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    Wage growth, currently running at about 3% YoY and declining quickly, stinks.  In fact, only twice in the last 45 years has there been real wage growth (i.e., in excess of the inflation rate)for more than a year or so: once, in the post-war economic golden era of the 1960s and early 1970s; and again during the tech boom of the 1990s.  Here is a graph showing that entire 45 years history (as long as the series exists), comparing wages (in orange) with CPI inflation (in blue):

  As you can easily see, real wage growth essentially stagnated in 1974, and ever since the Reagan revolution, almost all growth from productivity has been vacuumed up by the very top of the income scale.  

    Americans have somehow survived despite this stagnation by resorting to a small bag of budgeting tricks. But now, with one possible exception, those tricks aren't going to work any more.  Simply put, from here on in, we're not going to have any sustained economic growth until real wages finally grow too.  I'll show you why, below.

 Over at The Economic Populist a few months ago I wrote a series about Economic Indicators during the Roaring Twenties and Great Depression. I examined those indicators because our current situation more closely resembles those debt-deflationary downturns, as opposed to post-World War 2 inflationary recessions.  That data from the Deflationary period of 1920-1950 showed that all of those deflationary recessions followed a pattern. The CPI declined from the beginning of the recession and its YoY rate of decline bottomed immediately before the recession's end. M1 money supply followed a similar pattern, sometimes coincidentally, sometimes leading slightly.  In all 6 of those deflationary recessions, once M1 and CPI began to decline at a decreasing rate, the recession was about to end.

For example, looking at the Great Depression of 1929-32:

we see that in this, the biggest of all economic contractions of the last century, like all other deflationary recessions, there was a clear pattern of M1 and CPI on the graphs  --both money supply and inflation contracted at an increasing rate, then at a constant rate, before simultaneously or with M1 leading the way before CPI, both turn back up (meaning, prices and money supply are still declining, but at a decreasing rate) near the end of the deflationary recession.   In other words, these deflationary recessions began to end once demand picked up.  As demand picked up (recall Econ 101) inflation reappeared.

Turning our attention to our current financial crisis, which also features a debt deflation, here is the graph of the same indicators (M1 in red, CPI in blue):

When I wrote the earlier series, I noted that it appeared very unlikely that YoY CPI would bottom out before the middle of 2009 -- and it hasn't. But unless we have another collapse in the price of Oil like we did last year, it is likely that deflation will end, and we will return to inflation in a few months.  Thus, if M1 continues to expand, the indicators studied from the Deflationary period of 1920-1950 suggest that the GDP might stop contracting in about Q3 2009, and start to actually grow.

But then what?

    Whether the bottom of the trough of this decline in economic activity is in a few months, or if it is a year or two or more away, the fact remains that, with anemic wage growth to say the least, any incipient recovery appears doomed.  For example, if our current (- 0.7%) deflation bottoms out and turns up within the next 2-4 months, how could there possibly be any significant expansion, if once again wages fail to keep up?  Any such recovery would be short lived, strangled by the inflation caused by its own increase in demand.  If the inflation rate agains exceeds wage growth, consumers will simply cut back again, plunging the economy into another leg down of a "W"-shaped recession.

    Ah, but here's the problem:  the same argument was true all during the 1980s and early 1990s, and for much of our own decade. Wages didn't keep pace with inflation then either.  Why didn't a recession persist throughout  the 1980s?  Why didn't it persist into the middle of our own decade?  In this case, the past answer serves as a prologue to the future.

