Mark Twain Understood That It Is The Purchasing Power Of Wages That Matters

This is the third recent post about how Twain discusses economics in A Connecticut Yankee in King Arthur’s Court. What he says in the passage below might seem like common sense but it is interesting that he puts it in there because it does not seem relevant to what is going on at the time. This is from chapter 31.

"A man who hasn't had much experience, and doesn't think, is apt to measure a nation's prosperity or lack of prosperity by the mere size of the prevailing wages; if the wages be high, the nation is prosperous; if low, it isn't. Which is an error. It isn't what sum you get, it's how much you can buy with it, that's the important thing; and it's that that tells whether your wages are high in fact or only high in name. I could remember how it was in the time of our great civil war in the nineteenth century. In the North a carpenter got three dollars a day, gold valuation; in the South he got fifty--payable in Confederate shinplasters worth a dollar a bushel. In the North a suit of overalls cost three dollars--a day's wages; in the South it cost seventy-five --which was two days' wages. Other things were in proportion. Consequently, wages were twice as high in the North as they were in the South, because the one wage had that much more purchasing power than the other had."

Mark Twain On Work And Pay

A couple of days ago I posted some passages from A Connecticut Yankee in King Arthur’s Court that related to trade.

It seems like one of the themes of the book is how unfair the feudal system was and how the nobility were able to take advantage of the lower classes. It looks like here that Twain equates the pay disparity in his own day between architects & engineers and manual laborers (well, it is the time traveling Hank Martin who says this) with the rigged system he saw in favor of the upper classes in Arthur's time. 

But the pay may need to be higher for architects, engineers and musicians, for example, because they have to go through long and expensive training. Also, the supply of unskilled labor might be very large, which will tend to hold their wages down. It is not necessarily the result of any exploitation or oppression or inherent unfairness in the system.

One other interesting observation he makes is that doing intellectual work is its own reward and Twain says he would not mind getting paid only a little to do such pleasurable work instead of getting paid much more to do manual labor. There are always trade offs and it is not surprising that he would give up pay for better working conditions, which can include how much you like what you are doing.

Anyway, here is the passage from chapter 28.

"There are wise people who talk ever so knowingly and complacently about "the working classes," and satisfy themselves that a day's hard intellectual work is very much harder than a day's hard manual toil, and is righteously entitled to much bigger pay. Why, they really think that, you know, because they know all about the one, but haven't tried the other. But I know all about both; and so far as I am concerned, there isn't money enough in the universe to hire me to swing a pickaxe thirty days, but I will do the hardest kind of intellectual work for just as near nothing as you can cipher it down--and I will be satisfied, too.

 Intellectual "work" is misnamed; it is a pleasure, a dissipation, and is its own highest reward. The poorest paid architect, engineer, general, author, sculptor, painter, lecturer, advocate, legislator, actor, preacher, singer is constructively in heaven when he is at work; and as for the musician with the fiddle-bow in his hand who sits in the midst of a great orchestra with the ebbing and flowing tides of divine sound washing over him--why, certainly, he is at work, if you wish to call it that, but lord, it's a sarcasm just the same. The law of work does seem utterly unfair--but there it is, and nothing can change it: the higher the pay in enjoyment the worker gets out of it, the higher shall be his pay in cash, also. And it's also the very law of those transparent swindles, transmissible nobility and kingship."

People leaving costly cities while rent falls in other cities due to rising supply

See More Americans Leave Expensive Metro Areas for Affordable Ones: Analysis of census data shows the impact of the rise in housing costs on population flows by Chris Kirkham of the WSJ and Some Big U.S. Cities See Apartment Rents Fall for First Time in Years: Declines in San Francisco, New York and San Jose suggest the beginning of a downturn by Laura Kusisto, also of the WSJ.

People are always looking for a better deal, so it is not surprising they leave more expensive cities. Here are excerpts from the first article:

"An April report from Trulia researcher Mark Uh found that lower-income households represent a larger share of those moving away from the most expensive markets than their overall population in those markets. For example, those earning less than $60,000 a year make up 27.4% of all households in the San Jose metro area, but they represent nearly half of all households moving away.

Another study this year from California policy group Next 10 and Beacon Economics found that New York state and California had the largest net losses of domestic migrants between 2007 and 2014, and that lower- and middle-income people were more likely to leave."

Here is a table from that article.

A couple of excerpts from the second article are below. When prices rise, in a competitive market, that can, in the long-run, induce more firms to enter. The increase in supply then lowers prices.

"Apartment developers have flocked to downtown locations, catering to affluent young professionals willing to devote bigger chunks of their incomes to rent to be near restaurants and shops. Across the country, rents have jumped 22% in urban areas since 2010, according to Axiometrics. High-end apartments now command a 45% premium over older ones, while historically they have fetched about a third more, according to MPF.

But the same downtown areas that drove the boom are now the deepest pockets of weakness."

"The main cause of the rent slowdown is a flood of new supply, with more than 555,000 units under construction across the 100 largest U.S. metro areas, according to MPF. Tenants also are beginning to tighten their purse strings as rents have jumped by as much as 60% in some markets since 2010.

Growth of high-paying jobs, meanwhile, is slowing in New York, San Francisco and nearby Silicon Valley.

Almost 6,700 additional apartments are expected to be built in San Jose and nearly 6,500 more in San Francisco by the end of 2018, according to Axiometrics. New York is expected to get more than 42,000 new units during that same period.

At the same time, job growth is losing steam in some major cities [so demand is decreasing or not increasing as much has it had been-CM]. San Francisco added 26,000 new jobs in August 2016, about half the 47,000 jobs it added in the year-earlier period, according to an analysis of Bureau of Labor Statistics data by Mr. Rosen."

"Eugene Korsunsky, president of Intempus Realty, a San Jose real-estate brokerage firm that manages apartments and single-family homes for landlords, said for the past couple of years apartments sat on the market for about a week. Now it can take him nearly a month to find a tenant, he said."

Here is a timeline chart from the second article.