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I have a better explanation. Wages have not even remotely kept pace with productivity, so most people do not see the benefits of increased overall productivity.

by wycats 15y ago

I have a better explanation. Wages have not even remotely kept pace with productivity, so most people do not see the benefits of increased overall productivity. http://rationalrevolution.net/images/EPI_Productivity_vs_Compensation.jpg http://rationalrevolution.net/images/EPI_Productivity_vs_Com...

true_religion 15y ago
I'm curious.... if productivity increases rapidly in all sectors then how are wages supposed to increase as well? The theory is that employees should be paid more for producing more value per head. However if everyone produces more then wages can't go up without a corresponding increase in prices. The alternative is reduced prices, new improved goods and services, and a steady wage giving the misleading sentiment of "everything is getting better, but I'm still being paid the same".
- mikeash 15y ago
  Why do prices have to go up with productivity? To take a toy example, let's say that the entire economy consists of nothing but producing TVs, and that enough TVs are produced for each person to have one TV per year. Now some massive productivity increase comes along and doubles output with the same workers. Now you're producing enough TVs for each person to have two TVs per year. Either the price of TVs will drop by 50%, or salaries will double. (Or half of the workforce will be fired....) Approximately. If everyone produces more then everyone has to be able to buy more, otherwise there's no reason to have the additional production in the first place.
tomjen3 15y ago
If that is the case, then you would expect to be able to make more money by starting your own business, because you start to reap all the rewards (and take on more of the risk). My theory? Well somebody has to pay for all the useless people (Washington employes a ton of them and so do nearly all large companies in the world).

by wycats 15y ago

true_religion 15y ago

I'm curious.... if productivity increases rapidly in all sectors then how are wages supposed to increase as well? The theory is that employees should be paid more for producing more value per head. However if everyone produces more then wages can't go up without a corresponding increase in prices. The alternative is reduced prices, new improved goods and services, and a steady wage giving the misleading sentiment of "everything is getting better, but I'm still being paid the same".

mikeash 15y ago
Why do prices have to go up with productivity? To take a toy example, let's say that the entire economy consists of nothing but producing TVs, and that enough TVs are produced for each person to have one TV per year. Now some massive productivity increase comes along and doubles output with the same workers. Now you're producing enough TVs for each person to have two TVs per year. Either the price of TVs will drop by 50%, or salaries will double. (Or half of the workforce will be fired....) Approximately. If everyone produces more then everyone has to be able to buy more, otherwise there's no reason to have the additional production in the first place.

tomjen3 15y ago

If that is the case, then you would expect to be able to make more money by starting your own business, because you start to reap all the rewards (and take on more of the risk). My theory? Well somebody has to pay for all the useless people (Washington employes a ton of them and so do nearly all large companies in the world).