    Back in August 2007, I wrote a piece called Are Hard Times Near?  The Great Decline in Interest Rates is Ending    At that time, I pointed out that,

[w]hile from 1980 through 2006, the median income of an American household has risen only from $39,700 to $48,200 in real terms, house prices for example have shot up form nearly $125,000 to $246,500.  Consumers have responded generally by taking on more and more debt.  Total household debt service has risen from 16% in 1980 to 19.4% in 2006:

   Fortunately for consumers, there has been a generation-long decline in interest rates since they peaked at 15.21% for the 30 year US Treasury bond in October 1981.  This has allowed consumers to refinance their debts at ever lower rates every few years:

 They have also been assisted by a bull market in stocks that took the S & P 500 from 102 in 1982 to 1553 in 2000, and the subsequent housing boom/bubble [that topped out by January 2006].
  There are signs that this "Great Disinflation" of declining interest rates is coming to an end.  Only twice in the last 27 years has the consumer been unable to refinance debt or tap into his or her stock or house ATM.  ... [T]he 3rd and final time is almost certainly near.

    In other words,  since 1980, facing stagnated real wages, the only way American consumers have been able to significantly improve their lifestyles is either:
 - to take on more debt, using assets which have appreciated in value as collateral (stock investments, housing), or
 - to refinance their existing debt at lower interest rates.
 
When consumers were unable to do either of those things, they cut back on spending, triggering consumer-led recessions.  Since 1980, this confluence of negative factors had only happened twice: in the deep Reagan recession of 1981-82, and again briefly from July 1990 to March 1991.    

    As of 2007, household income was still below 1999 levels.  Interest rates had not receded to their 2003 levels, so refinancing activity could not increase.  House prices were already in marked decline.  Consumers were already starting to cut back, albeit not yet that significantly on debt.  Only stock prices, by the barest of margins (.02%), were positive.  I concluded then that "In order to avoid a recession, house price declines must stop, stock market gains must accelerate, or household income must increase significantly.  Failing at least one these three things, if households have continued to cut back on debt, as appears likely, America will probably enter (or may already have entered) only its 3rd consumer recession since 1980."

    That last conclusion was certainly proven correct!  With a declining 401k value, crashing house prices, increasing Oil-fed inflation, and paltry wage gains, the recession started just a few months later in December 2007.

 So, where to now?  Unfortunately, the neoliberal economic paradigm is still embraced in a bipartisan fashion in Washington DC.  We need not recapitulate the pedigrees of the most powerful economic advisors to the new Administration.  So it does not seem that the productivity of American workers is suddenly going to be reflected in wage increases.  No new asset bubble is on the horizon.  On all of those counts, the  news is bleak.  There is no upsurge in wage growth lurking on the horizon - or even seriously considered as a public policy desideratum inside the Beltway.

    In summary, from here on - with one possible exception I'll discuss below - we're not going to see any sustained recovery in the American economy until average Americans see a real and sustained increase in their compensation for labor -- for the first time in over 35 years.
   
    But there is still a chance that consumers might be able to use one of their old tricks, one last time.  In the August 2007 story recounted above, I concluded that there was "a first-order danger signal for the long term future is that long term interest rates seem unlikely to move lower ... soon."   But "[i]f long term interest rates do decline again, consumers may yet have one more chance to refinance their spending for the next few years."

    And lo and behold, a window of opportunity in interest rates has just briefly opened.  Here is a graph of mortgage interest rates, showing the recent record decline to near 4.5%:

This interest rate (currently at 4.81%) is slightly less than the previous record low since 1980 (of 5.23%).  Already it is estimated that up to 15% of all mortgages might be refinanced this year.  Just on Monday CNBC reported:

The mortgage business is booming—70 percent in refinancing and 30 percent in new home purchases," Kelly King, CEO of BB&T told CNBC. "On the low end of the houses, we’re beginning to see some movement...There’s a long way to go, but there’s definitely activity."

For example, a family with a $200,000 6% mortgage, who refinance at 4.5%, will save $3000/year.  Such a refinancing would be seriously stimulative to household finances.

    While if lower mortgage rates persist, there will be space for an economic breather, the paradigm of my 2007 piece remains true.  So long as real wages remain stagnant, any recovery which might start will be vulnerable to every uptick in inflation and interest rates, and will be shallow, weak, and probably short-lived.  The Great Disinflation of Interest Rates is Ending, the long-term structural problems of our economy have become immediate  problems as well, and no long-term recovery is going to take root without real wage growth.

