Nick Bunker — Rising U.S. compensation inequality and productivity growth

If the question you want to answer is ultimately how well labor as a whole is being compensated for its productivity, this data choice is the right way to go. Lawrence finds evidence of a break between productivity and average labor compensation around 2000, just as he did in a recent National Bureau of Economic Research working paper. This break means that labor as a whole is receiving a declining share of income, with the gains from productivity go to the owners of capital instead.

But what if we want to think about how productivity growth results in rising standards of living for workers on different rungs of the economic ladder? Then we need to look at what’s happening to the distribution of compensation. It may have been that compensation for labor as a whole tracked productivity until 2000, but it’s not clear how well productivity growth was translating into growth and higher living standards for all workers.

Note: The assumption of trickle down is that higher growth rate per capita implies a higher standard of living for all through distributional effects based on market forces.

WCEG — The Equitablog
Rising U.S. compensation inequality and productivity growth
Nick Bunker