Wage Story, Longer Term

May 18th, 2011 at 8:53 pm

A few comments urged me to reference the longer-term wage story…no one better than EPI for that, so here it is.  It’s not pretty, either in real terms or especially compared to productivity growth.

It’s this latter story that EPI put on the map and it’s a central part of the evolution of wage, income, and wealth inequality that’s been a growing problem in our economy since the 1970s.  We’re a far more productive, wealthy nation than we were back then, but the benefits of the growth have lifted the living standards of a narrow slice at the top of the income scale far more than the rest.

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5 comments in reply to "Wage Story, Longer Term"

  1. Fred Brack says:

    A warm welcome to the blogosphere, Mr. Bernstein. Adding honest knowledge and disinterested insight to the public sphere is more valuable than ever in this era of the fog of propaganda.

    Issue: In the ’80s an article in The New York Review said that from the 1940s until 1973 the division of U.S. productivity gains had been 70-30 in favor of labor. Then it mysteriously reversed.

    Question: Can you discuss this in a blogpost and offer an explanation?


  2. Sandwichman says:

    Jared,

    I’d like to suggest an “even longer term” story. Historically, the secular trend of growth in wages was paired with a secular decline in the normal hours of work. The eight-hour day was at the core of the founding philosophy of the American Federation of Labor, as expressed in Mary Steward’s slogan, “whether you work by the piece or work by the day, reducing the hours increases the pay.”

    In 1957, Bureau of Labor Statistics economist, Joseph Zeisel wrote that the long term decline of the industrial work week was “one of the most persistent and significant trends in the American economy in the past century.” But the secular decline of weekly hours in manufacturing came to a halt in 1945 and the decline in average annual hours — which also reflected changes in the demographics of the workforce and sectoral changes in the economy — began to actually reverse in the early 1980s.

    Theory suggests that wages and hours are connected much as the early trade unionists had argued. Two factors that contribute to an association between long hours and lower pay. One is that, all other things being equal hourly productivity can be increased by reducing the hours of work. The other factor is that unemployment is higher with longer hours, which forces wages down. Of course, with lower wages, people work even more hours to “make ends meet” and we see a vicious cycle of longer hours, higher unemployment lower productivity and lower wages…

    Back in January 2009, I sent a submission to the White House Task Force on Middle Class Working Families detailing the case I’ve touched on here. See “website” linked to my name. As a matter of fact, I cited you, Karen Kornbluh and Dean Baker prominently in the submission, so I strongly suspect you agree with some aspects of the analysis. I’m curious to hear what you think of the seldom heard argument that the end of the secular decline in hours (weekly since 1946 and annually since around 1980) has been a significant contributor to the stagnation of wages.


  3. Sandwichman says:

    Jared,

    I’d like to suggest an “even longer term” story. Historically, the secular trend of growth in wages was matched with a secular decline in the normal hours of work. In 1957, Bureau of Labor Statistics economist, Joseph Zeisel wrote that the long term decline of the industrial work week was “one of the most persistent and significant trends in the American economy in the past century.” But that secular decline of weekly hours in manufacturing came to a halt in 1945 and the decline in average annual hours began to actually reverse in the early 1980s.

    Theory suggests that wages and hours are connected much as the early trade unionists had claimed in Mary Steward’s doggerel, “whether you work by the piece or work by the day, reducing the hours increases the pay.” Two factors contribute to an association between long hours and lower pay. One is that, all other things being equal, hourly productivity can be increased by reducing the hours of work. The other factor is that unemployment is higher with longer hours, which forces wages down. Of course, with lower wages, people work even more hours to “make ends meet” and we see a vicious cycle of longer hours, higher unemployment, lower productivity and lower wages…

    I’d be curious to hear what you think of the novel argument that the end of the secular decline in hours has been a significant contributor to the stagnation of wages (see my January 2009 Submission to the White House Task Force, linked to my name).


  4. Steve says:

    Far too little attention is being give to the impact of technology and globalization on wages, unemployment and the concentration of income at the top.

    Computers and robots are getting better and better. More jobs are being done by software, often incorporating artificial intelligence or machine learning. There was a recent piece in the NYT about teams of lawyers being replaced by e-Discovery software.

    This is going to ACCELERATE in the future. A company called Heartland Robotics is working on a $5000 robot; that means an employer can buy a robot for the price of a couple of months wages.

    What happens when robots like that start taking even burger flipping jobs? It might not happen in the next few years, but SOMEDAY it is GOING to happen. Then what? McDonalds is already introducing touch screen self-service ordering sytems.

    As jobs at all levels, from McDonalds to college-educated knowledge-workers, are increasingly automated, there will be more unemployment, more downward pressure on wages, and especially even more income inequality as the owners of capital realize even more gains.

    For a great overview of this, see this book:

    “The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future”

    http://www.amazon.com/gp/product/1448659817

    A free PDF is also available here: http://www.thelightsinthetunnel.com

    Also see the author’s blog at http://econfuture.wordpress.com.

    I think the issues raised in this book are among the most important that we will have to confront as a society. I encourage everyone to read it…


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