Contemporary Decoupling of Median Wages and Labor Productivity Pattern

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A Contemporary Decoupling of Median Wages and Labor Productivity Pattern is an economic measure pattern that shows a separation between median household income growth rate and labor productivity growth rate.



References

2014

  • McKinsey Quarterly. (2014). “The Great Decoupling.” In: September 2014
    • ABSTRACT: The rapid advance of machine learning presents an economic paradox: productivity is rising, but employment may not.

2012

  • (Brynjolfsson & McAfee, 2012) ⇒ Erik Brynjolfsson, and Andrew McAfee. (2012). “Jobs, Productivity and the Great Decoupling.” In: New York Times, December 11, 2012
    • QUOTE: Productivity growth slowed in the 1970s but revved up again in the 1990s and has stayed strong most years since. But as shown by the accompanying graph, which was first drawn by the economist Jared Bernstein, productivity growth and employment growth started to become decoupled from each other at the end of that decade. Bernstein calls the gap that’s opened up “the jaws of the snake.” They show no signs of closing.

      We are creating jobs, but not enough of them. The employment-to-population ratio, or percentage of working-age people that have work, dropped over 5 points during the Great Recession, and has improved only half a point in the three and a half years since it ended.

      As the jaws of the snake opened, wages suffered even more than job growth. Adjusted for inflation, the average U.S. household now has lower income than it did in 1997. Wages as a share of G.D.P. are now at an all-time low, even as corporate profits are at an all-time high. The implicit bargain that gave workers a steady share of the productivity gains has unraveled.

      What’s going on? Why have job volumes and wages become decoupled from the rest of the train of economic progress? There are several explanations, including tax and policy changes and the effects of globalization and off-shoring. We agree that these matter but want to stress another driver of the “Great Decoupling” — the changing nature of technological progress.


2011