Re: [OPE] real wages and productivity growth

From: Paul Cockshott <>
Date: Mon Nov 17 2008 - 08:00:30 EST

> Key to Rick Wolff's explanation of the economic crisis
> was the claim that there is a long-term gap between real wages
> and productivity in the US (see, especially, his video lecture).

 There is a problem with this in general as a thesis as the US as a
whole is massively overconsuming and under saving.
> This association, however, had been called into question by
> Daniel Sullivan in a _Chicago Fed Letter_ article entitled "Trends
> in real wage growth" which is *attached*.
> *Do you know of any critiques of this article?*
> Sullivan is critical of the prior measures of real wages and
> offered alternative real wage measures in which there is
> substantial growth in real wages which tracks quite well
> the growth in productivity over the same time period.
> (NB: since the Sullivan article was published in March,
> 1997, it obviously doesn't tell us anything about the last
> 11+ years).
> Besides objecting to the _Current Employment Survey_ statistics
> on real wages only including "production and nonsupervisory
> workers" and excluding workers at "newly opened establishments"
> (the former objection seems to be ideologically-based and the
> latter trivial, imo), his main "methodological problem" with the
> CES measure is:
> "they cover only wage and salary compensation. Fringe
> benefits and contributions for social insurance programs,
> important parts of the workers' total compensation, are
> left out. Because these components of compensation have
> been increasing more rapidly than wages and salaries over
> most of the period covered ... average hourly earnings
> understate compensation growth".
> There are a number of questions here including:
> (1) which workers should be included in the survey?
> (2) should the measure of real wages include employer
> compensation for health benefits, pensions, etc.?
> (3) even if we accepted (which I don't) Sullivan's
> objections and used an alternative measure of
> real wages, had real wages grown to the extent
> that he claimed in the 1964-1996 period in the US?
> (4) how have real wages changed - using different measures -
> since 1997?
> On (3) - and, to a lesser extent (4) - I wish to note the
> following:
> Since the early 1980s and the concessions movement,
> employers have rigorously attempted to shift the costs of
> health and other social insurance programs to workers.
> To a great extent, they succeeded. A larger percentage
> of workers in the US pay for all or a portion of their health
> insurance out-of-pocket or as a direct deduction from
> wages than they did prior to that time. Additionally, less
> US workers today are enrolled in company-paid pension
> programs and most workers who used to have dental
> insurance no longer have it. This is related, I think, to trends in
> unionization: since the late 1970s the % of workers who are union
> members has been steadily falling and unions have essentially
> been on the defensive and in retreat over the entire period
> (NB: ... and, the union 'leaderships' which largely bought into the
> practice of 'labor-management cooperation' willingly made
> these concessions in the name of job security - which often
> proved illusory - and increasing corporate 'competitiveness'.)
> It would also be interesting to see if/how part-time workers
> are counted in the surveys on real wages since contingent
> workers not only receive lower wages but also less (or no) social
> insurance benefits ... yet they represent an increasing fraction
> of the employed labor force. To the extent that they are not
> adequately counted, then this would tend to under-state a
> fall in real wages.
> Thus, while it is true that the cost of social insurance costs
> have risen it is not at all the case that the burden of this has
> fallen all or even primarily on employers. It is entirely possible
> if we re-calculate real wages to show employee contributions
> for their own social insurance that real wages would have fallen
> to an even greater extent than the amount suggested by _Current
> Employment Survey_ statistics.
> *Does anyone have any thoughts and/or statistics on this which
> support or refute Sullivan's claims?*
> In solidarity, Jerry
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Received on Mon Nov 17 08:06:59 2008

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