Inside the Fight Over Productivity and Wages

 How do we measure wages and productivity? Productivity and compensation are both adjusted for inflation over time—but by different measures. The measure of productivity, or output, is converted based on the components of America’s national output (gross domestic product, or GDP).  Adjustments for wages use an index that tracks the prices of things workers consume, to give a sense of how far each earned dollar goes towards paying for life’s essentials. Prices have risen faster for consumer goods and services than for the prices of things that workers produce (such as machinery or airplanes), creating what Mssrs. Bivens and Mishel call the “terms-of-trade gap.” This gap accounts for a little less than one-third of the overall gap between pay and productivity.

Then how productive is the average worker anyway? Robert Lawrence, an economist at Harvard University, suggests the higher return to some workers could reflect the fact that they truly are more productive than other workers. Who are these high performers? Surprisingly, they’re not only Mensa members or people with ironclad work ethics. They’re workers in mining, energy and manufacturing, all sectors that have seen innovations in what Mr. Lawrence calls “labor-augmenting” machinery that makes each worker capable of producing more widgets (or cars or oil) in a given period.

 So where does all the money go?  Even if a small number of firms (or the top 1% of American earners) are responsible for the bulk of productivity gains, if worker pay has not risen in recent decades, it raises the question of whether the channels through which those rising wages might normally spread through the economy are blocked. In other words, why is this economy somewhat immune to Baumol’s cost disease?


From： http://blogs.wsj.com/economics/2015/09/08/inside-the-fight-over-productivity-and-wages/