ECONOMY: The WAGE-- PRODUCTIVITY GAP

[unlawflcombatnt]

The WAGE--PRODUCTIVITY GAP

The most damaging factor to our economy today is the Wage-Productivity gap. This refers to the increase in the hourly output of workers vs. the increase in hourly pay. This concept is described quite well in Chapter 6 of economist Ravi Batra's book, "Greenspan's Fraud."

During times of true economic prosperity, wages have kept pace with productivity increases. Workers have shared in the benefits of their increased productivity. The result is that wages remained sufficient to purchase our nation's industrial output. Borrowing, or debt-financed consumer spending, was unnecessary to maintain sufficient consumer spending to purchase our production. More production can be purchased because more wages are paid. Demand, created by wages, matches supply, which is created by productivity. This creates a balance that makes massive borrowing unnecessary. And such balance maximizes economic "growth."

This balance has not been maintained, however, during recent years. It has worsened greatly under the Bush administration. Productivity has increased significantly during the Bush years. In contrast, wages have actually decreased. This trend started before Bush took office, but I'll confine the time frame to December 2001 through March of 2005. These are years for which records are readily available from the U.S. Bureau of Labor Statistics. Below is a graph from the New York Times showing how productivity is outpacing wages
.


Starting in January of 2003, productivity (or output per hour) has increased 11.2% thru the 1st quarter of 2005. In contrast, hourly wages have declined 2.3% over the same time period, from an inflation-adjusted $8.32/hour in January, 2003, to $8.13/hour in June, 2005. Production has exceeded the ability of wage earners to purchase the production by 13.5%. This gap has been filled by consumer borrowing. The amount borrowed must steadily increase, in order to keep pace with our increasing industrial production. If it did not, our economy would sink into recession. However, maintaining demand through borrowing is not a sustainable path.

(Statistics on U.S. Productivity can be found at:
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=PRS85006092 )

Sometimes the effect of the wage-productivity gap can be seen better from a distance. An example of the effect of the wage-productivity gap can be seen with Japan's economy. Again, this was described by economist Ravi Batra in Chapter 6 of his book, "Greenspan's Fraud." Dr. Batra makes a very compelling case that Japan's economic problems resulted from the increasing gap between Japanese wages and productivity. I will paraphrase his explanation here.

Japan experienced extremely rapid growth between 1960 and 1975. During that time there was a 168% increase in per capita GDP. Their per capita GDP increased from $2,139 in 1960 to $5,750 in 1975. Real wages increased 217% during that time. Manufacturing productivity increased 264% during these 15 years. Japan prospered and its economy grew during this period because wages, which create demand, kept up with productivity, which creates supply. There was sufficient WAGE-FINANCED demand to stimulate production. And the necessary demand was maintained by consumer income, not consumer borrowing.

After 1975, productivity growth began to outpace wage growth. The result was a much slower growth in GDP. Between 1975 and 1990, productivity increased 3% more than wages per year. During that period, wages increased 27%, while productivity increased 86%. The per capita GDP increase was 64% from 1975 to 1990. Less of the wealth produced by Japanese workers was being shared with them. As a result, business profits soared, increasing money available for investment. This caused Japanese investors to over-invest in both the stock market and housing. Japanese stock markets and real estate values soared as a result of this over-investment. Meanwhile, there was insufficient wage-financed demand to keep up with this capital investment.This necessitated increased levels of borrowing to maintain the demand that wages could not maintain.

By 1990 there was a huge Japanese stock market bubble and real estate bubble. And in 1990 this overvaluation all came crashing down. The Japanese economy has still not recovered 15 years later. By 2003, the Japanese stock market was still 80% below its peak in 1990. From 1990 thru 2002, per capita GDP increased 13%. Compare that with the 168% increase between 1960 and 1975. Compare this latter 15-year increase with the 59% increase during the 27 years from 1975 to 2002. Japan's per capita GDP increased 3 times as much during the 15 years prior to 1975, than it did during the 27 years after 1975. The pre-1975 rate of increase was 5 times faster than the post-1975 increase.

What caused this slowdown? The rise in the wage-productivity gap. Worker income that could have been put to good use buying Japanese goods was siphoned off as corporate profits. Since the benefits of investment capital are limited by consumer demand, the result was over-investment of Japanese stock and housing markets, and maintenance of consumer demand by borrowing.

Does this situation describe any other economy you can think of?

unlawflcombatnt

[redqueen]

1. Yeah... I've heard the parallels between our economy and Japan's

Cronyism isn't helping...

[unlawflcombatnt]

2. Japan's Parallels

Redqueen,

The parallels are certainly there. There is "cronyism" for sure. (It sounds like might have been reading Paul Krugman.)

