Home > Uncategorized > The disconnect in the US between productivity and wages

The disconnect in the US between productivity and wages


Since 1975 workers have received almost none of the gains of increased productivity, which has increased by 143% since around 1975 (figure 14). In other words, productivity has more than doubled, while workers received none of the gains. This can be explained by the deindustrialization of the US economy, as heavy industries followed by manufacturing in general were exported to Asia. Due to this trend there was a huge decrease in unionization which went from 39% in 1940 to around 10% in 2014. During the same period there was a trend toward part-time work and contract labor, mergers and acquisitions, with downsizing and layoffs. The Reagan revolution and Republican “Contract with America” both served to remove power from the working class and transfer it to corporations. One of Reagan’s first acts as President was to break the Pilots and Air Traffic Controllers strike (PATCO), replacing them all with military personnel. That was the final nail in the union coffin. The Democratic Party in 1992 through the Democratic Leadership Conference chose to seek the same corporate and Wall St. money as the Republicans, and from that point on effectively stopped serving the working class. All these factors led to the reduction of bargaining power and political power on the part of labor, and can help explain the stagnating real wages during this period of time.

Gary Flomenhoft 

  1. patrick newman
    November 25, 2016 at 7:08 pm

    I would be very surprised if this disconnect is not reflected in the economy of the UK. Production in heavy industry (like ship building, mining and engineering generally) have all been in decline since 1970’s. Similarly with union membership now about 6M or less than 20% of the employed workforce and with a large public sector element.

  2. November 25, 2016 at 8:00 pm

    I saw this chart on epi’s website. All it says is the mean and median income diverged (which is also the basis of Piketty’s (r,g) ‘theory.) Krugman (much later), S Rosen, R Frank, Bowles and Gintis, L Thurow etc. also pointed out the income distribution is largely a matter of convention, tradition, power, and bounded rationality.

    Another issue is because of huge income disparities and changing values, there is alot of excess money floating around, so there is an underground economy which gets money from people who have it which is not counted as wages, and also some people have decided they dont want alot of what money can buy so they operate in social networks, and are technically under or unemployed, but manage to survive at various levels of quality of life–they may not have a car, but they don’t have to pay for it, and may not have a well paying job but they have decided they would prefer working in low paid areas like arts, natural studies, sometimes education or sciences, and have free time, low expenses, and can choose thier own schedule and have alot of ‘leisure time’ to produce their own low paid occupations.
    (i go for hikes—which can be free or low cost—so i dont need to pay to join a fitness club.)

    one thing that is historically true is that some people who produce things at low pay, later are ‘picked up’ by big scale business (eg native americans produced potatoes, corn and tobacco) but never really get paid for their factor productivity. (van gogh and herman melville didnt get alot of pay, nor did alot of musicians.).
    the ‘harry potter’ books and movies were made by someone who was on welfare at the time. and now its an industry. she got paid eventually.

  3. November 28, 2016 at 4:15 am

    My questions revolve around the recognition that it could have been different. Our societies in the west and increasing in the rest of the world as well are structured around several dichotomies. First, workers and everyone else. Then the everyone else into the entrepreneurs and business elite, and all the other everyone else. Then the remaining everyone else as the angry and un-involved, and the involved and disinterested with the money economy. The history is complex but goes something like this. Yuval Noah Harari in “Sapiens” notes that one of the unique aspects of homo sapiens, apart from other human species is its ability to imagine what cannot be seen, heard, touched, etc. The labor vs. non-labor division in the US began to form about 50 years into the life of the US Republic. With the industrial revolution mechanization became an ever-larger factor in the organization of life in the US. With these two images of the future of the nation began a battle that continues today. One focused on property and profit, and fitting people into this world. The other focused on human welfare, and fitting work, property, and money into this world. The first described by Daniel Webster, “The great object of government is the protection of property, and respect and renown abroad.” For these union was necessary, along with slavery and the control of workers. The preacher Theodore Parker told his congregation, “Money is this day the strongest power of the nation.” This vision lead to mass poverty, mass disease, mass starvation, and mass homelessness. The second vision inspired those not included in the first vision to describe themselves as oppressed and attacked. Early feminist Frances Wright asked, “Has the Revolution been fought to crush down the sons and daughters of your country’s industry under …. neglect, poverty, vice, starvation, and disease.” She wondered if the new technology was not lowering the value of human labor, making people appendages to machines, crippling the minds and bodies of child laborers. The two visions for the US remain at battle today. No quarter expected or given. Now you fit Donald Trump into this!

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