Originally posted to New Deal democrat on Thu May 21, 2009 at 08:01 AM PDT.

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Comment Preferences

  •  US elite's war on working people must be reversed (16+ / 0-)

    or we face a future of stagnation at best or economic collapse at worst.

    nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it. - Barack Obama

    by Lefty Coaster on Thu May 21, 2009 at 08:07:29 AM PDT

    •  How do u ensure Wage Growth? (3+ / 0-)
      Recommended by:
      badger, Albatross, EthrDemon

      I believe that President Obama wants to achieve median wage growth.

      But, short of protectionist measures, how do you realize it?

      We participate in a global economy in which broadband has facilitated wage arbitrage.  Up until the mid-1970s, the US was the driver of world economic growth.

      No easy answers.

      One way to do so, on a short-term basis, is permanently exempting the first 35K from the FICA tax, for all HHs earning less than US$ 250K per year, without a corresponding decrease in benefits accrued.

      The problem, of course, is how to finance this.

      No easy answers.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. http://www1.hamiltonproject.org/es/hamilton/hamilton_hp.htm

      by PatriciaVa on Thu May 21, 2009 at 08:28:46 AM PDT

      [ Parent ]

  •  You're up against a 29 year mindset (7+ / 0-)

    that any wage growth is unacceptable inflation but asset inflation is cool.

    I completely agree, with the reservation that there may not be one last sprint left in the debt growth horse.

    •  Asset Inflation Has Ended (4+ / 0-)

      Without either loose/fraudulent lending or a rise in wages for working people.

      Wage movement right now is downward and this downward movement appears to be part of the plan of the current administration to bring the cost of U.S. labor more in line with that elsewhere on the globe.

      This brings about an essential paradox ...

      Larry Summers keeps promising that "when housing prices come back up in 2010/11/12/whever ..."

      At the same time, part of his plan is to suppress wage growth.  Well, who will be buying all of these more expensive houses if wages are declining and consumers don't have access to the crazee loan terms that they did during the boom?

      So ...

      In this case ...

      I think we can expect the value of the average American family's biggest asset -- the home -- to continue to decrease over time as wages fall.

      Obama's Solution: Give Money to the Rich to Buy Distressed Assets.

      by bink on Thu May 21, 2009 at 08:17:34 AM PDT

      [ Parent ]

      •  In what sense is the "plan" (1+ / 0-)
        Recommended by:
        eugene

        to suppress wage growth?  I'd actually like to see it broken out, to understand how much of decline is due to high-paying jobs in the FIRE sector going away in the past year.

        I just don't see any conspiracy from the Obama admin to suppress wages.

        "Dream for just a second and then do it!" -- Kolmogorov

        by theran on Thu May 21, 2009 at 08:27:10 AM PDT

        [ Parent ]

        •  Not a Conspiracy (4+ / 0-)
          Recommended by:
          eugene, theran, Pozzo, chrome327

          But -- going back to what the president and people in his administration have said over and over about right-sizing the economy -- Americans must save more, Americans can't borrow like they use to, Americans must be more competitive -- I can't see any way that a corresponding declining wages can be avoided.

          We're supposed to spend less.  Save more.  No more out of control borrowing.  Have to be more competitive with overseas workers.

          In what scenario could this possible equal rising wages?

          Unless the Obama administration plans also a very dramatic rebalancing of the distribution of income.

          Such wage decline might not be a bad idea -- and might be inevitable, when you think that wages only kept up with inflation because the government also released so much hot cheap money into the system that working people could not help but get a share in some of it.

          But in the absence of loose lending to fuel the economy ...  What is going to make wages go back up?

          I don't know.

          All evidence seems to suggest to me that shrinking paychecks are either collateral damage that the Obama administration is willing to impose on working people, or part of the plan to "right-size" the economy.

