Taking what's given - working for a living - incongruities persist between US worker productivity and wages earned - includes related article on US population statistics as of April, 1997

American Demographics, April, 1997 by Elia Kacapyr, Berna Miller

Many middle-income earners do not have to consult an economist to find out what's been happening to wages. They know from experience that the answer is "not much." They complain that they work just as hard as their parents did, but don't seem to be making comparable gains in living standards. It seems almost un-American for a generation to be worse off than its parents.

Some explain this phenomenon by blaming it on the profligacy of the current generation of wage earners. They don't know how to save, and they don't know what real work -- putting your nose to the grindstone -- is all about. This explanation is undoubtedly true for certain individuals, but it does not explain the nationwide stagnation of wages at a time when labor productivity is growing.

The accompanying chart illustrates the paradox. For 40 years after World War II, wages and labor productivity rose in tandem. When one dipped, so did the other. It seemed to be a clear case of people earning more for doing more. Then, beginning in 1986, wages stagnated while productivity kept growing.

Admittedly, the data aren't perfect. Labor productivity is not easy to measure, especially in an increasingly service-producing economy. Upward bias in the inflation rate also has an effect. However, both wages and labor productivity are underestimated as a result of inflation being overstated. And labor productivity is measured the same way it always was. The more fitting explanation for the divergence of wages and productivity is that, in fact, people are making less than they used to in real terms for doing comparable work, or maybe getting the same amount for doing more.

Another explanation for the split between wages and productivity involves the "globalization" of our economy. For most Americans, globalization is merely a buzz word corporations use to indicate that they have a foreign branch or rely more heavily on overseas suppliers. But in the end, it means that American workers are competing more directly with workers elsewhere, most of whom get paid a lot less than Americans do. This competition has held down wages despite productivity gains. If this thesis is correct, American wages will only begin to rise with productivity when and if foreign labor markets tighten up and wages rise abroad.

Taken on its own as a rough-and-ready gauge of the standard of living, wages wouldn't tell as optimistic a story as the American Demographics Index of Well-Being. Between April 1990 and November 1996, the inflation-adjusted wage rate fell 1.46 percent. In November 1996, the Index of Well-Being stood at 101.73. This implies that living standards have risen 1.73 percent since April 1990, the base month for the index. Unlike the wage rate, it suggests that things are getting better, albeit very gradually, for the typical American.

Comparing November with the previous month, however, the Well-Being Index retreated 0.27 percent. Four of five major sectors lost ground. The income and employment sector edged down just a bit. The productivity and technology sector took a harder hit, as both energy efficiency and labor productivity declined.

Consumer attitudes continued to scale down from the heights they achieved earlier in the year. And the social and physical environment slipped because the crime and divorce rates rose.

The only sector to register an increase in November was leisure. The average weekly number of nonwork hours remained unchanged at 126.3 hours, and per-capita spending on recreational goods and services forged ahead 0.84 percent. Americans may not be getting ahead by working harder, so some are playing harder instead.