The $150,000 Housekeeper: Wage Inflation Kicks Into Second Gear

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If we add up all these tidal forces, the conclusion is self-evident: labor “inflation” has just shifted into second gear.

One of the lesser known manifestations of the inflationary crisis in early-1920s Germany was rampant wage inflation. Bourgeois burghers complained bitterly about the high wages being demanded–and received–by tradespeople. This reversal of fortune–wage earners gaining some power over the upper-middle class and wealthy–was naturally upsetting to those accustomed to wielding power over mere laborers.

But when the roof is leaking or the car won’t start, negotiations favor the few who can actually fix the problem. Despite the overblown hoopla about AI, ChatGPT can’t fix leaky pipes or roofs, nor will it ever be able to do so because all it can actually do is play around with words. Since we can’t repair a leaky roof or prune a tree with words, Large Language Model (LLM) – Machine Learning AI is useless in the real world.

Which brings us to the remarkable competition among the uber-wealthy for competent housekeepers: Palm Beach housekeepers are making $150,000 a year due to massive demand from the wealthy.

It’s certainly tempting to collect a cool $120,000 to $150,000 a year for dusting the Dali and other fine art, but as with many other forms of labor, the skillset required isn’t quite as easy as it looks from the outside:

The mass wealth migration to Florida from New York and other high-tax states has created record demand for household staff in elite Florida enclaves–especially Palm Beach. Demand for butlers (now called ‘hospitality managers’ or ‘estate managers’) as well as nannies, chefs, drivers and personal security has surged, according to staffing agencies.

“There are specific tools and skills you need to work in fine homes,” she said.

In other words, Jeeves won’t come cheap, and the outraged wealthy must swallow their targeted frugality–lavish spending on themselves, low pay for the help–if they want things done properly in the real world.

The backdrop for sustained wage inflation is already firmly in place. As the chart below illustrates, wages’ share of the economy have been declining for 49 years, and has plenty of room to move sharply higher, in effect reversing the tide of trillions of dollars siphoned off by capital in the 50-year long experiment of elevating globalization and financialization to dominance.

Demographically, millions of people have left the workforce for good. This trend is especially visible in males who didn’t earn a college degree. We can debate the specifics of this massive demographic shift, but not its impact: the labor force of those willing and able to do in-demand tasks is shrinking.

Generationally, millions of Boomers are working past traditional retirement age for a variety of reasons, but this boost to labor force numbers has an expiration date: at some point full-time physical labor is no longer viable. Yes, there are plumbers over the age of 80 still working, but they’re working part-time and they’re not working for chump-change.

Work is more demanding nowadays. Those with little real-world knowledge may dismiss fast-food workers, for example, as low-skilled “burger flippers,” but this is not the lived reality of the work: fast-food is a high-production, demanding industry. Not everyone can keep up the pace or do the work. This describes many of the jobs wrongly dismissed as “low-skill.”

Now overlay the soaring number of disabled. Again, we can quibble about the causes until doomsday, but the reality isn’t changed by our debate.

Then there’s the cultural shift of denigrating physical, skilled labor in favor of trading meme stocks and becoming a social media influencer. The worship of celebrity and the lotus-eater class has deformed the culture so that pride in the quality of one’s work has been replaced with a frantic scramble for digital visibility. The real world demands skills and quality work, and those who are able to perform are scarcer than most imagine.

It isn’t easy or quick to acquire real-world skills. Armchair pundits airily propose expanding training programs and the like, but training is only Step One of a much longer process of experiential learning. We may well have mis-trained millions of people to work in fields that will shrink as economic realities intrude–for example, fine dining and marketing. The labor scarcities that will only become more acute won’t be solved with quickie half-measures.

If we add up all these tidal forces, the conclusion is self-evident: labor “inflation” has just shifted into second gear. The real acceleration is still ahead. From the perspective of history and the real world, it isn’t “inflation,” it’s simply a return to properly valuing what’s actually valuable.

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