The wage-productivity gap makes it impossible for a country to buy all of its own production, unless there is massive borrowing. A large volume of exports would also help some. Japan probably delayed the onset of their problems that way. But it still caught up with them. And they still haven't fully recovered to this day.

The U.S. is going to get in trouble sooner because we are relying much more on debt-financing of consumer spending. In addition, we're not being helped by our trade deficit either. Our purchase of imports is further reducing the amount of U.S. production that Americans buy.

Like Japan, the excessive upward redistribution of wealth is causing over-investment in both the stock market and real estate. Eventually there will have to be a "correction" at the least, and maybe even a crash. Only time will tell.

unlawflcombatnt

[redqueen]

6. What's the difference between a correction and a crash?

Is it how fast it happens?

[unlawflcombatnt]

11. Crash vs. "Correction"

Redqueen,

Yes, a "crash" is a much more rapid "correction."

Much of the difference is whether you're a right-winger or not. Or maybe I should say whether you speak Greenspan-ese, or just plain English. A "correction" means the same thing as a "slowdown" or "downturn" It just removes all negative connotation. A "crash" is a more severe downturn.

It's like the word "froth" from Greenspan-ese. It translates to "bubble." But it doesn't sound as bad. Because little "bubbles" eventually coalesce.

unlawflcombatnt

[redqueen]

14. *sigh*

I just hope I can get in on the currency markets before whatever it is happens.

Lots of money to be made. Yes, yes.

[idlisambar]

13. no excessive upward redistribution of wealth in Japan

Japan was and still is one of the most materially egalitarian nations on Earth. If there were a large upward redistribution of wealth the Gini coefficient would show it, but Japan's gini is about 0.25 whereas the U.S.'s is over 0.40, as you can see here....

http://en.wikipedia.org/wiki/Gini_coefficient#2004_Gini_coefficients_in_selected_countries

This number has not changed significantly in the past 30 years.

Moreover the income ratio in Japan between the richest 10% and poorest 10% at 4.5 is the lowest in the world as you can see here....

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

This compares to 15.9 in the U.S.

The economies of the U.S. and Japan are very different and any comparisons between our situation and theirs must be made with caution.

[JDPriestly]

3. We have a real estate bubble here in California

I don't know about the stock market.

[Trillo]

4. Its sad that a crash could be avoided or its landing softened...

It sure would be nice if "the owners" of production were cooperative and fair with workers' wages, to help bring about "a balance", but in these days it doesn't appear to be anything more than an elusive dream of idealists.

I guess everything self-corrects given enough time. Extreme Greed is in need of correction.

[unlawflcombatnt]

20. Fair Wages

SimpleTrend,

I agree with your sentiment. But I'm not sure everything will self-correct. At least not in the near future.

During the Great Depression workers sat idle outside of production facilities. Labor and capital were not coming together to produce goods and create wealth. During all of the time this occured, wealth was not being created. And that is wealth production that can never be recovered. Years' worth of production were lost during that time. We'll never get those years back, or the production we could have had from those years.

Many believe this loss of production was due to consumer spending deficiency, and loss of the demand it created. Another recession, or another depression, will cause the same loss in wealth production.

A "change of course" might prevent this. But that seems like an impossibility with this administration.

unlawflcombatnt

[wli]

5. those who fail to understand currency circulation are doomed

They're even hypocrites to their own economic principles.

[EVDebs]

7. Greedspan will let interest rates rise while China lets yuan float higher

And in that way the Chinese still get paid for their US Treasury investments even though their commodity prices, so far only a rise of about 2% (BFD !).

We're still 'treading water' until we get an administration in office that follows Amory Lovin's Rocky Mt. Institute plan to "Win the Oil End Game" www.oilendgame.com

Within twenty years oil will be 'dry' and countries without plans for that event will wish they had made them.

http://www.electric-fuel.com/evtech/index.shtml for buses, and even compressed natural gas for trucks, along with bio-diesel and 'veggie-cars' (www.greasecar.com) are starting points. Hybrids are already showing their value.

Another bright spot is www.ovonic.com deciding to manufacture their solar panels in Michigan, where the coming unemployment in the auto industry will require home-grown power to take up the slack in employment !

[newswolf56]

8. This is not an anomaly: it is in fact a graphic portrait of the world...

monopoly capitalism is deliberately creating: two classes, a tiny obscenely wealthy oligarchy and a huge, increasingly exploited, increasingly burdened, increasingly underpaid proletariat -- not merely factory workers, but literally ANYONE with a mortgage or personal debt sufficient they would be financially ruined were their income cut off. (Identical to perpetual enslavement by the old-time "company store," today's indebtedness holds working families in defacto slavery, and the Bush Administration -- with Democratic help -- has already sealed off the one escape route by effectively outlawing personal bankruptcy.)

