Ever since the lastest figures showing an increase in labor productivity and the subsequent battlespace preparation articles came out I’ve been waiting for a riposte. It has arrived in the form of this post from Evan Soltas. His rejoinder, essentially, is that when viewed properly compensation actually has kept pace with increases in productivity. Here’s the meat of his post:
Between 1987 and 2013, changes in sector-level labor productivity explain almost all of the changes in sector-level hourly labor compensation. And almost all of those productivity increases were paid as compensation to labor.
If you really want to know, 74 percent of the variance in the change between 1987 and 2013 in sector-level log hourly labor compensation is explained by changes in log labor productivity over the same period. A one-percentage point increase in productivity generated a 0.81-percentage-point increase in compensation. I’ve used 1987 and 2013 because this data was collected starting in 1987 and much of the data is still missing for 2014. As always, you can find my cleaned dataset here for your own analysis.
I have some problems with his analysis. For example, this:
If workers aren’t compensated for their productivity, it seems, they’ll switch firms or industries.
That process has been impeded for the last 30 years by all sorts of things including two-income households, slow job growth, increasing specialization, and the rise of credentialism. It might be that under circumstances of perfect elasticity there would have been considerably more job-hopping.
At any rate it’s an interesting post.
