On August 27, David Wessel of the Wall Street Journal appeared on NPR’s Morning Edition to discuss why, despite healthy corporate profits and stock market gains, wages remain stagnant. After addressing the usual suspects, such as globalization and technological change, he claimed that the best solution to wage stagnation “is the old-fashioned one: a faster growing economy.”
So, does the old adage remain true that “a rising tide lifts all boats”? To believe this, you have to ignore a lot of data. Exhibit A is the chart that the Economic Policy Institute updates every year, which shows wage growth relative to productivity growth. Since productivity growth is the measure of the economy growing, we would expect wages to rise as productivity goes up if the cure for wage stagnation was in fact a growing economy. But what do we actually see?
Growth of real hourly compensation for production/nonsupervisory workers and productivity, 1948–2011
Source: http://www.epi.org/publication/ib330-productivity-vs-compensation/
Mobilizing Ideas 