Sunday, August 21, 2011
Productivity & Wages
Benjamin Landy reports, "Productivity -– a measure of economic efficiency in terms of output per hour worked -– actually grew at the relatively fast rate of 2.8 percent between 1948 and 1973, when tax rates were far higher and regulations were more extensive in many industries, relative to 1973 to 2010, when average productivity growth slowed to 1.9%. In addition, during the period from 1948 until 1973, almost all Americans were seeing their average income rise as productivity climbed. Income inequality in the United States was at its lowest levels in history, with the rising economic tide lifting all boats. But beginning in the mid 1970s, the income of the bottom 90% –- all but the highest earners -– started to fall behind productivity increases. As the graph shows, though,the incomes of the top 10% and 1% continued to track productivity growth. As of 2008, the average American’s real wages were no higher than they were forty years ago. Since all workers are collectively enhancing the efficiency of the economy, there's little justification for perpetuating policies that have enabled only the wealthiest to benefit from those improvements."