it is popular with British politicians

Edited by stormymonday_2011

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+1

Low productivity is nearly always associated with low investment. Cheap labour is then needed to take up the slack otherwise firms can not compete.

The process can also work in reverse. In the early part of the 20th Century huge improvements in American industrial production were triggered in part when immigration laws to the US were tightened and the outbreak of World War I meant the supply of plentiful labour from Europe to the US was cut off. It also saw US workers become the most productive and best paid in the world.

Trying to compete in the world purely on the basis of low wages is ultimately a losers strategy which probably explains why it is popular with British politicians

This is a much harder question.

So are Goldman's employee really highly productive?

So are eur100000 civil servant at Brussel highly 'productive' ?

Do certain politician wife on eur500k highly 'productive' ?

To a certain extend, wages/profit/earning have more to do with bargaining power (which could be backed by unique skills but also government fiat, location monopoly, historical accidents and access to violent ) than real productivity. In most cases, it is the relative productivity that counts, if you can produce 10 widgets a day by operating a machine when we used to be able to make one by hand, you will make a lot of profits, until your competitor can produce 15 and eventually everyone operates on a 3% profit margin.

That is the reason Berkshire Hathaway pulled out of textile manufacturing and allocate the capital to 'interesting stuffs'.

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absolute income cant really be compared because a low paid person in the UK would be classed as a high earner in another country.

so if you assume for simplicity everyone is in 1 economy, the question is what structure produces the optimum efficiency/output.

2.9_news_chart_update.jpg

now although you might think perfect equality is the ideal, so there is no top middle or bottom, history shows that often when equality is imposed or implemented artificially so everyone is equal, everyone can also just end up equally poor if the system doesnt work.

and despite the US having massive income disparity compared to Sweden the US has the highest absolute median income in the world, far outstripping sweden.

average household disposable income 2011:

1 United States - 42,050

2 Ireland - 41,170

3 Luxembourg - 37,997

4 Switzerland - 35,471

5 Australia - 34,952

6 United Kingdom - 33,513

7 Canada - 32,662

8 Norway - 32,620

9 South Korea - 31,051

10 Netherlands - 29,269

11 Austria - 29,008

12 Sweden - 28,301

Edited by mfp123

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This thread does raise the question of why labour should regard increased productivity as a benefit- it's just as easy to make the case that a more productive worker is a danger to his fellow workers and a threat to the social power of his entire social class.

After all- the more productive a worker is the less workers you will need in aggregate and the lower their bargaining power will get as the supply of surplus labour increases- leading to lower wages in the future.

So on the face of it there is no reason for the workforce to welcome increased productivity since they will generally not be the winners in this process but the losers.

I am even becoming suspicious of the logic that declares that the road to prosperity for the common man is through the narrow gate of lower wages and less rights at work.

Maybe I'm missing something here but I struggle with the idea that getting poorer and more insecure is something worth striving for.

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This thread does raise the question of why labour should regard increased productivity as a benefit- it's just as easy to make the case that a more productive worker is a danger to his fellow workers and a threat to the social power of his entire social class.

After all- the more productive a worker is the less workers you will need in aggregate and the lower their bargaining power will get as the supply of surplus labour increases- leading to lower wages in the future.

So on the face of it there is no reason for the workforce to welcome increased productivity since they will generally not be the winners in this process but the losers.

I am even becoming suspicious of the logic that declares that the road to prosperity for the common man is through the narrow gate of lower wages and less rights at work.

Maybe I'm missing something here but I struggle with the idea that getting poorer and more insecure is something worth striving for.

but then youre missing the argument about the size of the pie. if people are productive and increase the size of the pie for everyone, your relative stake maybe less equal to another country yet your absolute stake still makes you far richer.

the average citizen in an unequal US is far wealthier then the average citizen in a more equal sweden.

the US is clearly unfair, and in a big way, but in real terms people are better off.

does it matter than the top 10% are getting very wealthy as long as you yourself, as the the average person, are getting wealthier than people of other countries.

Edited by mfp123

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absolute income cant really be compared because a low paid person in the UK would be classed as a high earner in another country.

so if you assume for simplicity everyone is in 1 economy, the question is what structure produces the optimum efficiency/output.

