480 sats \ 12 replies \ @elvismercury OP 15 Nov 2023 \ on: _Broken Money_ book club, part 4 bitcoin
Persistant inflation means that real wages go down each year. Employees can either deal with this, constantly ask for raises, or change jobs. In practice, #1 and #3 are the dominant strategies. Both cause tumult to the person and to society at large.
Bitcoiners often talk about how this problem will be a thing of the past on a bitcoin standard, when wages are subject to deflationary pressure. Given how deeply ingrained human loss aversion is, and consequently how persistently sticky wages are, how might labor relations -- and the nature of work itself -- evolve?
Before Nixon removed the peg to gold, and inflation was much lower, people stayed in the same job for much longer. Now that was still an inflationary environment and deflation is qualitatively different, but I think that's a good place to start. It's hard to go back to the deflationary period of the gold standard looking for conclusions, because the world was so different.
I do think people will stay with one job longer on a deflationary Bitcoin standard, because the frictions involved in job switching are so costly. That has a bunch of consequences. One is that people will be more productive at their jobs, because they've become more specialized. Another is that bad managers will be less tolerated, because driving people away will be more of a competitive disadvantage. People will also become more selective about what job they take, if there's an expectation that it's a long term position.
There's a social cohesion tie-in to people staying in the same job (or at least the same organization) longer. That's a source of identity for people and one of the social problems today is lack of social identity. It also means longer and deeper relationships with coworkers.
On the sticky wages point, I don't know how big of a problem that really is. It was Keynes' primary reason for favoring an inflationary money, but that carries limited weight with me. The fact that real wages rise gradually, while nominal wages stay fixed, shouldn't be a huge problem if workers are becoming more productive over time. There will be a psychological adjustment in not expecting nominal wage raises regularly.
If sticky wages are an issue, we might see different compensation packages become more common. A mix of fixed wage and profit sharing can partially address the problem, as well as being more incentive compatible.
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I was talking to a friend who now lives in Germany, and he was talking about how strong the German social institutions [still] are, at least from his (British) perspective: Christmas markets, chess clubs, drinking clubs, clubs of all kinds, and everyone a member of at least a couple; and even quite formalized ways of interacting with them: you go once with your work colleagues, once with your non-work friends, once with your family. "The joke is that the Germans need a system to have fun."
(I don't know anything about this, so don't get mad at me, Germans, it was him who said it!)
Assuming this is true, it's an intriguing contrast to what's happened in the States, which is basically the antithesis of all that: no customs, no broad civic pursuits, the demolition of community and non-religious ritual. I hadn't considered that the employment connection could be a factor, and the monetary connection to the employment connection. Food for thought for sure.
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I hadn't thought about it either until you encouraged us to think about this topic. These book clubs are easily worth the price of admission.
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Haha, I should hope so, since the price is zero :)
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Employees can either deal with this, constantly ask for raises, or change jobs. In practice, #1 and #3 are the dominant strategies. Both cause tumult to the person and to society at large.
I have a rental income and, for the same reason, hardly ever raise rent. When a tenant moves out, I raise it for the next one. So my rent is sticky, but also my tenants are sticky, because they know that when they move their rent will catch up with the market reality.
I think if we ever get on a Bitcoin standard, people will just have to accept wages going down (and rents and prices; after all they're all prices, whichever side 'the little man' is on).
We may have metrics to help with that, e.g. if the economy grows by 5% (not in BTC of course) in a given year, they will have to accept a 5% wage decrease. How we measure the economic growth is another story and potentially prone to manipulation.
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Yeah, measuring anything is hard, and then Goodhart's law kicks in.
I have a rental income and, for the same reason, hardly ever raise rent. When a tenant moves out, I raise it for the next one.
Could you talk me through it on your side? Are renters hard to get, so when you get a good one you want to be maximally nice? I have a friend who has a lot of rental properties, and his motivation is a combo of what I said + pity. He's been taking a loss for more than a decade on one place, but the renter is nice and has few options; and the place is gaining equity, so he can be philosophical about it.
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I wonder how the gig economy is faring with our recent inflation. I'd guess gig work is less rigid in wages than more traditional jobs. If that's true and we imagine all future jobs will be gigs, maybe wage stickiness isn't as much of a problem.
If bitcoin's exchange rate continues to rise, we'll have a natural experiment in SN's open source contribution/gig payments.
Are wages as sticky during deflation as they are during deflation? If employers hold more power over wage setting and are given incentives to change wages, perhaps wages will be less sticky.
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The loss aversion is super primal, so if wages stopped being sticky it would be against the countervailing force of that. But this:
I'd guess gig work is less rigid in wages than more traditional jobs. If that's true and we imagine all future jobs will be gigs, maybe wage stickiness isn't as much of a problem.
That's super interesting! You can imagine there being a force in the direction of shorter and shorter term contracts, to deal with this issue. But [yet another] countervailing force of the transaction costs inherent in having to train a new person on your thing.
Man, Coase keeps coming up today.
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I actually think that with the advancements in technology and advent of trends like remote working, attitudes towards work among the Gen Z and Gen Alpha have changed. For one, the stigma towards job switching has all but decreased. People have come to expect that it’s normal of youths to switch jobs every 2-3 years because they want to broaden their horizons and gain myriad experiences. Remuneration may not be so important to them than self-actualisation in the grand scheme of things. Instead, it is taken as part of a holistic criteria that makes someone want to take on a job or not. I also believe that with AI automating most repetitive work, it isn’t quite necessary for individuals to spend an extended period of time at one company to gain deep experience since the focus is on them to problem-solve and collaborate with others. Which is something ironically attained by job switching because you naturally bring fresh perspectives and ideas to the table.
The thing that will be interesting for us to consider, with the increasing adoption of BTC by institutional investors, it’s likely for more companies to pay out their salaries in Bitcoin. (Shoutout to Bitwage: please come to Asia!) Would more and more employees switch from jobs that pay out in fiat to other jobs that pay out in sats because they wish to live the Bitcoin Standard? Your guess is as good as mine.
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youths to switch jobs every 2-3 years
I have friends in tech that switch every 1-2. As they've grown older they've started switching less though. The switching in part was probably them trying to find themselves.
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Is it that they were finding themselves and then, as they get older, there's less undiscovered territory, or is it that they get established and moving is hard?
I wonder how many people would keep the hyper-aggressive moving, for fiat-related reasons, if they weren't getting tethered (no pun intended) by family constraints, etc?
I also wonder how much of this will change as a result of the full-remote changeover. Seems like a giant sociocultural thing that has only just begun to play out. What happens when it intersects w/ the monetary stuff?
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Is it that they were finding themselves and then, as they get older, there's less undiscovered territory, or is it that they get established and moving is hard?
Bothish. They're hard to separate out. There's always new territory but with fixed lifespans we often give ourselves fixed discovery periods. We discover as much as we think we need to settle in the best place - all aforementioned things considered.
I wonder how many people would keep the hyper-aggressive moving, for fiat-related reasons, if they weren't getting tethered (no pun intended) by family constraints, etc?
Probably a lot. We have less family formation so we can already see this happening, eg rise of gig work, traveling for the photoshoot, side hustles on side hustles, etc.
I also wonder how much of this will change as a result of the full-remote changeover.
Employees<>employers are more liquid and fungible than ever before. It triggers a nostalgia in me for time periods I didn't even live in. The monetary stuff should at least allow older folks to leave the goblin workforce sooner and settle into being a proper gnome.
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