Raising Wages on the Denominator

A blog about business and economics.
Nov. 28 2012 2:26 PM

Raising Wages on the Denominator

Something that I think goes missing from most discussions of work is that incomes can be increased not just in the numerator (what's the nominal wage you get paid) but also the denominator—how much do things cost?

For example, if we're wondering about the jobs of the future and whether the typical person in 2052 will be able to afford a visit to the doctor this turns out to be basically a question about how many doctors there will be, not what kinds of jobs people have. Insofar as doctors are scarce, lots of people won't get to see the doctor. By contrast, if doctors are plentiful then a decent society shouldn't have a difficult time organizing things so that people can see the doctor. It's quite possible that doctors really will be too scarce for everyone to be able to get lots of doctor's visits. It used to be that doctors made house calls, but they're too scarce now for any reasonable person to pay for that. But the point is that if doctor-scarcity comes to pass, it'll be a question of doctors not a question of good manufacturing jobs versus lame yoga instructor jobs.

So then the secondary question becomes whether some new innovation will make it possible for middle-class people to enjoy a decent standard of health care despite doctor scarcity. The hope is that if a very fancy computer can win Jeopardy in 2011 then by 2052 perhaps a fairly banal computer will be able to do lots of diagnostic work.

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Long story short, if it were possible to get a medical condition reliably diagnoses for the price of Internet access that would be a huge de facto increase in the wages of incomes of bloggers and yoga instructors and carpenters and baristas all across this fine land. By the same token relaxing anti-density regulations would not only increase numerator wages by improving productivity and agglomeration, it would increase wages on the denominator side by reducing the cost of housing in desirable locations.

In general, if we think past the admittedly severe cyclical problem of high current unemployment and think about the long-term economic issues that people are struggling with I think it's often more productive to think of them on the consumption side than the income side. Will people be able to get treatment when they get sick? To live in a decent-sized house in a safe neighborhood with a convenient commute and adequate schools? To eat a healthy diet? To have fun? If you can achieve those things, you've by definition got at least an okay good job and a decebt income regardless of what the specific nature of the work is. But right now lots of people can't get that stuff. But to fix the problems, you have to go to the source. Better health care delivery systems and better cures, more housing and more good schools. All that good stuff isn't something different than an agenda for higher wages, it's exactly how you achieve higher wages.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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