2.9_news_chart_update.jpg

now although you might think perfect equality is the ideal, so there is no top middle or bottom, history shows that often when equality is imposed or implemented artificially so everyone is equal, everyone can also just end up equally poor if the system doesnt work.

and despite the US having massive income disparity compared to Sweden the US has the highest absolute median income in the world (excluding mini states e.g luxembourg), far outstripping sweden.

One gigantic flaw in your comparison.

Median income is entirely irrelevant.

What matters is the quality of life individuals in each nation state experience. By far, sweden is hands down better than the U.S in this regard. Any non-wealthy elite who wants to choose which of these two nations to live in, should if they want a higher quality of life choose sweden. They'd be daft not to.

On that basis the model that Sweden has adopted with its levels of income inequality is the one we should follow rather than the U.S. Or do you think the UK should on purpose choose to have a lower quality of life for its citizens than it otherwise could?

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This is a much harder question.

So are Goldman's employee really highly productive?

So are eur100000 civil servant at Brussel highly 'productive' ?

Do certain politician wife on eur500k highly 'productive' ?

To a certain extend, wages/profit/earning have more to do with bargaining power (which could be backed by unique skills but also government fiat, location monopoly, historical accidents and access to violent ) than real productivity. In most cases, it is the relative productivity that counts, if you can produce 10 widgets a day by operating a machine when we used to be able to make one by hand, you will make a lot of profits, until your competitor can produce 15 and eventually everyone operates on a 3% profit margin.

That is the reason Berkshire Hathaway pulled out of textile manufacturing and allocate the capital to 'interesting stuffs'.

Specialist groups with privileged access to resources markets, technologies, taxes or money flows are always going to be in a position to enhance their incomes but that ability to take a rake off is ultimately dependent on the productivity of the wider economy. This was a fact that was not lost on medieval monarchs who were keen to encourage the growth of market towns and basic industries such as cloth manufacture because they knew it ultimately boosted their own feudal dues and tax yields. Sadly that rather obvious point seems to have become a major disconnect in our society where the lords of the manor appear to be under the impression that they can extract ever greater amounts of economic rent from a shrinking or stagnant economy. Suppressing wages may help to preserve this process in the short term but without real growth in productivity and earnings that can only go one for a limited time If both earnings and productivity nose dive then the end result is that the elite or privileged groups themselves have to be downsized because there is simply less available to keep them in the manner to which they have become accustomed. It is this process rather than the exploitation of the poor that usually leads to conflict (ie most civil wars are fought between rival elite groups over who should enjoy what privileges in a society or economy).. Of course, it is possible to run an economy and society with a small elite using almost entirely on slave labour but often they are not very efficient and are usually subject to some form of 'takeover' of their resources by better organised and more productive neighbours. A perfect example of the latter case is what happened to the Southern US states in the mid to late 19th Century

Edited by stormymonday_2011

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but then youre missing the argument about the size of the pie. if people are productive and increase the size of the pie for everyone, your relative stake maybe less equal to another country yet your absolute stake still makes you far richer.

the average citizen in an unequal US is far wealthier then the average citizen in a more equal sweden.

Except that's a load of nonsense isn't it?

We know exactly whats happened to the size of the pie the average U.S. citizen gets. It's not changed in 30 years. So how exactly are they getting more pie, when their real incomes are the same as 30 years ago?

does it matter than the top 10% are getting very wealthy as long as you yourself, as the the average person, are getting wealthier than people of other countries.

Please give your evidence for the U.S. to back up this claim. Do not bother posting data that does not adjust for hours worked, or number of individuals working per household, as otherwise such data is meaningless and flawed.

Edited by alexw

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Except that's a load of nonsense isn't it?

We know exactly whats happened to the size of the pie the average U.S. citizen gets. It's not changed in 30 years. So how exactly are they getting more pie, when their real incomes are the same as 30 years ago?

Please give your evidence for the U.S. to back up this claim. Do not bother posting data that does not adjust for hours worked, or number of individuals working per household, as otherwise such data is meaningless and flawed.

it was a rhetorical question, but if you want to look at the US the US has far higher incomes than every other country in the world.

spain is more equal than the US in income equality but the average US citizen clearly earns far more than the average spanish or swedish citizen.

and the average is massively scaled up as well.

