Great article on the economy, income inequality, the rural urban divide, and Monopsony

alphasigmookiealphasigmookie Senior MemberPosts: 8,073 Senior Member
http://www.mauldineconomics.com/outsidethebox

This article is again from the website of one of my favorite Republican financial analysts John Mauldin, so definitely not some liberal occupy wall street type. He makes his money providing advice to millionaires and billionaires so has a vested interest in accurately identifying important trends and dynamics. The article focuses on why wages have stagnated or even declined in real terms for a significant majority of workers even though unemployment is low and the economy is doing well.

Since I know few of you will actually click the link and read (which I highly recommend) here is the cliff notes version:

Based upon historical metrics typical worker wages should be much higher than they currently are based upon the health of the economy, the unemployment rate, and worker productivity

Corporations are keeping a much larger share of the pie as profits vs. what they pay in wages relative to historical averages over the past 70 years.

The market power of companies has been increasing while the market power of employees has declined. Factors at play include mergers and consolidation (there are 50% fewer companies today than 20 years ago and most industries are controlled by only a few major companies that dominate the entire industry), decline of unions, collusion, and Monopsony

Monopsony is when there is only one buyer for a product. In this case there are large monopsonies for purchasing labor, especially in rural areas. Basically few employers so workers have little choice but to accept the wages offered to them because there are few options.

The large income divide between cities and rural areas is driven largely by the number of jobs and competition for those workers which doesn't exist in many rural areas. Companies in urban areas have more competition for workers so must pay higher wages.

The article doesn't offer answers, but in my opinion this specific dynamic is what is driving both the populist right (Trump) and the populist left (Bernie).  The government has essentially abandoned it's post in terms of enforcing anti-trust law and changes in campaign finance law have made it much easier for the elites who benefit from the status quo to buy politiicians and ensure that it doesn't change.

"Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
-DoctorWho
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Replies

  • earlyagainearlyagain Posts: 1,720 Senior Member
    Yep.

    Too bad all this will be summarily dismissed as socialist, communist propaganda. It's all right, modern technology will provide vastly improved materials for the Hoovervilles of the future.
  • BAMAAKBAMAAK Senior Member Posts: 4,256 Senior Member
    I didn't even have to look to see who posted this.
    "He only earns his freedom and his life Who takes them every day by storm."

    -- Johann Wolfgang von Goethe, German writer and politician
  • BAMAAKBAMAAK Senior Member Posts: 4,256 Senior Member
    You know they were saying the same things 50 years ago right?  Probably longer.  How about it Ned, you remember them saying that in the 1800s?
    "He only earns his freedom and his life Who takes them every day by storm."

    -- Johann Wolfgang von Goethe, German writer and politician
  • alphasigmookiealphasigmookie Senior Member Posts: 8,073 Senior Member
    BAMAAK said:
    You know they were saying the same things 50 years ago right?  Probably longer.  How about it Ned, you remember them saying that in the 1800s?
    It's possible they did. One of the biggest flaws in completely unfettered capitalistic systems is a tendency towards monopoly. Even Adam Smith recognized that problem and the importance of the government's role it limiting monopoly. The US economy tends to go in long cycles corporate power and concentration of wealth and failure and revolt. We're near another tipping point imho. The status quo can't hold too much longer. The election of Trump was one of the first tremors of the earthquake the earthquake that will strike the status quo at it's core. 
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • zorbazorba Senior Member Posts: 16,917 Senior Member
    "Income Inequality" is one of those codewords that causes me to roll my eyes...
    -Zorba, "The Veiled Male"

