Increased productivity must lead to increased real wages. There is no question about that. But I am not really sure if ‘real wages’ in this normal sense of the use of the term denotes the purchasing power of a constant dollar. I think it has more to do with the workers’ share of the total income of the economy.
IF (and that’s a big IF) that’s the case, a declining share of average labor wages in the economy’s income denotes a higher relative scarcity of capital compared with average labor. That is, most of the economy’s income is passed into the pockets of capital owners.
Two words: Government Intervention. During this time frame, the central bank of the USA and the rest of the Western World for that matter, have grossly distorted markets by creating new money. This new money enters the economy through the financial system that gets to use it first and then it trickles down to the lower classes. The financial system then booms and the rest of the performs worse than would have been the case.
You should also add employer’s contribution to health insurance to real wages. What’s the picture then?
I’d also agree with Bogart. Last decade we have seen rise in “financial revenues” along with bloated financial sector. Also, percentage of profit share in GDP is rising, mostly due to profits from financial sector and closely related sectors. US capital base is slowly destroyed, a fact that can be verified by stock market indexes - they are essentially flat for a decade.
Well, first I would like to point out that the wage rate depends not only on the productivity of workers but also the total spply of available workers. For example, if you had a case where the labor supply was totally elastic (completley responsive to price changes), then you would see that an increase in the marginal productivity of labor would not result in any increase in wages (because new workers would become immediatley available, bidding the wage back down to its previous level).
However, absent this special and possible unrealistic case, then I would imagine that any improvement in marginal labor productivity would increase wages in some way in a competitive market (as Prashanth has already pointed out). However, how much of an crease will depend on the relative slopes of the supply and demand curves.
Maybe wages wouldn’t increase a statistically noticeable amount if you had a non-competitive labor market. Like say a monoposony for labor or something holding down competitive pressures that would put upward pressure on wages. However, I would say that his is also a very special and rare case.
Empirically, wages do tend to match increases productivity. One has to remember to include non-wage compensation in their statistics and to account for inflation using the proper indicies. Paul Krugman explains here why claims of wage stagflation between the 1970s and 1990s were incorrect: http://web.mit.edu/krugman/www/ricardo.htm
but i was asking about ‘real’ wages which i thought were in some ways adjusted for monetary inflation…directly affected by inflation and perhaps subject to episodes of govt and central bank money manipulation.
the articels i posted speak of a period from the 70s thru the late 90’s i believe. as far a productivity…i would think that a 98 malibu would be more efficient than a 73 malibu as well as many other goods - leading to overall greater productivity. which is why i was wondering how real wages stagnated for so many years.