> The productivity gains are due to capital, not to any improvement on the part of the worker.

Tools that increase productivity however do come from improvements made by workers - namely the workers whose labor is absorbed into the firm that sells the technology.

The money to pay for the machine comes from revenue earned by workers. The company has to value the employee's work more than their wage for this to happen - so there is selection pressure for willingness to accept low wages; lower wages means greater profit; greater profit means greater precarity... etc. Technology devalues worker specialized knowledge by rendering it less useful, while keeping production at least constant (e.g. being computer-literate is as valuable as it is specialized)

Many fewer people (can) produce a disruptive technology compared to the number of people it displaces, but that does not exempt them from the same selection pressure. A technology firm that depends on outcompeting others in its sector still has to make its own productivity gains. They'd likely prefer to do with one inventor what they could do with two. Maybe very long from now there will be a kind of artificial intelligence/singularity perpetual motion machine that - because of its near-zero cost of tinkering to discover improvements in its self over the competition - no other firm can compete with. A cloud "SaaS-as-a-service" like John Lilly's fears of solid state intelligence (SSI)

> The money to pay for the machine comes from revenue earned by workers.

That's kind of the contract between workers and their employer. Workers get short-term benefit of not having any risk, and employers take the risk but receive the long-term benefit of capital.

But that's the thing, imo. There is a big difference between a contractor and an employee (whose contract is very different).

Does this really mean that the amount of profit the employer makes is an adjustment reflecting how little risk the employees take on because they didn't take a chance to start their own companies? With employees whose income they would then hypothetically make the same adjustments to?

It's not obvious that the employer is justified in protecting themselves from their own risks with money skimmed (relative to market value) from consenting employees. These workers allow it because they still prefer it to being unemployed or a contractor themselves. But in theory they are doing worse being a part of the company than if they did the exact same actions (magically disembodied from the company monad) would be compensated, if they took the risk for themselves. The employer's risk is if they don't find enough people who are willing to risk not taking enough risks!

If having more employees means having more sources of income, big employers would not have as pressing a demand to hedge against catastrophic events; so they would recalculate the risk adjustment fee built into wages. Rarely do you see large employers give their employees better wages to reflect the company getting past earlier stages of high risk.

Basically in the long-term the value to being a capitalist is getting others to pay you for working for you. The ability to suppress wages pays for this profit - and that ability comes from contracts being costly to arrange themselves. If we could reduce the cost of contractual work and more people did it, most if not everybody would be better off, except for the people profiting from mutually-satisfactory contracts being difficult to do often.

Taleb gives this a good treatment:

"If the company man is, sort of, gone, he has been replaced by the companies person, thanks to both an expansion of the gender and a generalization of the function. For the person is no longer owned by a company but by something worse: the idea that he needs to be employable

...

A free market is a place where forces act to determine specialization and information travels via price point; but within a firm these market forces are lifted because they cost more to run than the benefits they bring. So the firm will be at the optimal ratio of employees and outside contractors, where having a certain number of employees, even when directly inefficient, is better than having to spend much resources negotiating contracts.

...

an employee is a risk management strategy"

http://www.fooledbyrandomness.com/employee.pdf

> Because there are 9 people waiting to take his job if he quits.

As the article points out, Japan has an unemployment rate of 2.8% and even there wages are not growing.

When the unemployment rate is that low, there will be no one waiting to take on the job if the worker quits.

To be fair, many of these jobs are things like "Irasshai" callers and bank door openers and the guy who literally just stands on a podium at Nagoya station. (Is he still standing there?)

I'll check in an hour.

> Why less? Because there are 9 people waiting to take his job if he quits

This is the answer

I wonder where those 9 people are though. Locally, for a given job opening, that could perhaps be true. Nationally however, unemployment is at historically low levels in many Western economies; 4.3% in the UK, 4.4% in the US, 3.9% in Germany, 6.2% in Canada, 4.8% in New Zealand.

Which should then drive an increase in wages. But it hasn't, and economists don't know why - or at least as far as this armchair economist has read ;-)

The US unemployment rate is based on the labor participation rate, a measure of the percentage of people who are unemployed and currently looking for work. It does not account for people who are unemployed and not looking for work. There is a real surplus of labor and employers know it. The vanity statistic that the US publishes has no basis in reality.

I don’t think that’s a very good description of U3, which is the headline rate the US typically uses. Specifically, labor force participation is usually a shorthand for overall workforce participation, looking at everyone of prime working age; that’s not U3. All unemployment measures are linguistically indistinguishable from “labor force participation rate”, so there’s nothing special about the US there.

I agree that U6 and prime age labor force participation rates are both weak, and relevant to worker bargaining power, but to argue that U3 has no basis in reality is absurd.

If I’m looking for labor this month, my pool of applicants will be coming from the U3 pool, people who are actively looking for work.

High U6 unemployment suggests I might do better to raise wages slightly, rather than aggressively, if I urgently need workers.

That guy who works 12 hours a week in the grocery store, because the company doesn't give him any hours most days? Doesn't count as unemployed, but might as well be.

Or, the more likely reason - there are NOT people willing to do those jobs.

> When a more advanced machine lets you replace 10 unskilled workers with 1, you don't pay that operator 10 times the wage, you pay him the same wage or even less.

But this is an unacceptable, or at least undesirable, outcome - for the majority of people anyway. If there is more wealth sloshing around the system, and fewer people involved in creating it, more of it should go to the person helping to create it. If this is what our economic system encourages our system is sub-optimal.

If Scrooge McDuck gets more money, he won't raise Donald Duck's wage.

If it's due to capital then the companies will reduce prices of the goods they produce (assuming there is enough competition). The consumers then can use the savings to spend it on more labor intensive products.

Is that happening at any scale though? Theoretically capitalism would do exactly as described but we are not operating in a purely capitalistic society by any margin