There Was a Class War. The Rich Won It.
[Quote:]
What happens if there’s a class war and only one side bothers to show up and fight it? That’s what happened over the last thirty years. There was a class war, and the rich won. Period. It’s over, they kicked our knees out from under us, put on their steel toed boots and spent the last thirty years telling us that they were going to trickle on us and we’re going to like it and beg for more.
Seems like hyperbole? It’s just the numbers. The top left shows the manufacturing wage earner’s hourly wages. Not “family income” which includes both of you going to work, but hourly wages. The only reason it’s goods producing is they go back longer, but other charts show the same pattern.
So, if you’re an ordinary slob, you haven’t had a raise in over 30 years. In fact, your real wage peaked over 30 years ago and it’s never recovered.
July 15th, 2008 at 18:12
That second graph suggests at first glance that the benefits of higher per-worker productivity are not being shared with the employees. But imagine if a company decided to keep the lines together and pay out the gain. That would effectively erase the gain created by the productivity innovation–and then where is the motivation to innovate further? So in a sustained period of productivity growth, wouldn’t you expect productivity growth to exceed salary growth?
Now, the fact that real wages have not gone up at alll makes for a better argument. How does one increase average nominal wages without causing equivalent inflation? Is it a coincidence that inflation starts to balance wage growth at exactly the time when the gold standard was abandoned (1971) and currencies were allowed to float against each other?
July 15th, 2008 at 18:17
That would effectively erase the gain created by the productivity
That’s assuming you define “productivity” as “amount of work done per salary dollar”, and I think that’s wrong - it’s “amount of work done per time unit”.
Of course there are many macro-economic subtleties working on inflation, on which wages are indeed an important factor - but check out the way inflation if currently calculated in the USA; food and fuel is left out of the equation. That basically makes “inflation” a meaningless thing to judge the economy by, and meaningless to figure out the effect of wages on it.
July 15th, 2008 at 18:30
Productivity increases because capital is substituted for labor, and the economic reward therefore accrues to capital. The misperception that labor productivity accrues to labor occurred because both rose together in the 1960s. But here was the causality back then:
1. Labor became really really scarce. The unemployment rate dropped below 4%.
2. That is what caused real waged to rise.
3. Rising real wages, coupled with cheap capital (low interest rates, for example), caused the substitution of capital for labor.
4. Thus labor productivity rose.
That is, in the 1960s, labor productivity was a consequence of rising real wages, not a cause.
July 16th, 2008 at 6:08
I’d like to see a graph using mean hourly earnings!
July 16th, 2008 at 23:25
I don’t think your responses addressed my questions, but I’m going to skip out on the core discussion because it’s just too tangled to carry on in comments here. One thing, though–the US switched to using core inflation for long term tracking, but the old CPI which includes food and energy is still calculated as well, and it is more what the press pays attention to in practice.