Home
>
Political
>
The Wage-Productivity Gap

The Wage-Productivity Gap

The most damaging factor to our economy today is the Wage-Productivity gap. This refers to the increase in the hourly output of workers vs. the increase in hourly pay. This concept is described quite well in Chapter 6 of economist Ravi Batra's book, "Greenspan's Fraud."

During times of true economic prosperity, wages have kept pace with productivity increases. Workers have shared in the benefits of their increased productivity. The result is that wages remained sufficient to purchase our nation's industrial output. Borrowing, or debt-financed consumer spending, was unnecessary to maintain sufficient consumer spending to purchase our production. More production can be purchased because more wages are paid. Demand, created by wages, matches supply, which is created by productivity. This creates a balance that makes massive borrowing unnecessary. And such balance maximizes economic "growth."

This balance has not been maintained, however, during recent years. It has worsened greatly under the Bush administration. Productivity has increased significantly during the Bush years. In contrast, wages have actually decreased. This trend started before Bush took office, but I'll confine the time frame to December 2001 through March of 2005. These are years for which records are readily available from the U.S. Bureau of Labor Statistics. Below is a graph from the New York Times showing how productivity is outpacing wages

http://graphics8.nytimes.com/images/2005/07/02/business/03cov1.graphic.gif

Startin g in January of 2003, productivity (or output per hour) has increased 11.2% thru the 1st quarter of 2005. In contrast, hourly wages have declined 2.3% over the same time period, from an inflation-adjusted $8.32/hour in January, 2003, to $8.13/hour in June, 2005. Production has exceeded the ability of wage earners to purchase the production by 13.5%. This gap has been filled by consumer borrowing. The amount borrowed must steadily increase, in order to keep pace with our increasing industrial production. If it did not, our economy would sink into recession. However, maintaining demand through borrowing is not a sustainable path.

Statistics on Hourly Wages can be found at: http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0500000049

Statistics on U.S. Productivity can be found at: http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=PRS85006092

Sometimes the effect of the wage-productivity gap can be seen better from a distance. An example of the effect of the wage-productivity gap can be seen with Japan's economy. Again, this was described by economist Ravi Batra in Chapter 6 of his book, "Greenspan's Fraud." Dr. Batra makes a very compelling case that Japan's economic problems resulted from the increasing gap between Japanese wages and productivity. I will paraphrase his explanation here.

Japan experienced extremely rapid growth between 1960 and 1975. During that time there was a 168% increase in per capita GDP. Their per capita GDP increased from $2,139 in 1960 to $5,750 in 1975. Real wages increased 217% during that time. Manufacturing productivity increased 264% during these 15 years. Japan prospered and its economy grew during this period because wages, which create demand, kept up with productivity, which creates supply. There was sufficient WAGE-FINANCED demand to stimulate production. And the necessary demand was maintained by consumer income, not consumer borrowing.

After 1975, productivity growth began to outpace wage growth. The result was a much slower growth in GDP. Between 1975 and 1990, productivity increased 3% more than wages per year. During that period, wages increased 27%, while productivity increased 86%. The per capita GDP increase was 64% from 1975 to 1990. Less of the wealth produced by Japanese workers was being shared with them. As a result, business profits soared, increasing money available for investment. This caused Japanese investors to over-invest in both the stock market and housing. Japanese stock markets and real estate values soared as a result of this over-investment. Meanwhile, there was insufficient wage-financed demand to keep up with this capital investment.This necessitated increased levels of borrowing to maintain the demand that wages could not maintain.

By 1990 there was a huge Japanese stock market bubble and real estate bubble. And in 1990 this overvaluation all came crashing down. The Japanese economy has still not recovered 15 years later. By 2003, the Japanese stock market was still 80% below its peak in 1990. From 1990 thru 2002, per capita GDP increased 13%. Compare that with the 168% increase between 1960 and 1975. Compare this latter 15-year increase with the 59% increase during the 27 years from 1975 to 2002. Japan's per capita GDP increased 3 times as much during the 15 years prior to 1975, than it did during the 27 years after 1975. The pre-1975 rate of increase was 5 times faster than the post-1975 increase.

