Productivity vs. Wages. Millions of jobs lost to the recession have finally come back, well sort of. That’s the conclusion of an analysis of Bureau of Labor Statistics data by the National Employment Law Project, which found that a large number of jobs created since the employment trough of 2010 pay less than the jobs they replaced.
The report found that lower-wage industries accounted for some 22 percent of job losses during the recession, but added back 44 percent of jobs created over the past four years. By contrast, higher-wage industries accounted for 41 percent of job losses, but only 30 percent of employment growth since the post-recession trough. Low-paying industries like food services and temp jobs accounted for 39 percent of job gains since the job market bottomed out.
For the fourth year in a row, the real median weekly earnings for full-time workers fell slightly, even with all the talk of local hikes in minimum wages. The issue is wage deflation and the notion that prices paid for products out strips wages gains. This is the work of the dirty little monetary secret of nominal vs. real economic factors. Juxtaposing this against even real corporate earnings, which has been stellar via productivity gains, workers lose out. We can see this in the attached thumbnail chart.
This question is what caused this productivity vs. wages divergence starting in the mid 70s? Many have claimed it was just government right-wing politics, technology, death of unions or some other idea. My take is that it all has to do with the monetary system. Starting in the mid-70s, the money system dramatically changed – “gold” standard vs. fiat money (click here for the story.).
It is not so much the issue that the money needs to be backed by gold, as so many gold “bugs” pronounce. The issue is that when governments allow banks to print unlimited amounts of money at no cost. All the new money is printed and given out to the public unequally and I would say unfairly. A gold standard does not allow for this. A fiat money system could work, so long as you respect “credit neutrality.” Meaning, if one wants new money (i.e. credit) they must pay for it – not the banks, but the rest of the population. After all, you with your new money, are effecting my valuations, and credit impact fees are justified.
A fractional reserve system under the current rules, creates this wealth inequality over time, mathematically. This inequality allows the few, to be the owners of businesses, and reap the lion share reward of worker productivity, while driving down the worker’s wages and monopolizing market share. This productivity vs. wage paradox, is just an effect of our current monetary system.
Of course this paradigm of productivity vs wage growth divergence can’t last forever, just like the current fractional reserve system. It is designed to eventually blow-up, when it reaches an extreme. When, is a harder question to answer – it can go a long time. But at that time, perhaps people will wake up and begin to realize that the current monetary system, is at the core to many of our problems today, bleeding into all kinds of other areas; family financial stress leading to social dis-cohesion, or worse, nations rising up against other nations in a fight for resources – yes, even war.
Blue Point Trading, William Thompson