3 thoughts on “Unions, Wages And Productivity”

  1. “If you think America is in a race to the bottom as low wage labor in China and elsewhere puts more and more pressure on our middle class living standards here in the US, you probably …”

    … haven’t been paying attention. Free trade is a rising tide that lifts all vessels. NAFTA has been a huge boon to the economy. Trade with the rising Asian economies benefit all – China gets wealthier, we get wealthier, India gets wealthier, etc. etc.

    And he makes great points about productivity in the health, education and government sectors. I hope the political class is up the challenges of making necessary changes in the regulatory environment necessary to effect these improvements. No Watson-style computers will ever take off, for instance, if IBM can be sued for $20 MM for medical malpractice every time it gets an answer wrong.

    And J.H.C., I’ve got a two-word suggestion for doubling the efficiency of the acounting profession overnight: Flat Tax. It doesn’t even matter if you apply that to Income, Sales or Real Estate; as long as it’s flat and has no exceptions that accountant can go do something more productive with his time. Plenty of lawyers would also find a lot of their time freed up too.

    Here’s another suggestion for making the accounting and legal field more efficient – make SEC reporting requirements conform with the accounting software used by companies. Need to file an 1OQ? Push a button to upload to the SEC servers; no accountants or lawyers necessary. (Well, maybe 1 or 2 for the management narrative, but not the dozens currently used).

    There is a problem with America’s economy today though, and you don’t have to be Matt Taibibi to wonder why hedge fund managers in New York are suddenly making 10x more money than even Fortune 500 CEOs (already a group that is paid questionable sums relative to their productivity). I work in this sector as an in-house attorney to a major investment bank, and even I think it’s too much (though I don’t say so aloud at the office).

    The efficient management of capital is a critical and necessary component to any modern, capitalist economy. Wall St. must exist. But Wall St. as it currently exists is gaming the larger economy. For decades the Managing Directors make money off selling Black Swan insurance, and when the Black Swan touches down – bailout! Or they earn fees brokering securities with hidden Black Swan pitfalls to investors that don’t understand the math (think of CDOs sold to municipal pension funds), and are long gone when the poop hits the fan.

    And the recent Frank-Dodd legislation doesn’t fix anything; it just moves some risk from the banks to the exchanges being set up, while still leaving the Fed as the liquidity provider of last resort.

    This must be addressed, or the next time a critical flaw is revealed in the financial models we’ll have the fun choice of TARP 2 or a financial crash. When the NASDAQ falls 70% we just write off our losses and work a little harder, but when banks fall it’s the equivalent of removing a few key gears from a running engine. They know this and exploit it, knowing the Fed will blink first.

  2. when banks fall

    All businesses fall. This is why you need a lot of them in competition.

    …and NO BAIL OUTS.

    When the biggest fall, it means the overall distribution that provides robustness increases. Bailouts work directly against this dynamic.

    Banks make money. There is no shortage of people that want to start up new banks.

  3. We feel that Wall Street is the biggest Bookie joint in the Big Apple if not the whole world. Think about it.

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