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"Boss, we need to talk... I want a payrise...
Everyone else is getting one"
If you've been keeping an eye on the news, you'll know this is true.
Companies ARE paying more 👇
Last March, Bank of America raised its minimum hourly wage to $20, a year ahead of plan and more than double the US federal minimum wage.
In 2010, the bank’s minimum wage was $11.30 per hour.
Many would argue that these wage increases are LONG overdue 👇
Workers have not proportionately shared in the post 2000 company prosperity as the chart (via the NYT) shows.
There was already pressure to remedy this pre-Covid, especially at the lower end of the payscale.
Many say that globalisation is to blame.
The outsourcing of jobs to countries with lower labour standards (and lower wages) such as China kept an anchor on domestic wages, especially at the lower end.
Basically, there was always someone else available to do it cheaper.
This gap between company profits and wages continued to widen, and the 'bottom' 90% were left behind 👇
Political pressure grew, especially when Bernie went after Bezos:
Then Amazon raised their minimum wage (in 2018)...
And the balance seemed to shift slightly...
Although the new administration has not (yet) been able to pass the $15 minimum wage into law, they have managed to hike pay for federal workers...
Many predict that this trend will continue.
A brand new era of higher wages beckons...
The argument is summed up well by 'the great demographic reversal' co-author Manoj Pradhan 👇
We are arguing for the reversal of this abundance of labor.
Labor is still cheap in China but the ratio of U.S.-China real wages has come down from 35-times to 5-times over the last 20 years -- that is incredible.
With global labor supply growth turning south and the globalization in reverse, firms will invest more.
That will push productivity higher, though not miraculously, and support higher wage growth.
In the book, one of their central arguments is that the total size of the working age population of the developed world, relative to the retired population, is about to start a long-term decline.
With labor more scarce, they argue, workers will be able to negotiate for higher wages, and this will translate into inflation (and also into a decline in inequality).
Over the long-term, they may be right.
It's definitely a trend to monitor.
However, it is FAR too early to declare that there are labour shortages (or claim that's the reason companies are announcing pay increases).
This is purely an extension of a pre-Covid trend.
The key to persistent wage increases is a shift in the balance of power between labour and capital.
Between the employee and the employer.
Current employment figures are distorted by unemployment support, Covid restrictions, childcare and all kinds of one-off factors.
By September, (furlough expires, schools reopen) the picture will sharpen and we'll start to see if the employee truly holds more cards...
My 2 cents?
It's too soon for the reversal.
Automation is a big barrier to overcome, and China isn't the only source of cheap(er) labour in the world 👇
If anything, the recent wage hikes have merely re-established and reinforced the weakest point of the pre-Covid system rather than reversed the wider trend.