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At the opposite end of the spectrum – which we call ‘strong linkage’ – it’s possible that productivity growth translates fully into increases in typical workers

At the opposite end of the spectrum – which we call ‘strong linkage’ – it’s possible that productivity growth translates fully into increases in typical workers’ pay, but even as productivity growth has been acting to raise pay, other factors (orthogonal to productivity) have been acting to reduce it. At the same time, non-purely technological hypotheses for rising mean-median inequality include the race between education and technology (Goldin and Katz 2007), declining unionisation (Freeman et al. 2016), globalisation (Autor et al. 2013), immigration (Borjas 2003), and the ‘superstar effect’ (Rosen 1981, Gabaix et al. 2016). Non-technological hypotheses for the falling labour share include labour market institutions (Levy and Temin 2007, Mishel and Bivens 2015), market structure and monopoly power (Autor et al. 2017, Barkai 2017), capital accumulation (Piketty 2014, Piketty and Zucman 2014), and the productivity slowdown itself (Grossman et al. 2017). All of the non-technological reasons, to me, boil down to globalization. I'd love to see the productivity-wage divergence chart in China and other developing countries. I wouldn't be surprised if the divergence is inverted in those places that have seen unprecedented wage growth over the last forty years. I guess what I'm saying is that I don't think productivity and wages have diverged as much as people think, it's just that a national analysis is insufficient in a global labor market.

malvosenior 9y ago
I would add women entering the workforce en bulk, essentially doubling it. Between that and globalization it would seem the supply/demand ratio significantly changed to have downward pressure on salaries.
- EliRivers 9y ago
  All those women spend their earnings, increasing demand. Essentially doubling it?
  - zaroth 9y ago
    A two-parent household isn't going to double its consumption of everything if both parents start working. First, because wages will be depressed from the new labor supply, the total income of the household doesn't double. Second because their tax rate will increase. Third because many things we consume in fixed units with little control over the total cost, like "health insurance". But they will increase their consumption of some things, particularly when it comes to the direct cost of working, so the family may spend more on things like transportation, clothing, child care, home care & maintenance services, food preparation, grocery delivery, etc.
    - jessaustin 9y ago
      It could be that housing costs are soaking up the bulk of the second earner's pay?
      - zaroth 9y ago
        Home ownership rate is currently near averages maintained since the 70s. But it increased substantially in the 40s-70s (from ~45% to 65%). So to the extent that rise was enabled by dual income households you’re absolutely right more demand for housing drives up housing prices and saps up the extra income.
  - malvosenior 9y ago
    I think you mean consuming more because spending more is meaningless if inflation has risen faster than the increased spending. A corollary trend is families having far fewer children. I imagine (but don’t have the data) that would decrease consumption more than whatever increased when we doubled our workforce.
- jhoechtl 9y ago
  Your downvotes are unwarranted for an economically proven observation. Woman entering workforce have had an effect and still have at a decreasing rate. Esentially they converted the labor market from a supply driven market (workers more in command) to a demand-driven market (those creating work in command) Any measures to lower the need for workers (automation, efficiency gains) or increasing the workforce (immigration, women working) worsens working conditions.
- PeterisP 9y ago
  Women entering the workforce in bulk was done already two decades ago. The female labor participation rate peaked in 2000 and has declined since that - however, the trends are still continuing; they are not coupled/correlated to this increase of workforce.
  - malvosenior 9y ago
    As the parent said, globalization seems to be the other factor.
- mirimir 9y ago
  Yes, that's been important too. But it's complicated. I gather that women are in greater demand in sectors that have benefited from globalization. Whereas globalization has cut labor demand in traditionally male blue-collar sectors. Except for trucking and construction, anyway.
crdoconnor 9y ago
>All of the non-technological reasons, to me, boil down to globalization. Union busting, the rise of monopoly power and capital accumulation aren't solely about globalization though. Most of these reasons do share one salient feature that technology doesn't, however: you can single out individuals who are deliberately making the problem worse.
- mirimir 9y ago
  True. And those have all worked synergistically with globalization.
danans 9y ago
> All of the non-technological reasons, to me, boil down to globalization. I tend to agree that globalization plays a significant role. However several of the listed factors aren't directly related to globalization, and have more to do with US culture and domestic economic priorities: "the race between education and technology" "the ‘superstar effect’" "market structure and monopoly power" "capital accumulation"
- aggronn 9y ago
  I'm most familiar with this one, but I agree with your comment more generally > (Goldin and Katz 2007) This in particular is not a globalization issue. To the unfamiliar, the premise is that technology aids productivity for the highly educated, but replaces productivity for lower educated. Highly educated people will see higher wage growth as technology improves but lower education will correspond with fewer productive job opportunities. The group will become increasingly small at the same time, as more advanced technology begins to replace more complicated jobs. I don't think it was part of the paper, but you can think of it also in terms of what the singularity will look like as it happens (eventually no human is individually more productive because of technology, because the technology doesn't need the human). Very little to do with Globalization, at least in the US where we have a relatively highly educated workforce.
deleted 9y ago
[deleted]
mirimir 9y ago
This seems like the obvious answer. There was a consensus after WW II to push globalization. The theory being that international economic relationships would reduce chances of war. Plus dramatic improvements in shipping efficiency, through containerization and attendant automation. So yes, "a national analysis is insufficient in a global labor market." Also, globalization has necessarily depended on reducing protectionism. And it's arguably been associated with declining nationalism. In a collective sense. As in, for example, American firms and their employees being loyal to each other. I believe that this sense of nationalistic loyalty peaked in the 40s and early 50s. Reflecting the war effort, of course.

