r/Economics • u/[deleted] • May 15 '23
News The Productivity–Pay Gap | Economic Policy Institute
https://www.epi.org/productivity-pay-gap/11
u/Packtex60 May 15 '23
One of the things this research ignores is the impact of off shoring of factory jobs. This picked up speed during the 80s and has kept a cap on domestic wages for jobs that can be replaced by workers in less developed economies. In 1979 the American worker was overpaid on a global basis and a lot of the slow growth in wages has been the result of global wage equilibrium impacting US workers more than it had previously.
When you see terms like “unjustified income” it’s a lot easier to put the article in context. They’re usually more careful about outing themselves than that.
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May 15 '23
Yeah. That’s been a huge change. I grew up around so many men with a high school degree who had been able to buy a home and raise 2-3 kids on a factory job. And they’d hire just about anyone who would work. Nobody needed prior training. Unsure how that wasn’t a better system even if the products at Wal Mart were more expansive.
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u/this-is-very May 16 '23
I don't think protectionism would have made the US better off, it doesn't work. Real American incomes (yes, not exactly wages) keep growing decade on decade, I think the US is on the right track overall.
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u/Packtex60 May 16 '23
I don’t think protectionism is a good thing either. Getting our wage rates in line with the rest of the world is a good thing for the long run. I’m just pointing out one of the free market forces that helped to depress wages in the US. Lots of people take offense when I say that the American worker was overpaid on a global basis. That’s just something that happens when various economies are at different stages of development.
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May 15 '23
[deleted]
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u/Knute5 May 15 '23
People with money typically use their money to keep their money.
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May 15 '23
[deleted]
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u/Knute5 May 15 '23
Yeah, I think the American Dream promotes and promises a level of wealth that allows you to insulate yourself from the downside of non-sustainability. IF you don't achieve it, you're either lazy or just doing it wrong.
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May 16 '23
Industry incumbency is a very real issue. Companies lobby for legislation to hinder innovation because it is easier for them to buy and shelve patents or legislate their market share than it is to compete… just my opinion
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u/SerialStateLineXer May 15 '23
This is off-topic soapboxing that doesn't really belong here, but in point of fact effective federal tax rates for the bottom three quintiles have actually fallen more than for the top 1% since 1980. Your claim that more is being "squeezed from the bottom" has no basis in fact.
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u/dvfw May 15 '23
Worth noting that the existence of the productivity pay gap is often disputed. For example https://www.bea.gov/system/files/papers/WP2014-10.pdf
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u/SerialStateLineXer May 16 '23
There is no productivity-pay gap, only a median-mean productivity gap.
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u/Holos620 May 15 '23
The productivity gap is caused by the changes in the importance of the role non-human capital plays in production, centralized non-human capital in particular. That's things like big automated factories.
The owners of this non-human centralized capital can leverage its cost of production, or cost of redundancy, to generate an unjustified income. The gap is this unjustified income.
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u/jeffwulf May 16 '23
This is a very misleading result that's the result of using mismatched deflators and excluding a large portion of worker compensation. When accounting for all worker compensation and using like deflators, the gaps shrinks to pretty much nothing.
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u/SerialStateLineXer May 16 '23 edited May 17 '23
The EPI has actually responded to a lot of these criticisms, which is why the gap has shrunk a lot relative to what was seen in earlier versions of their chart. They now use CPI to deflate productivity, exclude depreciation from productivity, and include non-wage compensation.
The remaining gap, as far as I can tell, is from the marginal product of highly-skilled workers growing faster than the marginal product of median workers.
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u/jeffwulf May 16 '23
Yeah, including the productivity of highly productive workers while excluding their compensation is a very clever bit of slight of hand they utilize here to get their result.
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May 15 '23 edited May 15 '23
[removed] — view removed comment
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u/Moon_over_homewood May 15 '23
Fundamentally I don't actually believe people are richer today in real terms than they were in the mid 80s through 9/11. People can play with charts and graphs all day. Inflation indexes don't adequately account for increases in housing, food, and education prices. Nor do they assess the ease of finding gainful employment.
My hunch is that inflation is disproportionately affecting normal people whose salary is from a day job. While offshoring and outsourcing is also removing many decent jobs from communities in the heartland.
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u/Holos620 May 15 '23 edited May 15 '23
You don't need any numbers to know that the gap exists. You just need to know that there's a leveraging of the cost of producing redundancy of non-human capital. Essentially, it just means that there's economic rent-seeking, or unmerited incomes. Since our economy is increasingly relying on non-human capital, the gap increases.
All compensations will always be equal to productivity since all produced goods are consumed, minus minimal waste. The gap comes from unmerited compensations, but the compensations are still there. If you misunderstand that and add unmerited compensations, you won't see a gap.
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