    My Karma ran over your Dogma!
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    edited March 10 #7
    I agree with Walter Russell Mead's view that we are in the middle of a major change in our society-- similar to when we went from agrarian to industrial. Now we are going from industrial to what? Is it an information society? Whatever it is, it has never happened before in the history of humanity. Some doors are going to open, some doors are going to close. We live in interesting times.
  • cpjcpj Senior Member Posts: 38,295 Senior Member
    edited March 10 #8
    .
    "I'm here for the guns, hunting, and skirt wearing men."
    Zee
  • alphasigmookiealphasigmookie Senior Member Posts: 8,073 Senior Member
    zorba said:
    "Income Inequality" is one of those codewords that causes me to roll my eyes...
    I get that. I am not a fan of equity per se. There needs to be a gradient between those that excel and those that to the bare minimum or worse. That said the gradient has gotten pretty huge. When the top 0.1% capture over 10% of total gdp and about as much as the entire lower 50% we may have a problem. We do live in a country where the majority rules. When almost have the population is getting a tiny slice of the economic pie, don't expect them to stay silent and take it for too long. 
    "Finding out that you have run out of toilet paper is a good example of lack of preparation, buying 10 years worth is silly"
    -DoctorWho
  • earlyagainearlyagain Posts: 1,720 Senior Member
    We're going from a stagnating quagmire of leftist bureaucracy that all but ran the whole country in the ground to a government of corporate oligarchy by corporate oligarchy for corporate oligarchy. 
  • cpjcpj Senior Member Posts: 38,295 Senior Member
    zorba said:
    "Income Inequality" is one of those codewords that causes me to roll my eyes...
    I get that. I am not a fan of equity per se. There needs to be a gradient between those that excel and those that to the bare minimum or worse. That said the gradient has gotten pretty huge. When the top 0.1% capture over 10% of total gdp and about as much as the entire lower 50% we may have a problem. We do live in a country where the majority rules. When almost have the population is getting a tiny slice of the economic pie, don't expect them to stay silent and take it for too long. 
    zorba said:
    "Income Inequality" is one of those codewords that causes me to roll my eyes...
    I get that. I am not a fan of equity per se. There needs to be a gradient between those that excel and those that to the bare minimum or worse. That said the gradient has gotten pretty huge. When the top 0.1% capture over 10% of total gdp and about as much as the entire lower 50% we may have a problem. We do live in a country where the majority rules. When almost have the population is getting a tiny slice of the economic pie, don't expect them to stay silent and take it for too long. 
    if one really doesn't like his or her situation, they can tell The Man to **** off, then open their own business. 
    "I'm here for the guns, hunting, and skirt wearing men."
    Zee
  • BAMAAKBAMAAK Senior Member Posts: 4,256 Senior Member
    I agree with Walter Russell Mead's view that we are in the middle of a major change in our society-- similar to when we went from agrarian to industrial. Now we are going from industrial to what? Is it an information society? Whatever it is, it has never happened before in the history of humanity. Some doors are going to open, some doors are going to close. We live in interesting times.
    I think it's more a services society which in a lot of respects accounts for pay inequality.  Services jobs just don't pay much.  Hopefully Trump continues to reverse the loss of manufacturing jobs.
    "He only earns his freedom and his life Who takes them every day by storm."

    -- Johann Wolfgang von Goethe, German writer and politician
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    BAMAAK said:
    I think it's more a services society which in a lot of respects accounts for pay inequality.  Services jobs just don't pay much.  Hopefully Trump continues to reverse the loss of manufacturing jobs.
    What Mead is saying, and I agree, is that those manufacturing jobs are gone and never coming back-- or at least in the way it used to be. Obviously, stuff still needs to get made. Living my whole life in the Flint, Michigan area, I have seen this decline close up. I have seen local leaders looking backwards at the past, believing it is our future. There is no bringing it back. It is time to move on to the next thing-- whatever that is.
  • bisleybisley Senior Member Posts: 10,112 Senior Member
    I look for most businesses to go the bonus route, rather than significant wage increases, at least until they see more effects of deregulation, and are able to see how the unions act. Union corruption and left-wing governments are a major factor in the decline of once great cities like Detroit, and no business wants to get caught up in that again. In the future, I believe most big companies will position themselves to simply close the doors and move to new locales, when the unions get too tough to handle.

