American workers' wages stagnant, even in a great economy: why?

[BrianSoddingBoru4]

Yeah, that's kind of silly.  When wages increase, people have more disposable income, buy more stuff, creating a greater demand for services and manufactured goods, which increases production which lowers prices.  Economies of scale work best when wages grow moderately faster than inflation.

Boru

I'm no economist, therefore I don't know squat about these sorts of things. But at the same time, I've never been one to accept 'because I know and you don't' as an answer. I can certainly think of lots of examples where increased production results in lower costs and therefore lower prices. But most of those examples are in the areas of production of hard goods. But when it comes to things like services, finding a builder to build your new deck for example, increase demand generally leads to higher prices. Why should I take you shitty deck job for $5k when I charge Mr Gotbucks $8k for the same work? Also in production areas like farming, seems like increased demand only leads to higher prices. Farmer Jed plants 200 acres of corn. When suppliers can get all the corn they want and more, prices are going to drop. When there just ain't enough corn to go around, prices go up.

We as a country don't produce nearly as many hard goods as we used to and we farm less than we used to as more and more farmers realize there's better money in using the land to plant million dollar McMansions than there is in planting $0.50 melons.

So again, as someone who doesn't like to take 'because I said so' as an answer, can you explain why increased demand will lead to lower prices overall? Not really doubting you. It just seems to defy logic and I genuinely want to understand it.

Fair points all.  Suppose widgets are popular in your area.  You've been buying two widgets per year forever, so Widgets R Us makes enough to keep up with demand.  Your wages go up and you decide to increase your purchases to four per year.  Companies (both manufacturing and service) tend  to project what they'll need do to keep pace with demand.  If the increase in demand slackens just slightly, your widget supplier is going to have to drop prices to make the product more attractive and to keep the warehouses from over-flowing with unsold widgets.

Granted, this isn't a hard and fast rule - there are always exceptions and variables.  But to address your deck-building example, most builders aren't going to permanently ignore a 5k job for an 8k one - rather than lose my business altogether, you're likely to prioritize Mr. Gotbucks' project, and get to mine a little later (this is a much better solution than having my job go to one of your competitors).

Historically, however, it has almost always been the case that wages rising faster than inflation tends to decrease prices.  When the reverse happens (prices rising faster than wages), inflation tends to feed on itself - this is happening in Turkey and Venezuela right now, happened in Zimbabwe recently, and famously happened in Germany after WWI (to forestall an inevitable objection, yes, there are other factors that contribute to inflation).

Boru