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Date:         Wed, 18 Nov 1992 11:03:08 -0500
From:         Andrew Allen <E7L8ALL@TOWSONVX.BITNET>
Subject:      Jamie's question about productivity & wages
Comments: To: politics@ohstvma.bitnet

Jamie asks:

>So, wages have fallen in the last 20 years.
>But we also know that productivity has risen. That is, American workers
>now produce more goods in an hour than they used to. But they're getting
>paid less.

>Where is all that extra money going?

Egads, this seems like a simple question, but it's really not...

First it is important to note that a smaller number of American workers
are engaged in productive employment, but those that are so engaged are
now more productive than they used to be. One of the reasons why wages
are falling is the increased productivity of the workers, causing a surplus
of available labor; the economy isn't demanding that more goods be produced
so maintaining a large work force produces excess production/capacity
as productivity increases.

The surplus of available labor leads to more competition between workers
for jobs, allowing employers to drive down labor costs.

The other factor which has severely driven down wages is the conversion
to a service economy. In the manufacturing sector in particular there
has been a trend toward contracting out for services that used to be
handled in-house. The company no longer having to pay (directly) salary
and benefits saves money, the contracting firms often pay considerably
less and provide minimal bennies. Given the large number of workers
now available to perform these service jobs - having been driven out
of secure, decent paying jobs with benefits wages plummet.

Those things said, lets look at where income money is going...

Looking at the figures of aggregate income that I posted it seems
that the first four quintiles lost ground over the 80's :

1st q - .5%  lost
2nd q - .8%  lost
3rd q - 1.0% lost
4th q - .6%  lost

And then we have the top of the heap...

5th q - 3% gained!  (I realize that the figures above add up to 2.9%
                     there is probably some inaccuracy, due to rounding
                     of numbers in the Statistical Abstract)

Here's a little tidbit that I forgot to include before:

The top 5% of income heap in 1980 took in 15.3% of the aggregate income;
in 1989 they took in 17.9% a net gain of 2.6%

These may sound like small gains, but 2.6% of the national aggregate income
is a whole lot of money (more than half of what the bottom quintile share),
spread among relatively few people.

j.b. has another answer:

jb>We just had this answered today in my economics class.
jb>
jb>Wages have fallen even though productivity has risen.  The surplus
jb>has gone into benefits which very often the government is requiring
jb>such as Social Security, retirement plans, medical insurance, etc.

A first observation is that no matter where the money is first put,
it winds up in the pockets of the wealthiest individuals.

Second, although I cannot provide a cite for this (from a work written
by someone far more something or other than myself), what I would
note is that as a result of the Reagan "mindset" there has been
a reworking of the social contract between the classes in the
80's. As far as I can see the wealthy, do not feel like paying
any more for labor than they *have* to, regardless if that means
that working class people suffer.

The things that government is mandating are things that used to be
provided (as a matter of course) by employers, ie., retirements,
medical insurance, etc.

I can understand how employers feel squeezed by the need to adopt
this way of doing business in order to compete, and may not enjoy
doing it - I am not saying that they are all evil (ok?). I am saying
that something needs to be done to rectify the situation and since
business is not attending to it, government may have to.

>Jamie
jb>j.b.

-other Andy
Comments: Gated by NETNEWS@AUVM.AMERICAN.EDU