    If corporations respond to tax cuts and de-regulation in a positive way, wages will eventually rise. And, the increase of small business will be a major factor, also. The climate is becoming more friendly for them with the tax cuts and getting rid of the back-breaking regulation that ran so many out.
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    edited March 10 #15
    bisley said:
    Union corruption and left-wing governments are a major factor in the decline of once great cities like Detroit, and no business wants to get caught up in that again.
    It would not be wise to gloss over the decline of some of these once great Rust Belt cities as "liberals". While it fits neatly in your narrative that liberals are destroying this country and conservatives can save it, there is a whole lot more going on here. Technology alone accounts for more job losses in the steel, coal, and automotive industries than foreign competition ever has-- considerably more than what has migrated to other states. There are simply less people needed to do the same amount of work.

    And the fact of the matter now is that some of these corporate types would sell their own mother on a street corner to yield an extra buck isn't helping the situation either. Everything is dollars and cents now and has nothing to do with the workforce. If some bean counter can squeeze another 2 cents out by moving operations to Hicksville, USA, they are going to do it. There is absolutely no sense of responsibility.

    Another thing you don't seem to understand is that in some of these "left-wing" areas, many of these Democrats are a whole lot more conservative than some the Republicans in your right wing deep red states-- that goes back to people blindly voting for a single political party. In the elections in my area, quite often there is one candidate on the ballot-- a Democrat. The real election happened during the Democratic primary earlier in the year between the snowflake left winger and the "wink,wink...nod,nod" Democrat. But from your view in deep red Texas, you dismiss it as all a bunch of liberals. 
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    edited March 10 #16
    cpj said:
    if one really doesn't like his or her situation, they can tell The Man to **** off, then open their own business.
    While I do agree with your statement, there is a qualifier: Quite often "the Man" is some "bro" with an MBA only concerned with his next bonus. There was no risk taking and sacrifice to get in that position. Those people can sincerely go have sexual relations with themselves.

  • BAMAAKBAMAAK Senior Member Posts: 4,256 Senior Member
    Name a big failing rust belt city that was run by Republicans.
    "He only earns his freedom and his life Who takes them every day by storm."

    -- Johann Wolfgang von Goethe, German writer and politician
  • cpjcpj Senior Member Posts: 38,295 Senior Member
    cpj said:
    if one really doesn't like his or her situation, they can tell The Man to **** off, then open their own business.
    While I do agree with your statement, there is a qualifier: Quite often "the Man" is some "bro" with an MBA only concerned with his next bonus. There was no risk taking and sacrifice to get in that position. Those people can sincerely go have sexual relations with themselves.

    The qualifications or lack thereof don't mean squat.  If you're working for the man, you're working for the man.  If you don't like that, quit and be the man who's **** the bosses wife's. 
    "I'm here for the guns, hunting, and skirt wearing men."
    Zee
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    edited March 10 #19
    BAMAAK said:
    Name a big failing rust belt city that was run by Republicans.
    Again, there are no Republicans but some of their Democrats are more conservative than your Republicans. Party affiliation is meaningless. It only matters to those that think an R or D by their name is that is good/evil in the world.
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    edited March 10 #20
    cpj said:
    The qualifications or lack thereof don't mean squat.  If you're working for the man, you're working for the man.  If you don't like that, quit and be the man who's **** the bosses wife's. 
    Sounds like a good gig. Maybe I should look into that.
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    Don Williamson was the mayor of Flint, Michigan during some tough times and was an idiot and a horrible mayor. The city was in state receivership during most of his tenure. While a "Democrat" in name, all his political contributions in statewide and national races were to Republicans. Detroit currently has a mayor that is one of those DINOs.

    You guys let political parties cloud your vision. 
  • CaliFFLCaliFFL Senior Member Posts: 4,250 Senior Member

    Monopsony is when there is only one buyer for a product. In this case there are large monopsonies for purchasing labor, especially in rural areas. Basically few employers so workers have little choice but to accept the wages offered to them because there are few options.


    This goes both ways. I am the ops manager for an aerospace factory in a town of 2500 people. We employee 110 people. While much of the unskilled labor makes minimum wage (WA is highest in the nation), the tech positions are WAY harder to find. To hire qualified engineers, I have to recruit nationally. Candidates have to WANT to live up here, they want moving expenses, and they practically name their price. 


    The question isn't who is going to let me; it's who is going to stop me.