malvosenior 9y ago

I would add women entering the workforce en bulk, essentially doubling it. Between that and globalization it would seem the supply/demand ratio significantly changed to have downward pressure on salaries.

EliRivers 9y ago
All those women spend their earnings, increasing demand. Essentially doubling it?
- zaroth 9y ago
  A two-parent household isn't going to double its consumption of everything if both parents start working. First, because wages will be depressed from the new labor supply, the total income of the household doesn't double. Second because their tax rate will increase. Third because many things we consume in fixed units with little control over the total cost, like "health insurance". But they will increase their consumption of some things, particularly when it comes to the direct cost of working, so the family may spend more on things like transportation, clothing, child care, home care & maintenance services, food preparation, grocery delivery, etc.
  - jessaustin 9y ago
    It could be that housing costs are soaking up the bulk of the second earner's pay?
    - zaroth 9y ago
      Home ownership rate is currently near averages maintained since the 70s. But it increased substantially in the 40s-70s (from ~45% to 65%). So to the extent that rise was enabled by dual income households you’re absolutely right more demand for housing drives up housing prices and saps up the extra income.
- malvosenior 9y ago
  I think you mean consuming more because spending more is meaningless if inflation has risen faster than the increased spending. A corollary trend is families having far fewer children. I imagine (but don’t have the data) that would decrease consumption more than whatever increased when we doubled our workforce.
jhoechtl 9y ago
Your downvotes are unwarranted for an economically proven observation. Woman entering workforce have had an effect and still have at a decreasing rate. Esentially they converted the labor market from a supply driven market (workers more in command) to a demand-driven market (those creating work in command) Any measures to lower the need for workers (automation, efficiency gains) or increasing the workforce (immigration, women working) worsens working conditions.
PeterisP 9y ago
Women entering the workforce in bulk was done already two decades ago. The female labor participation rate peaked in 2000 and has declined since that - however, the trends are still continuing; they are not coupled/correlated to this increase of workforce.
- malvosenior 9y ago
  As the parent said, globalization seems to be the other factor.
mirimir 9y ago
Yes, that's been important too. But it's complicated. I gather that women are in greater demand in sectors that have benefited from globalization. Whereas globalization has cut labor demand in traditionally male blue-collar sectors. Except for trucking and construction, anyway.

crdoconnor 9y ago

>All of the non-technological reasons, to me, boil down to globalization. Union busting, the rise of monopoly power and capital accumulation aren't solely about globalization though. Most of these reasons do share one salient feature that technology doesn't, however: you can single out individuals who are deliberately making the problem worse.

mirimir 9y ago
True. And those have all worked synergistically with globalization.

danans 9y ago

> All of the non-technological reasons, to me, boil down to globalization. I tend to agree that globalization plays a significant role. However several of the listed factors aren't directly related to globalization, and have more to do with US culture and domestic economic priorities: "the race between education and technology" "the ‘superstar effect’" "market structure and monopoly power" "capital accumulation"

aggronn 9y ago
I'm most familiar with this one, but I agree with your comment more generally > (Goldin and Katz 2007) This in particular is not a globalization issue. To the unfamiliar, the premise is that technology aids productivity for the highly educated, but replaces productivity for lower educated. Highly educated people will see higher wage growth as technology improves but lower education will correspond with fewer productive job opportunities. The group will become increasingly small at the same time, as more advanced technology begins to replace more complicated jobs. I don't think it was part of the paper, but you can think of it also in terms of what the singularity will look like as it happens (eventually no human is individually more productive because of technology, because the technology doesn't need the human). Very little to do with Globalization, at least in the US where we have a relatively highly educated workforce.

deleted 9y ago

[deleted]

mirimir 9y ago

This seems like the obvious answer. There was a consensus after WW II to push globalization. The theory being that international economic relationships would reduce chances of war. Plus dramatic improvements in shipping efficiency, through containerization and attendant automation. So yes, "a national analysis is insufficient in a global labor market." Also, globalization has necessarily depended on reducing protectionism. And it's arguably been associated with declining nationalism. In a collective sense. As in, for example, American firms and their employees being loyal to each other. I believe that this sense of nationalistic loyalty peaked in the 40s and early 50s. Reflecting the war effort, of course.