Steve Randy Waldman[new draft post] Why does wage compression underwhelm? https://drafts.interfluidity.com/2024/03/25/why-does-wage-compression-underwhelm/index.html
Kent Willard@interfluidity I think a lot of growth in the lower wage cohort is from those with higher job mobility. For example, those with lower wages who are older or in a small city or rural area won't change employers or industries. Their employers know it, so their raises are small.
Alon@kentwillard @interfluidity That's every wage increase, though. Growth doesn't mean everyone gets the same 2% real wage increase; it means more productive workers get more. The problem is when populists have latched onto the least productive workers (e.g. ones who won't move to opportunity) as the representatives of the real working class.
@Alon @kentwillard If we are concerned abt welfare, we are concerned abt the welfare of all the humans, not just those willing or able to move to opportunity under current circumstance, even if that wld increase their productivity. If we are concerned abt democratic politics, we are concerned about the humans in proportion to their numbers, and if the fraction willing or able to move to opportunity is modest, don't blame "populism" for the bankruptcy of a politics that slights the place-bound.
@Alon @kentwillard None of this prejudices the solution space. One way to address the disconnect is to make it easier for people to live the dynamism imagined of homo economicus. Another way is to reshape productivity, so that, for example, geographical dynamism is less necessary because remote work. Lots of possibilities!
@Alon @kentwillard But if most of the working class still live within 15 miles of their parents, any "populism" — any functional democracy — will put a great deal of weight on those people as "representatives of the real working class".
@interfluidity @kentwillard *All* reduction in inequality involved moving to opportunity, it was just once called urbanization and today it's called moving to a different city.
The idea that "most of the working class still live within 15 miles of their parents" is just wrong. It comes from a single survey of American women over the age of 50 asking them where their children lived; it's been publicized way past its statistical power precisely because it moralizes against migration.
@Alon @kentwillard Urbanization creates growth, not equality. On the contrary. cf China. We can quibble about surveys, but it remains true that there is a very, very large cohort of people who have and likely will always, absent very sharp changes in our circumstances, remain near family and childhood community, close to the place they were born. Trying to undo this is quite a radical project, utopian or dystopian. Ignoring this cohort is morally indefensible and politically catastrophic.
@interfluidity @kentwillard No, urbanization creates both growth and equality: China has high inequality with fast urbanization, India has even higher inequality with slow urbanization and repeated failed attempts at growth-in-place.
And the cohort that I'm ignoring is not "people who'd like to stay" but "people who'd like the children they abused to stay." It's okay not to give them money, same way it really is okay not to give farmers special welfare when they riot.
@interfluidity @kentwillard Usually democracies have higher taxes and lower inequality than autocracies, because of the median voter theorem (I presume you've seen the paper that made the rounds on this on Econ Twitter pre-Musk?). That India has a Gini of 0.5 (China: 0.41; US: 0.39 pre-corona) is an indictment of an entire strategy of trying to grow without urbanization or labor-intensive industry.
@Alon @kentwillard The relationship between urbanization and inequality is complex, like the relationship between growth and inequality is complex. It is not defensible to say that urbanization creates equality. It is also not defensible to say urbanization always creates inequality, although that is usually its very short-term effect. 1/
@Alon @kentwillard But trying to impose a preference for urbanism and geographic dynamism on the coat tails of egalitarian values is definitely not defensible. There have been more equal and less equal agrarian and urban societies. We don't know what the shape of the future is. Perhaps you have a very particular urbanistic, dynamic, egalitarian development path in mind, but mere "urbanization" is not necessarily, not remotely necessarily, egalitarian. /fin
Misuse Case@interfluidity @Alon @kentwillard Urbanization isn’t necessarily a driver of egalitarianism…but freedom to migrate, either towards a better situation or away from a bad situation, is *definitely* a driver of egalitarianism.
@MisuseCase @Alon @kentwillard I don't think that's true in general. It might be true if everyone were equally situated to be able to move, so everyone would optimize towards equally good situations. But in real life, some people simply cannot move for a variety of reason, so freedom to migrate often exacerbates inequalities. Those who were already relatively well-situated move to even better circumstance. Those who were poorly situated are left-behind in places and circumstances now much worse.
Diego@interfluidity @MisuseCase @Alon @kentwillard In a high migration environment, the "left behind" are an increasingly irrelevant minority. That's how inequality is reduced, a smaller and smaller share of the population living in a persistently poor place.
And I don't think migrating away makes things worse for those left behind, if the process continues to its bitter end everyone left can have a productive job in farming (or services for the farmers).
@DiegoBeghin @MisuseCase @Alon @kentwillard Like a lot of plans, you have an end state in mind where everything's hunkydory. If everyone's a migrant, there's no left-behind to trouble us. But how does the transition to that exalted stat work, when for now at least 30-40% will not for the foreseeable join the program? 1/
@DiegoBeghin @MisuseCase @Alon @kentwillard You can tell a just-so story about migrants making life better for those who remain. The marginal product of workers decreases in quantity, so those who remain will have better, more productive jobs, so everyone will be better off! 2/
@DiegoBeghin @MisuseCase @Alon @kentwillard At the same time, the migration destinations aren't underpopulated places, but huge cities. Here the just-so story is agglomeration effects mean that in fact the marginal product increases in the number of humans! 3/
@DiegoBeghin @MisuseCase @Alon @kentwillard Empirically, just-so story 2 seems pretty definitively to win, under our current economic arrangements. Places that depopulate do poorly in aggregate, and the people who live there do poorly on average and at median. Place that populate, and the people who live there do well at least on income grounds, though high costs blunt the benefit. 4/
@DiegoBeghin @MisuseCase @Alon @kentwillard That's not to say these things wouldn't work out differently with different economic and social arrangements. Place-based policy could make both just-so stories true in their respective places. Which is why I support it. /fin
@interfluidity @DiegoBeghin @MisuseCase @Alon There's a doom loop as those best able to compete leave an area. Once it starts, taxes and labor pool are reinforcing. Imagine other nations become like aging Japan, where there's consolidation in few MSA's, but where shelter is expensive in those mega-cities.