          Obama's Solution: Give Money to the Rich to Buy Distressed Assets.

          by bink on Thu May 21, 2009 at 08:34:04 AM PDT

          [ Parent ]

          •  When you surf a wave of debt (2+ / 0-)
            Recommended by:
            bink, eugene

            the wave is surfing you back.  (Concretely, there is a duality relationship between speculating in credit markets and consumerism based on continuous refinancing.)

            In what scenario could this possible equal rising wages?

            Obama is saying to break that cycle and put money back into the real economy, which engages (or has the potential to) a lot more people than finance.  

            "Dream for just a second and then do it!" -- Kolmogorov

            by theran on Thu May 21, 2009 at 08:45:50 AM PDT

            [ Parent ]

        •  Its the inevitable result of free trade (0+ / 0-)

          As long as labor arbitrage is profitable, it will work to depress real wages.  This is really just a question of supply and demand.

          It is amazing how this simple explanation escapes people.

          The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

          by fladem on Thu May 21, 2009 at 09:11:33 AM PDT

          [ Parent ]

          •  Why? (0+ / 0-)

            It is amazing how this simple explanation escapes people.

            This is an assertion.  Demand is not a fixed quantity.  Elaborate.

            "Dream for just a second and then do it!" -- Kolmogorov

            by theran on Thu May 21, 2009 at 09:12:35 AM PDT

            [ Parent ]

            •  As long as (0+ / 0-)

              wages are significantly lower in places outside the United States, the demand for that labor (assuming all else is constant) will increase and the demand for labor within the United States will decrease.

              The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

              by fladem on Thu May 21, 2009 at 09:20:08 AM PDT

              [ Parent ]

              •  And the demand for products? (1+ / 0-)
                Recommended by:
                Pozzo

                Maybe protectionism is the shiznit, but you are miles away from explaining why.

                "Dream for just a second and then do it!" -- Kolmogorov

                by theran on Thu May 21, 2009 at 09:22:06 AM PDT

                [ Parent ]

                •  The demand for products (2+ / 0-)
                  Recommended by:
                  Pozzo, EthrDemon

                  declines when income declines.

                  See my post below from FDR's head of the Fed on how income inequality effects economic growth.  

                  The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

                  by fladem on Thu May 21, 2009 at 09:28:08 AM PDT

                  [ Parent ]

      •  Goverment has already figured that out (0+ / 0-)

        How else can you explain the 3% down payment requirement on a $729k FHA loan with $18k in down payment assistance. That means first time home buyers can buy a $729k home in CA with $4k out of their own pocket. The Fed/Treasury/FHA are desperate to re-inflate the housing bubble. It's obvious they are out of ideas so they will continue the present course until the dollar gives up and crashes.

  •  Very Important Observation (5+ / 0-)

    And one that must be taken into account whenever we're discussing things like, "When will housing prices get back to previous levels?"

    Obama's Solution: Give Money to the Rich to Buy Distressed Assets.

    by bink on Thu May 21, 2009 at 08:14:49 AM PDT

  •  Great diary! (4+ / 0-)

    I've recommended it and if you leave a tip jar I'll leave you a tip.

    This would be a good time to read my sig...

    Capital is only the fruit of labor, [...] Labor is the superior of capital, and deserves much the higher consideration.
    President Lincoln, December 3, 1861

    by notrouble on Thu May 21, 2009 at 08:20:56 AM PDT

  •  FlipSide of the last "Old Trick" : Inflation (1+ / 0-)
    Recommended by:
    notrouble

    Great Diary, NDDemocrat.

    Of course, this refinancing window is coming courtesy of a bloated Fed balance sheet, which is acquiring Treasuries and mortgages as fast as it can, and possibly signaling that inflation is in the offing.

    This is not lost on China, which is SIGNIFICANTLY shortening its maturity schedule of US Treasuries...

    China Grows More Picky About Debt

    By KEITH BRADSHER
    Published: May 20, 2009

    http://www.nytimes.com/...

    While this has been clear for months, new data shows that China is also trading long-term Treasuries for short-term notes, highlighting Beijing’s concerns that inflation will erode the dollar’s value in the long run as America amasses record debt.