    Ayn Rand
  • BigslugBigslug Senior Member Posts: 6,697 Senior Member
    cpj said:
    if one really doesn't like his or her situation, they can tell The Man to **** off, then open their own business.
    While I do agree with your statement, there is a qualifier: Quite often "the Man" is some "bro" with an MBA only concerned with his next bonus. There was no risk taking and sacrifice to get in that position. . . 

    So what?  The Bro with the MBA targeted an opening and had the motivation and opportunity to put himself in it - those that didn't, DIDN'T.  No critter or blade of grass in this entire world is entitled to a G.D. thing.  News flash: Failure Happens.
    WWJMBD?

    "Nothing is safe from stupid." - Zee
  • earlyagainearlyagain Posts: 1,720 Senior Member
    The unions being referenced haven't existed in their once power bloated form for decades. Nor are they to blame for the inferior products that left consumers looking for better. 

    Municipalities run by appointed czars in place of an electorate flys in the face of what I understand to be conservative.

    Conservatism and free market capitalism are fine if that's what we have. An economy where the amount of money, it's value, and where it goes being manipulated by a myopic microcosm may not be so free or conservative.

    When did public execution of moderates become liberal or conservative?


  • BAMAAKBAMAAK Senior Member Posts: 4,256 Senior Member
    BAMAAK said:
    Name a big failing rust belt city that was run by Republicans.
    Again, there are no Republicans but some of their Democrats are more conservative than your Republicans. Party affiliation is meaningless. It only matters to those that think an R or D by their name is that is good/evil in the world.
    I agree you don't judge a book by its cover or a person by a letter, as a whole, it's to big of a coincidence that almost all failing cities are run by Ds.  In your area D=Union=liberal policies for the most part.  Ds down south have different history, you know the KKK and the like but now we have some cities following the same failing ways as northern failures and guess what, they are run by Ds.  Huntsville is the most educated, fastest growing, highest paying city in Alabama and guess who runs it and has run it for years.  It's like that in areas all over the country.  So individuals, judge them by their actions, but parties, there is one that fails a lot more than the other.
    "He only earns his freedom and his life Who takes them every day by storm."

    -- Johann Wolfgang von Goethe, German writer and politician
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    edited March 10 #26
    True. But I get the feeling that some very wide brushes are being used to paint these pictures. So much so, that the details telling the real story are being left out or ignored.
  • bisleybisley Senior Member Posts: 10,112 Senior Member
    bisley said:
    Union corruption and left-wing governments are a major factor in the decline of once great cities like Detroit, and no business wants to get caught up in that again.
    It would not be wise to gloss over the decline of some of these once great Rust Belt cities as "liberals". While it fits neatly in your narrative that liberals are destroying this country and conservatives can save it, there is a whole lot more going on here. Technology alone accounts for more job losses in the steel, coal, and automotive industries than foreign competition ever has-- considerably more than what has migrated to other states. There are simply less people needed to do the same amount of work.

    And the fact of the matter now is that some of these corporate types would sell their own mother on a street corner to yield an extra buck isn't helping the situation either. Everything is dollars and cents now and has nothing to do with the workforce. If some bean counter can squeeze another 2 cents out by moving operations to Hicksville, USA, they are going to do it. There is absolutely no sense of responsibility.

    Another thing you don't seem to understand is that in some of these "left-wing" areas, many of these Democrats are a whole lot more conservative than some the Republicans in your right wing deep red states-- that goes back to people blindly voting for a single political party. In the elections in my area, quite often there is one candidate on the ballot-- a Democrat. The real election happened during the Democratic primary earlier in the year between the snowflake left winger and the "wink,wink...nod,nod" Democrat. But from your view in deep red Texas, you dismiss it as all a bunch of liberals. 
    I didn't say that the rank and file were liberals - I said the governments were.

    I know all about very conservative people voting for liberal Democrats because the union thugs hit them hard and fast before every election with the same BS they used against management when negotiating a new labor contract. The only leverage a union has is the threat of a strike, and it takes a lot of lies, arm-twisting, and threats of ostracism to get the average $40 an hour wage-earner pissed off enough at the people who write his check to think about walking off the job. I spent 30 years in the middle - not union and not management - and I know how this works, from both sides.