Though I make no claim to being an economist, I have spent my entire adult life covering public affairs, and I have never seen a time in which the significant economic indicators were so universally ominous. This downward spiral will not end until skyrocketing oil prices utterly destroy the U.S. economy -- the prices themselves another expression of the oligarchy's methodical march toward maximum profits and total control of the world's wealth. The destruction will culminate in a collapse that will make the Crash of '29 and the Great Depression seem like an era of prosperity by comparison. And this time there will be no recovery: the fate of the dispossessed won't matter to the oligarchy because the means of production will already have been outsourced to more easily tyrannized realms. As for U.S. workers, many of us -- permanently out of work and with social-services ever more deliberately obliterated by a succession of Republican and DLC administrations (this to provide the oligarchy with still more wealth) -- we will literally face death by starvation. Such is late-stage capitalism, precisely as predicted by Marx.

The nation to watch through all this is China. Not only does it hold the U.S. purse-strings -- ironically thanks to Bush Administration gambler-deficits amassed to boost the global corporate oligarchy to maximum power in the shortest time possible. China -- still very much a Marxist nation -- is also methodically avoiding the economic errors that killed the Soviet Union. What a hideous and telling irony if the Chinese are able to dependably eat three meals a day even as U.S. citizens are starving.

[EVDebs]

10. I love it when these idiots speak of 'creative destruction'

and Joseph Schumpeter as if no one gets hurt. Criky, even the Indians in Bangalore have a socialist government along with the Chinese !

We must ignore these facts at home here in the US.

[lildreamer316]

9. Thanks; this is very informative.

Your posts always are; just wanted to say thanks!

[unlawflcombatnt]

19. Thank you

Lildreamer316,

Thank you for your compliment and your support. It's always appreciated.

unlawflcombatnt

[idlisambar]

12. hate to disagree

What caused this slowdown? The rise in the wage-productivity gap. Worker income that could have been put to good use buying Japanese goods was siphoned off as corporate profits. Since the benefits of investment capital are limited by consumer demand, the result was over-investment of Japanese stock and housing markets, and maintenance of consumer demand by borrowing.

The Japanese bubble of the late 80's occurred as a result of the reaction of Japanese government to the Plaza accord in 1985, after which the yen's value rose considerably. Fearing that the swift rise in the yen would hurt Japan's trade prowess, the response was to lower interest rates so that its firms could access cheap capital for redoubled investment in infrastructure and technology. This had the side effect of creating a larger bubble that enterered the stock market and more importantly the real-estate market.

First, the idea that worker income was siphoned off as "corporate profits" is inaccurate. Japan, compared to the U.S. has lower levels of corporate profits and higher wages. This generally low level of investor returns has held for decades, in good times and in bad.

Second, Japan's growth in the pre-1975 period could not reasonably be sustained no matter what economic policies it had in place. Rapid growth like that is only possible for industrializing states, like China today. Once a nation reaches a certain level of development, further growth is harder to come by.

Third, the extent to which Japan has not been doing well in the last 15 years is exaggerated. The GDP measure is not standardized across nations which causes problems for any comparison based on official figures. In fact, one of the architects of the U.S.'s system of measuring inflation went to Japan a couple of years ago and found that after making a few adjustments that brought Japan's accounting part of the way in line with the U.S.'s an additional 0.7% yearly growth (by then U.S. standards) occurred in the late 90's. These adjustments brought per-capita GDP growth numbers for the 90's very close to what was seen in the U.S. The details are here...

http://www.economist.com/finance/displayStory.cfm?story_id=2155438

GDP aside, this must read article goes into more detail discussing Japan's current economic strengths...

http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=9540

[unlawflcombatnt]

15. Specific Disagreements

Idlisambar,

I'd like to clarify what we disagree on. If you can give me some specifics as to what you agree and disagree with, that would be helpful. The research on the U.S. economy over the last 4 years I did myself. And the numbers are quite clear in supporting the idea that American wages have not kept up with productivity. Average hourly wages have declined 2.3% since January 2003. This information is available at the Bureau of Labor Statistics website.

U.S. productivity has grown 11% over the same time period. So that's roughly a 13% increase in the gap between productivity and wages. Again, this information is readily available at the BLS website.

I think the increase in the gap between American wages and productivity is well supported by data. I can try to post direct, or semi-direct links to this if you are not in agreement. I am very certain about this information, because I have it right in front of me.

Regarding the Japanese economy, I've used numbers provided by economist Ravi Batra from his book "Greenspan's Fraud." This part I am less certain about. His numbers on Japan could be wrong. However, the magnitude of difference he has shown makes the validity of his statements likely, even if his numbers are off a little.

I agree with you that Japanese workers have always been paid better than American workers, and still are. The point is that their increased productivity after 1975 was not matched by increases in wages. And this made it more difficult for Japanese workers to purchase their own production. So from the information I've seen, and the logic involved, it seems that the increased wage-productivity gap of Japanese workers created a "consumption" deficit, which could only be filled by more borrowing. And this trend started in 1975, and has continued to this day.

