From the Washington Post: For a long time in America, earnings and productivity went hand and hand: The more productive workers got, the more they made. That relationship appeared to break down starting in the early 1970s, as productivity increased but wages flat-lined.
According the U.S. Bureau of Labor Statistics, manufacturing in the U.S. peaked in 1979 when there were over 19.6 million manufacturing jobs --- but that has been on a downward trend ever since. And 1979 was also when the total number of union members had peaked out at over 22 million. And so it' no coincidence that today the labor force participation rate is also at the lowest since 1979.
As to wages since that time: James Sherk, a senior policy analyst at the conservative Heritage Foundation, contends total compensation, properly adjusted for inflation, has kept pace with properly-measured productivity (on average).
The real problem, he says, is that far too many workers are stuck in low-productivity jobs, particularly in the health-care sector; he argues policymakers should be focused on helping those workers gain more skills and move into more productive sectors — specifically, by looking for ways to reduce the cost and increase the accessibility of higher education. (The healthcare sector? What about retail and fast-food?)
While average wages have fallen by 7 percent over the last 40 years, Sherk calculates total compensation has risen 30 percent. By using his methodology for calculating worker's wages, Sherk finds there’s hardly a gap between the growth in what an average worker earns and the average productivity gains over the last 40 years.
What he does find persists is a gap between productivity and median worker compensation. Sherk blames this on market forces, including globalization and automation, pushing lower-skilled workers into low-productivity jobs. If those workers could more easily and cheaply gain more skills — say, through widely available, low-cost online education — they could compete for higher-productivity jobs.
American workers need to be more productive and acquire more skills? Is James Sherk at the Heritage Foundation implying that if 20 million Americans (who are either unemployed or can't find full-time work) were all healthy and robust 21-year-old athletes with a PhD in computer Science -- and they all had a IQs of 175 or higher -- and they were all ambitious --- that they would all be more productive, and therefore, they would all find good-paying middle-class jobs?
For Economic Wonks Only (This is far above my pay level, but if you know of any economists who can make sense of all this, please have them explain it to me. Thanks.)
- From the Washington Post: Higher productivity used to mean higher wages. Has that broken down?
- From the Federal Reserve Bank of San Francisco: The Path of Wage Growth and Unemployment
- From the Heritage Foundation: (James Sherk) Productivity and Compensation: Growing Together
- From the Wall Street Journal: Real Wages Still Below June 2009 Level
- From the New York Times: Overpaid? Or Worth Every Penny? (References a study for 2012 CEO pay -HTML / Original PDF)
Per Media Reports
This is per a new report from the Bureau of Labor Statistics, via the Huffington Post: "The economic recovery just keeps getting worse for the average worker as U.S. employers squeezed their employees even harder than usual in the first quarter [of 20123], leading to the biggest drop in hourly pay on record." Worker productivity is up, corporate profits, CEO salaries, and the stock markets are all at record highs --- but workers haven't been reaping the same rewards that their employers have been. Average Americans today are making less, after inflation, than they made in the early 1970s. Something has gone fundamentally wrong. American workplaces are simply no longer working for those who punch timecards. Last year Walmart's CEO Mike Duke made 796 times the average worker's pay and Target's CEO made 645 times the average worker's salary. The rate of CEO pay has far outstripped wage growth for the country's rank and file. A recent report from the AFL-CIO found that CEO pay grew at a rate 127 times faster than worker pay over the last 30 years.
Also Related to Workers
- Huffington Post (Robert Creamer) How the GOP Hopes to Take Away Americans' Right to Collective Bargaining
- New York Times (Paul Krugman) Hunger Games, U.S.A.