PeakTrader.com

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Max Planck:

"Worker productivity has skyrocketed over the years, but yet, wages have either stagnated or declined. So the link between earnings and output has been severed, while the profits from this output get kicked upstairs." Chart:

http://www.outsidethebeltway.com/what-happened-to-the-wage-and-productivity-link/

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PeakTrader:

Max, there was massive immigration of workers from poor countries, which likely drove-down wages.

Also, more entitlements, e.g. disability or earned income tax credits, reduced income.

Nonetheless, the U.S. not only consumed all its output, it consumed up to $800 billion a year of additional output through trade deficits.

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Your chart shows the de-linking began around 1965, which is when the Great Society began.

Could it be increasingly more entitlements cause increasingly more disincentives to work?

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Also, it seems, the Immigration Act of 1965 caused the de-linking, driving-down wages and driving-up profits, similar to offshoring.

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Moreover, I may add, it seems, real compensation equals productivity.

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PeakTrader:

I stated before:

The potential speed of economic revolutions are constrained by resources, e.g. labor and capital.

It’s unfortunate, government has slowed the U.S. economy to a speed more like Europe and we may eventually go into reverse like Greece.

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When a society moves towards equality, economic growth slows. However, competition also increases.

In a natural disaster, for example, the rich win and the poor lose competing for limited resources.

Of course, there are also fewer resources to compete for with greater equality.

However, that doesn’t matter when the poor’s chance of winning limited resources is zero.

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I suspect, if real compensation kept up with productivity, an Obama would’ve never been elected.

Charts:

http://www.epi.org/publication/ib330-productivity-vs-compensation/

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Juandos, economic conditions aren’t always the same.

When the economy is underproducing and below full employment, a rise in the minimum wage can facilitate growth and employment.

I stated before:

A rise in the minimum wage can increase real economic growth.

The higher wage attracts better workers, with higher reservation wages, to increase productivity.

Minimum wage workers have high marginal propensities to consume. So, a higher minimum wage increases consumption.

Only a portion of the higher minimum wage may be passed along in higher prices, because portions will be absorbed by “excess” wages of other workers and “excess” profits.

Weak or poorly managed firms will lose business or fail. However, stronger or better managed firms will gain their business, and also gain from the increased demand.

Also, I may add, the combined increase in unemployment benefits and higher wages can facilitate a virtuous cycle of consumption-employment.

I suspect, the income effect will be stronger than the employment effect (i.e. layoffs from the higher minimum wage) to have a net positive effect on growth and employment.

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Juandos, regarding the increasing gap in real compensation and productivity over the past 40 years, would it be better to reduce productivity growth a little to raise real compensation for most workers a lot?

There’s something wrong when someone works hard for $30,000, while someone else works twice as hard for $30 million, and the gap continues to grow.

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It seems, that’s the trade-off most workers want, particularly the working poor and lower middle class.

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The political reality, it seems, is “the masses” believe, rightly or wrongly, they’re not being compensated enough, while corporate profits reach new highs each year and the disparity between upper and lower income workers increase.

You can ignore the trend over the past 40 years and wonder why the country is moving towards Marxism.

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http://www.aei-ideas.org/2012/11/to-understand-the-revolution-in-modern-energy-we-should-first-understand-something-about-horsepower/#comments

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PeakTrader:

I suspect, right-to-work states have less regulation, less government spending, and lower taxes, along with expectations they’ll remain low.

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Also, I suspect, low income states spend less on education and less education means less income.

Low income states can better directly compete with poorer countries, e.g. through “reshoring.”

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Larry, a friend started a firm about 20 years ago and has over 100 employees now. He doesn’t make a profit, because revenues equal expenses.

He pays the highest possible wages for his workers, who all earn $30,000 to $60,000 a year, and buys equipment to make the work easier for them. He pays himself $150,000 a year. He could pay himself much more, if he wanted to, but limits his pay.

That’s always been his business philosophy, to pay his workers as much as possible and make their jobs easier.

However, a few years ago, I guess, someone, a group, or a union wanted to unionize his firm. He was against it and had people talk to his workers about it, who rejected it.

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http://www.aei-ideas.org/2012/11/since-2009-right-to-work-states-have-created-4x-as-many-jobs-as-forced-union-states-and-may-have-help-obamas-re-election/#comments

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