dagblog - Comments for "David Brooks Does Not Understand How Wages Work"

That is a good summary of the

moat — Sat, 04 Mar 2017 16:17:05 +0000

In reply to Interesting topic. I hardly

That is a good summary of the status of the industry. While it does a great job at showing the contrast between traditional and emerging processes such as Building Information Modeling and tools requiring greater technical expertise, there is another change that should be emphasized: a breakdown of the previous management culture.

In the traditional construction management structure, a person had to demonstrate competence in their responsibilities before given the task of managing others. So, in the case of carpentry, the progression is Laborer, Carpenter's Helper, Carpenter, Lead Carpenter, Site Supervisor. The Supervisor has to manage other trades and thus has to understand enough about them to control the assembly. This seems a simple of enough program to follow but other factors are in play. The need to manage the job as parts of a competitive deal puts a high premium on corporate project management skills. It introduces a selection process that interrupts the traditional sequence in order to utilize those who work well in both environments.

So the preponderance of older workers is not just about how many new people are coming into the industry. The older workers are not being replicated by the younger ones who are there now.

Good post Mike. I would add

HSG — Tue, 28 Feb 2017 14:06:56 +0000

In reply to David Brooks Does Not Understand How Wages Work

Good post Mike. I would add that the Colorado construction wage paradigm demonstrates how raising the minimum wage can in some situations lead paradoxically to higher employment. In the Centennial State, it appears that builders are forsaking profitable projects because taking on more work would require them to pay higher wages across the board than the current industry average of $26. The resulting higher labor costs would reduce profits per project by a greater amount than the increase in profits from more projects (with lower margins) overall.

Now imagine that Colorado raises the minimum wage for construction work to $30/hour. Assuming that builders can still realize sufficient profits at this labor price point to justify realistic bids, we can project an increase in total employment in construction. This is because builders will take on as many projects as they can staff at $30 per hour regardless of whether total profits would be higher if labor costs were lower.

In an employment market characterized by high barriers to entry and a limited number of employers (depicted in chart below), this situation is most likely to occur. Thus, raising the minimum wage from W2 to W1 will lead to an increase in jobs. See also http://davidcard.berkeley.edu/papers/njmin-aer.pdf

X axis = Number of workers

Y axis = Wages

Negative sloping line depicts the point where marginal return per employee equals wages paid. Higher wages mean fewer employees because the last hired employees must generate a higher return for the employer to justify their higher salaries. Lower wages mean more employees because the last hired employees do not need to generate as great a return for their employer.

The steeper positive sloping line depicts the marginal cost of hiring one more worker at any particular point. The less steep line depicts the average cost of labor (i.e., the prevailing wage) necessary to entice any specific number of employees. Where the marginal cost is steeper, employers will not produce at an optimal level. Doing so would require them to forsake the supernormal profits they gain from paying at a below-optimal wage level.

I bow to your advanced

artappraiser — Tue, 28 Feb 2017 09:05:47 +0000

In reply to Except maybe Krugman, Krugman

I bow to your advanced knowledge of Lena scripts. And doh, I think I figured out the correct answer: libertarians like Tyler Cowen.

(Article I posted there on millenials certainly rings true for me as to the 10 or so I worked with as temps this last summer--was a good mixture too, not only college students but supermarket cashier workers, and semi-lazy hipsters getting work on Taskrabbit... and that's without going into listening to complaints from boomer male colleagues about their children.)

You guys are so two thousand

jollyroger — Tue, 28 Feb 2017 02:27:39 +0000

In reply to Fascinating. Thanks for this

You guys are so two thousand and ten...You don't BUILD houses anymore--You print themhttps ://www.theguardian.com/technology/video/2014/apr/29/3d-printer-builds-houses-china-video

Except maybe Krugman, Krugman

Michael Maiello — Mon, 27 Feb 2017 15:21:53 +0000

In reply to I agree and I think the same

Except maybe Krugman, Krugman somehow got himself an it factor, he is a celeb.

Though on the season premiere of Girls (which, yes, I hate-watch) Krugman is the butt of millennial jokes. I think he's losing his halo.

I agree and I think the same

artappraiser — Mon, 27 Feb 2017 05:46:05 +0000

In reply to Brooks speaks for and

I agree and I think the same about another NYT columnist that has been a bete noire for a lot of liberal bloggers: Tom Friedman. On the other hand, younger voters left right and center don't pay any attention to any of these folks, who knows what they pay attention to and I doubt the op-ed writers understand them either. (I was just reading an art review by a millenial about a show in L.A., it is like in a different language. This is why I am thinking on that.) Except maybe Krugman, Krugman somehow got himself an it factor, he is a celeb.

Brooks speaks for and

ocean-kat — Mon, 27 Feb 2017 03:30:04 +0000

In reply to Interesting topic. I hardly

Brooks speaks for and influences the moderate wing of the republican party. If we want to understand those voters reading Brooks is essential. And we want to understand those voters because those are the people we need to move towards the democrats to win in some of the red or even purple states. I agree with rmrd who has frequently posted that democrats cannot reach Trump's supporters. We need to reach republican moderates who disliked Trump and who have been uncomfortable with the extreme right wing, evangelicals, and anti-environmentalists for years if we want to take back state governments and house and senate seats.

Fascinating. Thanks for this

Michael Maiello — Mon, 27 Feb 2017 02:17:41 +0000

In reply to Interesting topic. I hardly

Fascinating. Thanks for this.

Interesting topic. I hardly

Anon — Sun, 26 Feb 2017 15:23:09 +0000

In reply to David Brooks Does Not Understand How Wages Work

Interesting topic. I hardly pay attention to Brooks or the NYT anymore. Here is link to a 64 page PDF of a report, Shaping the Future of Construction:

http://www3.weforum.org/docs/WEF_Shaping_the_Future_of_Construction_full...

You can either read the executive summary, or skip ahead to page 36 to read about workforce issues.

"The E&C industry will face stiff recruiting and talent challenges in the years ahead. One major challenge is the prospective scarcity of skilled labour, driven by demographic shifts in developed countries. A case in point is the United States: between 1985 and 2014, the average age of construction workers surged from 36 to 43 years, while over the same period the proportion of soon-to-be retirees (aged 45 to 64 years) increased from 25% to 40% (see Figure 15). 81 Another serious challenge relates to the increasing sophistication of technology, which demands new and broader skill sets at all levels of a company. A final challenge is the high volatility of workforce demand and composition: staff demands become evident at short notice following a
competitive tendering bid, and the execution of contracts typically requires the short-term integration of a transient workforce from multiple subcontractors."

The authors accurately observe that the focus on low bids is a problem, but offer no solution. Besides bromides about better training, the proposed solutions include emulating the auto industry in terms of closely monitoring the work, expanding the use of BIM software throughout the industry, semi-automation of construction techniques, and increasing the size of firms. Frankly, firms will have to be larger to afford the other three recommendations, and none of them imply higher wages for anyone outside the trailers.

Also, a large portion of future construction is going to be retrofit, in which BIM and automation are more difficult.

Common sense is for

Michael Maiello — Sat, 25 Feb 2017 20:53:56 +0000

In reply to Commie!

Common sense is for communists.