I think everyone’s seen the famous graph from the Economic Policy Institute, that show that while Productivity has been growing in a steady and linear fashion decades after decades, wage began to stagnate in the 70s.
Since the 70s, wage have grown about +0.6% per year, while productivity has grown at an average of 1.4% per year. That gap is enormous and it is compounding over time.
Can someone me why it’s happened?
In: Economics
Yes. Your boss is paying their employees as little as they possibly can before their workforce dries up. Welcome to neo-feudalism, I hope you enjoy your stay.
Corporate greed.
Why pay your staff the gains of their increased productivity, when you could pay them a fraction of that and pocket the rest yourself? The overwhelming majority of people aren’t going to look into financial data to discover that fact, especially pre-internet, so it’s basically free money if you’re a greedy business owner.
Lots of Boomers.
Big workforce. A lot of competition in the labor market. Glut of talent for employers to choose from. Depressed wages.
That trend was prolonged, because Boomers birthed the millennial generation, which is now the largest workforce.
We are only now seeing the trend begin to reverse, because all the Boomers are retiring, and the replacement workforce is Gen Z, which is a very, very small generation comparatively. Labor power is coming back in a big way.
There’s a lot of reasons why this is a thing but the most concise answer is Nixon, then Reagan.
I assume you are talking about these graphs: https://wtfhappenedin1971.com/
If you scroll to the bottom of the page, it gives the answer.
The chart you’re referring to does not show productivity vs all wages, it shows productivity of the entire economy vs wages of manufacturing workers. The US economy has mostly moved away from manufacturing, and is now service-based.
Also, it only shows wages. It doesn’t show increases in health insurance, retirement benefits, or paid time off.
Capital investment is significantly higher for the same output. There are generally more layers to business, but that silly graph ignores it.
Silly/Simplistic Example:
Blacksmith is making steel and can pound 50lbs of iron into steel a day and gets paid $10.
Blacksmith starts working at steel mill and can produce 5,000lbs of steel per day. Should he now get $1,000? No – that’s silly. He can only produce that much because of the powerful/expensive smelters that he works with. Someone built the smelters. Someone designed the smelters. Someone else needs to maintain the smelters. etc. The blacksmith gets $15. He’s making 50% more for the same work but is producing 100x as much.
The normalization of a dual income household. Imagine what would happen to wages if there were suddenly 2x the workers. Wages stagnate cost of living increases and rich get richer since theres more money to buy the stuff the rich are selling.
Reagan busted the air traffic controllers union which basically weakened union positions and then states became right to work
Productivity isnt an even growth.
The person who used to put the bolts on the tire in the 70s is a robot arm. The manual jobs that are left have seen productivity boosts based on automation that happened around them.
Same thing with tech: Sears had a catalog, you mailed in your order they mailed it back… No more printing, no more mailing, and the company is called amazon now… Less workers to deliver the same item…
I would argue that the gains for the workers who remain (in factories and warehouses) arent more profxucgive than they were 30-40 years ago… the gains have come from tech removing lots of other jobs from the chain. (the work product of one person does the job of dozens)
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