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. http://www1.hamiltonproject.org/es/hamilton/hamilton_hp.htm

    by PatriciaVa on Thu May 21, 2009 at 08:21:19 AM PDT

  •  That wage chart is stunning. (9+ / 0-)

    It coincides with my working life.

    No freaking wonder I've never been able to get ahead.

    I graduated from college in 1978. I sent out 100 resumes, got two interviews, and after three months finally got a job making $3.75 per hour -- and remember, I already had a BA, and two years of working in my profession in internships. It didn't matter.

    It's never gotten much better.

    I've tried to explain to people before that our wages needed to rise with our age and experience, but bosses and bean counters where I worked never seemed to see it the same way. THEY were making money -- why wasn't I?

    I always thought I just had a dark cloud parked over my head when it comes to my working life, but those charts show me I wasn't alone.

    It doesn't make me feel a whole lot better about my wasted life, but it sure helps me understand it.

    But I am just the canary in the coal mine, and I have been all my life. And if people like me (now, with an MA as well!) can't find work after TWO YEARS of looking, pretty soon the rest of you are going to have trouble finding work too. (If you work for wages, that is. If you are an entrepreneur or something that doesn't rely on anyone for a paycheck, I know I can't reach you.)

    We need JOBS in this country! Good-paying jobs and a jobs program for young people like we used to have with apprenticeships. (And more and better education, so that people will stop saying "well-paying jobs," which is a grammatical abomination.)

    Otherwise, I just don't know what the powers that be think that the people in this country are going to do. It could get very, very ugly.

    "The difference between the right word and the almost-right word is like the difference between lightning and the lightning bug." -- Mark Twain

    by Brooke In Seattle on Thu May 21, 2009 at 08:24:28 AM PDT

    •  Maybe You Need to Go Back to School (7+ / 0-)
      Recommended by:
      eugene, Pozzo, bibble, EthrDemon, MKinTN, chrome327, Toon

      And get a PhD ...

      As the president says, "re-educate, re-train."

      Heh.

      All of the re-education and re-training in the world does not matter if the jobs are not there.  CNN advises me all day and all night about "how to create a great resume."

      American does not need great resumes.  It needs jobs!

      Obama's Solution: Give Money to the Rich to Buy Distressed Assets.

      by bink on Thu May 21, 2009 at 08:41:50 AM PDT

      [ Parent ]

      •  The only green jobs in the US will be in design (4+ / 0-)
        Recommended by:
        eugene, theran, Pozzo, EthrDemon

        And those jobs will require a PhD in Material Science, Electrical, or Mechanical Engineering. The manufacturing will all be done overseas. The administration always fails to mention these pesky details.

        •  It's a good thing public schools are so good n/t (0+ / 0-)

          "Dream for just a second and then do it!" -- Kolmogorov

          by theran on Thu May 21, 2009 at 08:57:03 AM PDT

          [ Parent ]

        •  Why Would the Design Be Done in the U.S.? (0+ / 0-)

          When you can get workers with equivalent degrees in low-wage countries for 1/5 or 1/4 of the price?

          Obama's Solution: Give Money to the Rich to Buy Distressed Assets.

          by bink on Thu May 21, 2009 at 09:00:27 AM PDT

          [ Parent ]

        •  In the case of the batteries (1+ / 0-)
          Recommended by:
          theran

          for the GM Volt the reverse is happening.  Th batteries will be made in Michigan, but designed in Korea.

          This is the result of a Korean decision to significantly fund the design of electric batteries for cars.

          The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

          by fladem on Thu May 21, 2009 at 09:36:36 AM PDT

          [ Parent ]

  •  I'm not normally a fan of charts (4+ / 0-)

    but I'd like to see one that compares the growth of US worker wages to US representatives in Congress.  I'd bet that would be quite revealing!  

