Tuesday, September 25, 2007

Automation and Inequality



This chart shows the real wage growth of farm workers and the decline in the number of workers (9% every five years).



The extrapolator in me has always wondered what would happen if we could automate all of our jobs away. Now I think I might know. As it relates to farm labor, wages are simply redistributed. The total amount of real wages (wages adjusted by the CPI) has held fairly constant over the years. If you are lucky enough to keep your job, you'll be worth more. You'll be happy. If you aren't, well, sorry about that.

If one was to keep extrapolating this trend to its logical conclusion, at some point there will be just one farmer. He'll have all the wages and will simply press the "harvest" button on his desk.

See Also: Romney Plan Would Eliminate Some Taxes

Source Data:
NASS: Farm Labor
Consumer Price Index

5 comments:

Anonymous said...

Hi Mark -
I really like these charts, especially the top one.
I've been meaning to ask you, in the top chart, does the decline in the number workers per farm mean that the farm-owners salary becomes an increasing part of the numerator?
In other words, are we looking at farm-workers wages increasing, or at the (owner's) profit per farm staying the same, while the number of workers goes down?

Thanks!
- jus me

Anonymous said...

Maybe I should have just asked, is the owner included as a farm worker.

Thanks!
- jus me

Stagflationary Mark said...

jus me,

You make a good point but since the data comes from "hired farm workers" it might not be part of the calculation, unless the farmer hires himself. Not sure.

I suspect that the average farm owner does pay himself a wage but I don't think he'd be particularly motivated to have it be all that high.

http://www.thinkinglike.com/S-Corporation/S-Corporation-Audits-2005.html
For example, suppose the owner of an S corporation worked full-time in the company and paid himself $90,000 in dividends, without taking any wages. That's a no-no. The IRS expects to see a reasonable salary before dividends are paid. If the entrepreneur had paid out this money as salary, it would be subject to about $14,000 in employment taxes. Of course, it's not necessary to pay all the $90,000 in salary. It depends upon what's considered reasonable. For example, maybe a salary of $45,000 could be paid and $45,000 taken out as dividends. That would amount to a tax savings of about $7,000. And, that could be fully legitimate.

getyourselfconnected said...

Dropping comments on 4 year old posts = WINNING!

Stagflationary Mark said...

GYSC,

Hahaha! It did slow the SPAM considerably! :)