What caused this slowdown? The rise in the wage-productivity gap. Worker income that could have been put to good use buying Japanese goods was siphoned off as corporate profits. Since the benefits of investment capital are limited by consumer demand, the result was over-investment of Japanese stock and housing markets, and maintenance of consumer demand by borrowing.

Does this situation describe any other economy you can think of?

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

personalized cleaning services Mundelein ..

In The News:

Here's how your daily brew is becoming the foundation for greener buildings.

Artificial intelligence (AI) and large language models (LLMs), such as ChatGPT, are transforming how we learn. But what does this mean for AI and learning retention?

Modern AI data centers use much more electricity than traditional cloud servers. In many cases, the existing power grid cannot keep up. One innovative solution is gaining traction: repurposed EV batteries for AI data centers.

Microsoft 365 and Outlook users are being targeted by a tactic that injects fake billing alerts directly into their calendars.

Researchers are now showing us that old smartphones as data centers could be the next big thing in sustainable tech.

Scientists have created micro-robots for sinus infection treatment that can enter the nasal cavity, eliminate bacteria directly at the source, and exit without harming surrounding tissue.

Let's examine how your data is collected in everyday life, who is buying and selling it, what happens to it afterward, and, most importantly, what you can do to protect yourself.

Researchers at the University of Sheffield in the U.K. developed small robots called "Pipebots" that can travel inside water pipes to find and potentially repair leaks, all without any excavation.

A groundbreaking new study has uncovered disturbing AI blackmail behavior that many people are unaware of yet.

Four teams of autonomous humanoid robots competed in China's first AI soccer tournament, demonstrating advanced capabilities in ball detection and independent decision-making.

The ID. Buzz autonomous van features self-driving technology with 13 cameras, nine LiDAR units and five radars after Volkswagen partnered with Hamburg and Uber for 2026 deployments.

Social Security phishing scams use urgency and impersonation to steal personal data. Learn how to spot fake SSA emails and implement 10 protective measures.

French startup Pazzi Robotics created an AI-powered pizza robot that made pies in under five minutes without human help, but it closed in 2022 despite patents and expert partnerships.

Reclaim your time from big tech with effective screen time reduction strategies for iPhone and Android, featuring steps to limit app usage and create phone-free zones.

Amazon Prime Day shoppers face threats from 120,000-plus scam websites as cybercriminals prepare phishing traps and malware ahead of the July sales event.

Fox News' AI Newsletter brings you the latest on this rapidly evolving technology.

The AEON humanoid robot tackles labor challenges with Nvidia AI, Microsoft Azure cloud and advanced spatial awareness, working alongside industry leaders Schaeffler and Pilatus.

Google's Ask Photos feature brings AI-powered searches to your photo library, letting you find memories with natural language queries while maintaining privacy controls.

The return of blue book exams emerges as universities fight widespread AI academic dishonesty and educators debate whether to ban AI tools or teach responsible usage.

Signs your phone might be hacked include strange behavior, unauthorized texts, battery drain and pop-ups, while protection involves updating software and avoiding public Wi-Fi.

Tokyo startup H2L has launched Capsule Interface technology enabling full-body robot control with muscle sensors, offering immersive remote operation.

The A.I. industry seems set for growing pains as Big Tech companies scramble for solutions to the medium's unprecedented strain on the power grid.

Fourth of July fireworks cause a 60% spike in lost pets, but GPS trackers and AI photo-matching services like Love Lost can help reunite missing dogs with their families.

Protect yourself from jugging, the rising crime by which thieves monitor ATM users and follow them to steal cash, with six practical safety tips to stay alert and secure.

U.S. airlines like Delta, American and United are selling your domestic flight records to government agencies through the little-known Travel Intelligence Program.

The Wage-Productivity Gap

Political