  •  The Economy's Engine (1+ / 0-)
    Recommended by:
    EthrDemon

    Demand drives everything.  Take away demand and nobody will invest.  With 30% of capacity lying idle, what corporate chieftain or entrepreneur will invest in additional capacity unless it dramatically reduces unit production costs?  So, we have a situation of no consumer demand and no business investment.  Only government-driven investment or exports remain.  We get played like chumps on exports, so government investment it is.  We're all going to be working for the state, no matter what the conservatives shout, because that's the only way forward.

    "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

    by PrahaPartizan on Thu May 21, 2009 at 08:25:56 AM PDT

  •  It's the Jobs, Stupid.... (5+ / 0-)
    Recommended by:
    bink, Pozzo, Brooke In Seattle, chrome327, Toon

    ....wish Congress would understand that and end this "free trade" insanity.

    No jobs, no economy.

    •  Yep. The downward pressure on wages is (1+ / 0-)
      Recommended by:
      EthrDemon

      a side effect of the erosion of jobs (for many reasons) and the consequent labor surplus. For myself, the level of my wages is a secondary concern. The primary one is getting a wage at all, since for a few months I joined the ranks of the unwillingly unemployed last year.

      "A president who breaks the law is a threat to the very structure of our government....President Bush has repeatedly violated the law for six years." Al Gore

      by psnyder on Thu May 21, 2009 at 09:11:27 AM PDT

      [ Parent ]

    •  Offshore our jobs (1+ / 0-)
      Recommended by:
      notrouble

      to low wage countries and race to the bottom for the very lowest wage possible. Race to the bottom for the lowest environmental safeguards as well.
      This is how business is operating now.

      The Panama Trade Agreement, negotiated by George Bush admin. is again in play. Once again, big business wants to get it passed. Not only do they want to get it passed but they want to get it passed FAST... by July. Now is a good time, while everyone is very preoccupied by torture, financial collapse, health care, etc..

      If our recovery is tied to jobs and wages, this trade agreement won't help Americans who actually work for a living.

      There is a nice diary up in the diary rescue on this subject.

      For more see http://www.citizenstrade.org/...

      http://www.citizenstrade.org/...

  •  Everything is proceeding according to plan. (4+ / 0-)
    Recommended by:
    notrouble, chrome327, Toon, Ezekial 23 20

    Those who have wealth and power act in such a way as to increase their wealth and power.

    Those who have wealth and power prefer a society where the many serve the few.

    In the USA the top 1% have 12% of the income and 34% of the property. Why would the top 1% allow that to change?  

    We shall overcome, someday. Yes we can.

    by Sam Wise Gingy on Thu May 21, 2009 at 08:32:18 AM PDT

    •  I think you're giving them more credit... (2+ / 0-)
      Recommended by:
      theran, Toon

      than they deserve, if you'll forgive the pun.

      Everyone acts to some extent to protect their own interests. That doesn't mean that they act wisely.

      Allowing banks to fail and stock markets to fall doesn't strike me as any kind of 'plan'.

      Unless the plan is failure, of course.  

  •  My wages have dropped by 2/3 over the last (3+ / 0-)
    Recommended by:
    Pozzo, Albatross, chrome327

    six months.  Going to need an awful lot just to get back where I was last year, much less have 'sustained growth'....

    Bah. Typoed during acct creation. It's Ezekiel 23:20

    by Ezekial 23 20 on Thu May 21, 2009 at 08:37:47 AM PDT

  •  This is a fantastic diary (2+ / 0-)
    Recommended by:
    bink, theran

    You're making some truly important points here.

    And there are no easy ways to fix this. Tax breaks aren't a long-term solution. We need to stop the concentration of wealth at the top, and get that money circulating throughout the economy again.

    To grow wages, we must also grow government spending. That spending takes the burden of paying for things (schools, health care, transportation) off of individuals. It helps them pay down debt and avoid it in the future.

    I'm not part of a redneck agenda - Green Day

    by eugene on Thu May 21, 2009 at 08:54:51 AM PDT

    •  That's if we are not stuck (2+ / 0-)
      Recommended by:
      suresh, eugene

      There's a general race between productivity (i.e., technology) and population growth, which influences overall demand (or stuff to be done).

