You may already be aware of a number of different ways of looking at the pay-productivity gap, which represents the difference between how much productivity has grown in the United States vs. how much worker pay has grown. This gap concept recently got some social media attention when Bloomberg said “no one has good answers” to why this gap exists, and some enterprising Twitter users brought up Marx as the obvious counter to this. (Here’s the Bloomberg article linked by the tweet, titled, “Workers Get Nothing When They Produce More? Wrong: But the trickier question is why they don’t get the full benefit of rising output.”)
I realized this was a highly simplified debate in need of some nuance. So I decided to to some informal polling and then some research: pay attention as you read to what your emotional response is to each bit of information. What do you want to be true? What do you reject out of hand?
Together we’re going to learn what we can about the productivity pay gap.
I asked a few friends what they thought might be driving the gap, and here’s what I got, in loose descending order of popularity:
One really, really interesting article that highlights a way to approach this question is “X Marks the Spot Where Inequality Took Root: Dig Here.” Author Stan Sorscher shows a version of the graph that shows productivity vs. wages of certain goods-producing workers. While the data choices are questionable (for reasons we’ll see later) and the second half of the article is not particularly methodologically strict, he does demonstrate an interesting point: there was a change in the 1970s that seems fairly abrupt.
Interestingly if we’re just looking for correlations, here’s what we see versus a few hypotheses:
If inflation was the primary driver for the productivity-pay gap, we’d need to see an inflation rate that remained much higher than the 1950’s/1960’s period when productivity and pay seemed to track better.
At first glance, none of these answers seem to be a silver bullet. And, as usual, the picture is a lot more complicated than it seems at first glance.
We’ll dive into how these two numbers–productivity and pay–are measured, and how they’re adjusted for inflation, to learn that it’s even more complicated to figure this out than we thought. Plus, we’ll look into some of the leading explanations for the gap.
Here’s an interesting graph from Heritage to whet your appetite.
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I suggest reading "Ages of Discord" by Peter Turchin: http://peterturchin.com/age-of-discord/
While his arguments involve a fair amount of data, the general gist of how he would explain this is simple supply and demand. Around the 60s and 70s is when the population of works started to hit the carrying capacity (in terms of jobs available). More supply (people looking for jobs) than demand (jobs available) means that owners ("job producers") can lower the price (wages paid) and keep the extra profits for themselves. I think you should add this hypothesis to your list (and probably also read the book!)
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