Norway is the richest European country per head mainly due to its oil reserves, and has 5 million people. the US has similar income/gdp per capita to Norway and has 300 million people. thats 300 million people with an average income that is equal to the wealthiest part of Europe.

Edited by mfp123

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it was a rhetorical question, but if you want to look at the US the US has far higher incomes than every other country in the world.

spain is more equal than the US in income equality but the average US citizen clearly earns far more than the average spanish or swedish citizen.

and the average is massively scaled up as well.

Norway is the richest European country per head mainly due to its oil reserves, and has 5 million people. the US has similar income/gdp per capita to Norway and has 300 million people. thats 300 million people with an average income that is equal to the wealthiest part of Europe.

Again I will ask, give your data to back up your claim. You have said that the pie grows faster in more unequal countries and so the less well off do better even though its more unequal.

So show me the data for the last 30 years in how real incomes per hour worked have increased for the U.S. for the average worker. I'm sure if you are correct real incomes for the average per hour worked must have increased by 50% or more. Therefore you must be chomping at the bit to prove me wrong and provide such data. So provide it.

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Norway is the richest European country per head mainly due to its oil reserves, and has 5 million people. the US has similar income/gdp per capita to Norway and has 300 million people. thats 300 million people with an average income that is equal to the wealthiest part of Europe.

I was offered a job in Norway, and after much research and soul-searching decided it was a complete basket case. If that's what wealth gets you they can keep it.

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if people are productive and increase the size of the pie for everyone,

No- not everyone- just those with access to the pie.

To man with no job or money the existence of more pie is not helpful- he can't afford to buy any pie.

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Again I will ask, give your data to back up your claim. You have said that the pie grows faster in more unequal countries and so the less well off do better even though its more unequal.

So show me the data for the last 30 years in how real incomes per hour worked have increased for the U.S. for the average worker. I'm sure if you are correct real incomes for the average per hour worked must have increased by 50% or more. Therefore you must be chomping at the bit to prove me wrong and provide such data. So provide it.

well take for example these 2 charts

income-percentile.jpg

IncomeByAgeBracket.gif

real incomes have grown and as you get older, real incomes have risen.

due to the unequal nature of things the bottom percentile has clearly risen at a far slower rate than the wealthier.

but dont forget those percentiles remain the same whether your in 1960 or 2010. so someone in the bottom percentile today is better off than someone in the bottom percentile when they were in that bracket 50 years ago.

that slower real growth at the bottom doesnt mean that people arent seeing the benefits of it because a 20 year old in 1970 will be a 60 year old now and their rise in incomes will reflect their change in society. the fact that someone was in the bottom percentile in 1970 doesnt mean theyll still be in that same percentile today. peoples earnings tend to move up the ladder and percentiles as you get older.

with regards to hours worked thats a slightly different issue because maybe they do work longer hours, and maybe theres a diminishing return in terms of hours worked and real reward, but at the same time you could factor in other variables e.g are people more motivated to work longer, is there more competition is there more work to be done. would you measure unemployment or underemployment as a good thing for your country as less citizens have work to do.

no one said anything about it being fairer, or more morally just, or an easier work life, its simply that the US is a prime example that inequality, unfairness, has worked in the past 50 years in helping it become a super power.

Edited by mfp123

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Specialist groups with privileged access to resources markets, technologies, taxes or money flows are always going to be in a position to enhance their incomes but that ability to take a rake off is ultimately dependent on the productivity of the wider economy backing of the state.

In the post you were replying it was discussing how manufacturing suffers a much greater competitive risk than manufacturing. To this end manufacturing has a low barrier of entry, for a country say like China compared to what the majority of the graduates western universities churn out take as a career.

If I look at my contemporaries at university now the vast majority, in fact almost all, are somewhere in the management food chain of the big accounting/law/consultancy firms. The bulk of what all these firms do is effectively facilitate the interaction of the genuinely productive with the state and this is how as a nation our maths/physics/chemistry and engineering graduates have in the majority ended up being employed.

Granted, quite a lot will also work in IT but even IT is barely a business in itself and effectively either provides systems or platforms to real world businesses or is reliant on them for advertising revenue.

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  • 239 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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