1. Many of those productivity gains happen via outsourcing work to countries where wages are much lower.
2. Many consumer goods have become cheaper as a result. The biggest ones, though (Rent, education, healthcare) have not. Incidentally, none of them can benefit from 'productivity gains.' Well, healthcare can, but...
That's a great idea. Let's all quit our day jobs, and buy into the S&P 500.
At the end of the day, someone has to 'waste' money, in order for companies to earn money. A quarter saved is a quarter that doesn't end up on a revenue sheet.
> At the end of the day, someone has to 'waste' money, in order for companies to earn money
I also used to feel this way, but I no longer think its accurate. This is most obvious in digital business-consumer goods today. Imagine I make a game. And it cost me about $100 to make this game. And you really want this game and would pay $5 just to get to play it. But I'm nice and sell it to you for $1. You certainly haven't wasted any money. And the fact I then sell it to 10,000 other people also doesn't mean you've wasted any money, nor they. Yet I've somehow made an immense amount of profit.
Even in the more difficult scenario of business to business material goods trades, it doesn't hold true. Imagine I sell iron and you need iron to make your widgets. It costs me $4 to produce a single unit of iron, but that's largely because I have an extensively refined and stream lined operation, and am able to benefit from an immense economy of scale. I sell it to you for $10. Well it seems that you must be wasting money, but the reality is that even if you bought the iron mine yourself and started producing your own iron you'd end up spending far more than $10 to create the volume of iron you need. So even though I'm again making immense profit, you're also not 'wasting' money in buying my iron.
This is why even huge companies are not entirely vertically integrated or producing their own supplies in other words. It's because buying from somebody else, even when that person is profiting immensely from the exchange, is not going to be inherently more expensive than if you did it yourself. And this is even true for simple no-skill goods like semi-raw materials. Get into skilled products, like semiconductors, and this all becomes even more true.
I think of money as a claim check on labor (and to a lesser extent, other resources).
If everyone's income rises by 5% (and most of most people's income is spent rather than saved), I would expect prices to rise by about 5% and find that entirely logical.
>If everyone's income rises by 5% (and most of most people's income is spent rather than saved), I would expect prices to rise by about 5% and find that entirely logical.
Generally everyone's income would be rising 5% either from inflation, which amounts to a transfer from creditors to debtors, or from growth, in which case the total basket of goods and services available has grown 5% and there's no need for prices to go up.
You always have a mix. There will be growth in some markets, and inflation in others.
Humans tend to eat always roughly the same amount of food (except if they can't afford it). So food prices generally inflate with wage increases. Growth leads to bigger televisions, safer cars, faster internet being available at roughly the same price.
>Humans tend to eat always roughly the same amount of food (except if they can't afford it). So food prices generally inflate with wage increases.
Quite the opposite. Over the long term, food prices have deflated, and the variety has dramatically increased of foods available at a given price and a given distance from the point of production.
The only way workers can win is:
1. Productivity gains make goods easier to make.
2. A bigger share of investor profits get redistributed to workers, be it through taxes, pension fund investments, co-ops.
#2 will not be happening anytime soon.