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The three wedges that separate workers from their pay by ferujkll sdff
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The three wedges that separate workers from their pay |
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Business,Business News,Business Opportunities
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Economists assure us that rising worker productivity is the key tobetter living. When workers produce more per hour of work, theirearnings should go up correspondingly. Since 1973, that hasn t been happening. Productivity has risen ata healthy clip, but the pay of the average worker has stagnated.That simple fact explains why younger Americans today aren t doingany better than their parents generation, and sometimes worse.
Asense of the part of Americans that they re not reaping therewards of hard work fuels the Occupy movement and the cries of We are the 99 Percent. In 1994, economists Lawrence Mishel and Jared Bernstein were firstto point out the gap that was already opening up between pay (low)and productivity (high). Bernstein later served as Vice PresidentJoe Biden s chief economist and is now a senior fellow at theCenter on Budget and Policy Priorities. Mishel is president of theEconomic Policy Institute. Now, Mishel has done the most careful study to date of whataccounts for the productivity/pay gap.
He wrote a blog post called Understanding the wedge between productivity and mediancompensation growth on April 26. He also has a longer article on the EPI website . And if that s not enough, there s a technical article by Misheland Kar-Fai Gee of Canada s Center for the Study of LivingStandards published in that center s International Productivity Monitor (PDF). Mishel zeroes in on three wedges and how much each hascontributed during different periods to the growing gap betweenproductivity and pay: First wedge: Owners of capital are taking a bigger share of income. Ordinary Americans get most of their pay in the form of wages andsalaries, while the wealthiest Americans get more of their pay inthe form of income on capital, such as dividends and capital gains.The owners of capital have been claiming a bigger share of thenational income.
That trend shows up in labor s share of overallcompensation, which has fallen from 64.3 percent in 1973 to 58.5percent in 2011. Second wedge: Inequality among wage earners has grown . The highest earners have captured a disproportionate share of paygains. Average pay, which factors in the salaries of chiefexecutive officers and NBA stars, has gone up faster than medianpay, which is the pay for the mythical person in the middle.
Halfof all workers earn more than the median and half earn less. Medianhourly compensation isn t dragged upward by a few big earners atthe top. Adjusted for inflation, it grew just 11 percent from 1973through 2011, while productivity grew 80 percent. Third wedge: Consumer prices have risen faster than prices of whatworkers produce . The idea here is that workers pay is connected to what theyproduce, which includes some consumer goods and services but also alot of things that consumers don t buy, such as industrialmachinery and business-to-business services.
Prices of those thingshave gone up slowly, so the compensation of the workers thatproduce them has gone up slowly. Consumer prices, meanwhile, havegone up faster. So pay hasn t kept up with inflation in theconsumer s market basket. In the 1970s, according to Mishel, the third wedge was the biggestfactor in the productivity/pay gap.
From 1979 to 2000, the biggestfactor was inequality of compensation (the second wedge). Since2000, both inequality of compensation and shifts in labor s shareof income (the first wedge) have been powerful forces in wideningthe gap. This is the most technical analysis we ve ever done. It s avery formal decomposition, Mishel told me.
There should be atight link between what workers produce and what they earn, hesays. They ve become woefully disconnected for over 30years and never more so than the last 10. Policy needs to makesure they re connected. I am a professional writer from USB Flash Drives, which contains a great deal of information about silk ribbon wholesale , helly hansen rain, welcome to visit!
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