      If productivity wins, then we need to think about how to organize society so that everybody can live a dignified life in a world with more people chasing less stuff to do.

      "Dream for just a second and then do it!" -- Kolmogorov

      by theran on Thu May 21, 2009 at 09:14:35 AM PDT

      [ Parent ]

  •  Part of the problem is (3+ / 0-)
    Recommended by:
    fladem, theran, terrypinder

    reflected in this sentence IMO:

    So it does not seem that the productivity of American workers is suddenly going to be reflected in wage increases.

    I don't want to impute some meaning the diarist doesn't intend, but the implication I see (clearly stated in other things I've read) is that wages should be coupled with productivity growth.

    The problem with that is that in a lot of cases, productivity growth comes from capital and not from labor - it's due to capital improving process productivity through automation or better product design, and not from labor becoming more skilled or putting out more effort. That's even true in a lot of cases for 'knowledge work', in places where computers or the internet are responsible for productivity increases. Tying wages to productivity is asking for owners to pay twice - once to invest in productivity enhancements and a second time to transfer the benefits of those enhancements to labor, even when labor wasn't the source of the enhancements.

    I agree completely that we need real wage growth, or at least not the wage declines of the last 30 years under either political party. But I think the link between productivity growth and wage growth has been broken and won't be fixed, and we need to rethink the mechanisms  and justifications for how income and wealth are distributed throughout society.

    Je suis Marxiste, tendance Groucho

    by badger on Thu May 21, 2009 at 09:01:00 AM PDT

    •  but every time they implement "productivity" tool (3+ / 0-)
      Recommended by:
      badger, EthrDemon, notrouble

      We are expected to learn them, use them, improve upon them.  When I started my career many decades ago, there was no internet, no e-mail.  There were typewriters, carbon paper.  Then there was Word Perfect and Fax Machines.  Now there is Microsoft Word, Excel, PowerPoint, Outlook, Blackberries.  Yes, they invest in them, but we must know how to use them effectively.

      My skillset has grown exponentially during my career and there is no end in sight.

      There are bagels in the fridge

      by Sychotic1 on Thu May 21, 2009 at 09:05:51 AM PDT

      [ Parent ]

    •  Point taken (1+ / 0-)
      Recommended by:
      badger

      though I think the real issue is the productivity of labor has not increased fast enough to offset the competitive advantage of doing work in lower wage countries.

      The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

      by fladem on Thu May 21, 2009 at 09:38:38 AM PDT

      [ Parent ]

  •  I have posted this (6+ / 0-)

    before, but it bears repeating.  This is from FDR's Fed Chairman Marriner S. Eccles on the cause of the Great Depression:

    As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. [Emphasis in original.] Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped. That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system.

    Pretty fricken discriptive of the last 30 years in this country.

    The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

    by fladem on Thu May 21, 2009 at 09:17:58 AM PDT

    •  Wow! (0+ / 0-)

      That is a wonderful quote. I've been trying to make that point and never realized FDR administration had beaten me to it by 75 years.

      Capital is only the fruit of labor, [...] Labor is the superior of capital, and deserves much the higher consideration.
      President Lincoln, December 3, 1861

      by notrouble on Thu May 21, 2009 at 11:02:52 AM PDT

      [ Parent ]

  •  Nonsense! (0+ / 0-)

    Where do you think wages come from?  They come from profits, or put another way, from more price than cost, leaving an excess.

    That comes from productivity: each unit having a lower marginal cost.  

    Unless you became more efficient and productive, wages stagnate.  

    •  Productivity (2+ / 0-)
      Recommended by:
      New Deal democrat, notrouble

      has grown substantially since 1994.  In that time real wages have stagnated.

      This is the fundemental economic problem we face.  

      The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

      by fladem on Thu May 21, 2009 at 09:34:47 AM PDT

      [ Parent ]

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