    From my view in "deep red Texas," I know that some companies deserve to have a union holding their feet to the fire. But I also know that most of them deserve to have the right to run their businesses the way they want and with the people they want. All of the big business around here, companies like Kelly-Springfield, or Carrier, that had hundreds or thousands of employees, are gone, now, because the unions wouldn't let them lower wages and benefits when the economy demanded austerity. They crippled along for years with lay-offs and hire-backs and finally just shut the doors. There were also two huge foundries that made cast iron pipe and employed a lot of people, but when they voted to go union, the companies gradually withered away until they finally shut the gates, for good. Safeway was one of the biggest grocery chains in Texas and surrounding areas, but they went under when the unions got in, because the narrow profit margins in the grocery business won't support ever increasing union scales.

    Most of those people that worked at these places had a rough time finding local employment, because they were used to high wages and good benefits, and small businesses weren't eager to hire them. The local economy didn't suffer too badly though, because there were lots of small businesses and jobs in the nearby oil fields, where I worked for thirty years.

    So, sure - I live in Hicksville, USA, compared to the urban jungles that sprouted up around the big manufacturing cities. But the towns around here don't dry up and blow away when the factories leave, because there is always a new business that wants to set up in a nice place where people will accept a fair wage until they can find something better, or start their own business. Some of them even find a happy medium where their employees can flourish and they can still make enough profit to stay in business.
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    Understood Bisley. The larger point I am trying to make is that with some of these cities, the politicians were grasping at straws trying to revive their declining industries when they should have been looking forward for the next big thing (or lots of little things). Most of these jobs and industries were naturally declining and still would have under different leadership. Their failure was not having the vision to see beyond the past, and quite frankly, they were merely reflecting the views of their constituents.

    Trying to bring back the Blockbuster Video and the 8-track tape factory in your town like the old days isn't going to cut it, regardless of who is in charge.
  • JermanatorJermanator Senior Member Posts: 14,252 Senior Member
    Bigslug said:
    cpj said:
    if one really doesn't like his or her situation, they can tell The Man to **** off, then open their own business.
    While I do agree with your statement, there is a qualifier: Quite often "the Man" is some "bro" with an MBA only concerned with his next bonus. There was no risk taking and sacrifice to get in that position. . . 

    So what?  The Bro with the MBA targeted an opening and had the motivation and opportunity to put himself in it - those that didn't, DIDN'T.  No critter or blade of grass in this entire world is entitled to a G.D. thing.  News flash: Failure Happens.
    It isn't about entitlement. It is about character. Call me old fashioned, but I do not feel the right way to build lasting relationships is by expecting the most and giving the least amount you have to. That goes for marriage, friendships, faith, and of course business. I feel like morality has been replaced by greed in some situations. I stay far away from those people both personally and professionally.
  • bisleybisley Senior Member Posts: 10,112 Senior Member
    Business is still business, whether high or low tech, the principles are still the same. All successful businesses are run on some variation of 'buy low and sell high,' and knowing where your market niche is. Local governments that have Chambers of Commerce that seek out business and sell their neighborhoods as good places to do business usually succeed in finding them, and having government that will offer tax breaks for long enough to let new business get their feet on the ground is key to attracting manufacturing and distribution industries.

    Liberal governments are never good at this because they do not believe in the tenets of capitalism in the first place, and they get elected by demonizing it in all of its forms, and labeling it conservatism. To them, concessions to a new business are crony capitalism, simply grist for their propaganda mill, and their constituencies have been trained to eat up any class envy slop, for generations. They talk up hope and change, but deliver nothing, because they don't know how to solve problems, and they don't care enough to learn. They don't have to, because their constituencies are full of perpetual victims. Most of the hard workers that couldn't find a living wage at home have either already left, or will as soon as they can.
  • tennmiketennmike Senior Member Posts: 23,288 Senior Member
    'Income inequality'. Buzz phrase for 'I'm too lazy to get off my dead rear end and onto my dying feet and work hard to better myself so I can make more money."
    I may be a Deplorable, but at least I'm not a Liberal!!!



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