<story><title>Decline in the labor share of income in the U.S.</title><url>http://www.vox.com/2015/1/8/7511281/labor-share-income</url></story><parent_chain></parent_chain><comment><author>netcan</author><text>One of the key concepts for thinking like an economist is noticing where and how things are economically equivalent, or literally  fungible.&lt;p&gt;Trade (like outsourcing) and technology is economically indistinguishable from technology from the perspective of a single country. The classic example is that if you export potatoes and import cars, this is economically equivalent to finding a way to grow cars in a field.&lt;p&gt;In practice trade and technology have always been closely related. When China could make silk and Italy could make glass, trade was very obviously a substitute for the technology.&lt;p&gt;So basically, it makes a lot of sense to treat advancements in trade and technologies similarly in our thinking. Luddite ideas and economic isolationist ideas are in this sense different flavors of the same reaction by those made redundant.&lt;p&gt;Personally, I don&amp;#x27;t buy &amp;quot;robots wil take all jobs&amp;quot; wholesale. There&amp;#x27;s a lot of guesses in there we don&amp;#x27;t have a rational way of making. We need to remember the many incarnations of Ned Ludd though time, including eminent figures like Ghandi. I think they&amp;#x27;ve all been wrong regarding the big picture. While this time might indeed be different, we need to give some respect to the fact that this is an idea we have a long history with, and we&amp;#x27;ve been wrong about it in most cases.&lt;p&gt;That said, I think the pace of change is a new part of the mix. The work in a 1850 factory and an 1875 factory was not different to the same extent as 1990-2015. People with 1990 skills now are not employable today in many&amp;#x2F;most fields. If that condenses further as I think it will, many people will fail to stay employable from 18-65, which means more unemployment.&lt;p&gt;I think we also need to consider some points Marx was fairly right about, the inevitability of political instability as a result of certain economic realities. Too much inequality can lead to revolution.</text></comment>
<story><title>Decline in the labor share of income in the U.S.</title><url>http://www.vox.com/2015/1/8/7511281/labor-share-income</url></story><parent_chain></parent_chain><comment><author>ptaipale</author><text>There are more issues here that could be discussed  - particularly what is pointed out already in point 5, statistical quirks -  but I&amp;#x27;ll stick to this one in point 6 for now:&lt;p&gt;&amp;quot;Another possibility is that the decline is more recent than we assume, and the result of slack in the labor market is due in large part to the recession.&amp;quot;&lt;p&gt;I haven&amp;#x27;t studied US data, but in my country (Finland), which is a small country dependent on trade, the impact of recession is exactly the opposite. Recession means that the labor share of income goes &lt;i&gt;up&lt;/i&gt;, not down. Labor share of income has been in historically local highs at a time when life was very very bad (1992-1993): high unemployment, falling income, foreclosures.&lt;p&gt;The labor share of income has gone down here, as well. But it&amp;#x27;s not because of more money going to capitalists. Their share has been essentially the same since 1970&amp;#x27;s (23-25%). In my country, the falling share of labor is almost entirely explained by the rising share of state: the proportion of taxes on production and imports has gone up by about 5 percentage points, from 10 % to 15% of national income. So the share of labor has gone down from ~67 % to ~60 %.&lt;p&gt;I wrote this blog post three years ago but it&amp;#x27;s still quite valid:
&lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;ptaipale.blogspot.fi&amp;#x2F;2012_08_01_archive.html&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;ptaipale.blogspot.fi&amp;#x2F;2012_08_01_archive.html&lt;/a&gt;</text></comment>