Productivity per hour simply measures how much workers are able to get done. Thanks to better training, better management, better IT, better equipment, etc., output per hour has steadily increased since World War II. All good. In the long run productivity increases are the key to economic growth. Until 1980 as workers became more productive they got paid more... hence median income rose in a parallel fashion. Starting in the early 1980's productivity increased but median income did not rise as fast. Since 2000, the median income has been absolutely flat even as productivity has increased.
Summary: Every year our workers get more done than the year before. Workers used to see their wages go up by an equal amount. For the past 25 years workers haven't been getting those raises. Why?
The is no silver bullet answer but I have my guesses. I'd like to hear yours before I discuss my ideas.
I have 3 guesses:
ReplyDelete1) Corporate greed. More profit for them, if they don't pay their workers as much as productivity increases.
2) Increase in better technology also means spending more on replacing equipment more often - so for instance, having more advanced computers/software every 1-2 years as opposed to every 5-6 years means spending more money more frequently.
3) Insurance (i.e. health care) costs have skyrocketed and so employers are paying out more in that area, so the wages stay more flat.
Okay, obviously I'm not an economist and actually have never taken any classes in economics. I'm a social worker - so go easy on me, teach! LOL
I'm not an economist either (just a lowly business/English major), but I like Smburke's guesses. I know #1 exists in some places, but around my company #2 & #3 probably come more into play (although I can't complain about my raises through the years).
ReplyDeleteQuestion, though. Do the salaries include only US citizens, or do they include outsourced workers as well? $60k in the US may get you one software developer, but you may be able to get five in India for the same price. Kinda hard to ask for a raise when you can be replaced so easily.
Again, I'll respond to the main question later, but to Denise's question: Median income is on US salaries and productivity is on US workers. What gets outsourced to India doesn't count for either.
ReplyDeleteMy not so serious guess is oil companies - that seems to be around the same time period all the OPEC "stuff" hit the fan.
ReplyDeleteMy more serious answer has something to do with the video I just watched - ironically enough it was e-mailed today: http://www.youtube..com/watch?v=cL9Wu2kWwSY . I second Smburke's answer on Technology and how it continues to improve exponentially. Workers can "afford" to get paid less for producing more. I like Smburke's other answers too.
Because the bigwigs couldn't claim those obscenely huge mega-bonuses if they paid the employees what they are worth. But, then, they figure the employees aren't smart enough to know they are't getting paid what they are worth.
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