I can try to post the numbers directly from Dr. Batra's book. If you have different information I'd be happy to see it. His numbers, if correct, are pretty convincing. If they're not correct, I'd certainly like to know about it.

Batra's main theme is similar to my own. Mine is that "profits are made from sale of goods, not production." Someone has to be able to buy production, or it is worth nothing. Maintenance of good wages allows for this. An increase in corporate profits at the expense of worker wages reduces consumers' ability to buy production. When that happens, consumer spending must be supplemented with borrowing, or demand for production goes down. If demand for production goes down, so does demand for labor, labor income, and ability to buy further production.

unlawflcombatnt

[idlisambar]

17. no dispute on U.S. trends

That wages have been declining of late in the US is acknowledged. I will only add that it is also the case that the official productivity numbers since 1995 have become increasingly dubious as the government agencies have been aggressively trying to reduce "measured" inflation. This reduced inflation leads to a higher real GDP and real productivity measure.

Nevertheless, the overall trend that wages have not been keeping up with overall economic growth is clearly true. One indicator of this trend is the growing income and wealth inequality in the U.S. over last 25 years; much of the wealth gains due to greater productivity have accrued in the form of securities and real estate which have disproportionately benefitted the investor class.

Concerning Japan, I would be interested in Batra's logic and numbers. I am not aware that Japan's productivity has exceeded its wage gains by an appreciable amount -- if this were so you would think that investor returns would be higher than they are to soak up the additional wealth, as in the U.S.

Also, Japan has historically had a high savings and investment rate and thus a low relative level of consumption partly as a matter of national policy. But this was even more true during the pre-1975 period when gross national savings rates typically topped 40%, where now it is in the high 20's (note -- China's gross national savings rate now exceeds 50%). I find it hard to follow what is meant by "consumption deficit" when consumption is actually greater in this period than in the pre-1975 period.

[unlawflcombatnt]

18. We Agree Overall

It appears we agree about the U.S. wage-productivity gap.

From Batra's numbers, Japanese productivity has not grown nearly as much since 1975, as it did from 1960 to 1975. But as you stated, it's a lot easier to increase productivity when it's at a very low starting level.

From 1960 to 1975, Japanese wages had been increasing at about the same rate as productivity. Batra uses a number derived from dividing the output/hour by the wages/hour. When that number increases, it implies an increase in the difference between productivity and wages. As per these numbers, the hourly output divided by hourly wages has increased from 70 in 1975 to 126 in 2003.

I'll try to get the numbers into an uploadable form. Batra states in his book that these numbers came from the U.S. Bureau of Labor Statistics in a section called "International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends." I'll try to find that.

By "consumption deficit" I meant the difference between what the Japanese produced and what they could buy with their wages alone. As you stated, it appears that Japanese workers made more in wages than they actually needed to satisfy their spending needs. I probably should have said they previously had a "consumption surplus," and that this surplus has decreased significantly. Their wage growth has not kept up with how much they produce. It may be that they still make enough to pay for most consumption with their wages, but don't have a large surplus like they used to. This would be expected to lead to a reduction in savings. Again, I don't have enough information on the Japanese economy to determine this for sure.

If I can locate a good source for Batra's numbers I'll post it. I may be able to scan it out of his book, but I doubt it.

unlawflcombatnt

[AJH032]

16. Here's my question

assuming your analysis is true, what exactly can our government do to prevent something similar from happening here?

[unlawflcombatnt]

21. Much can be done

AJH032,

I saw your question earlier. I just thought "oh boy, oh boy, oh boy!" Thank you for asking.

I can write 20 pages on this. I'll try to do this in parts, because a 20 page post would turn everyone off. I'm going to limit this one to the effect of the tax cuts for the top 2%.

TAXES:

Roll back the tax cuts on the top 2%. That would increase general revenue and reduce inflation. The inflation reduction would increase consumer spending power without any nominal increase in wages. That would directly reduce the wage-productivity gap in terms of "real," inflation-adjusted dollars.

This increased spending power would result in increased demand for goods and services, and the labor to provide those goods and services. Increased demand for labor increases wages. If labor demand were higher, it would force employers to pay more. They'd simply have to pay more to employ sufficient workers for maximum production and profitability.

Rolling back the tax cuts on the top 2% would reduce available capital, and reduce current overinvestment. At present markets are decribed as being "glutted with capital" and "awash in cash." There simply is more investment capital than investment opportunities. Those investment opportunities are created by consumer demand and spending. Any downward redistribution of income would increase consumer spending, consumer demand, and would increase investment opportunities resulting from the increased demand.

Increase the Earned Income Credit, giving lower income workers more spending power. This would further fuel consumer production demand, as well as the demand for workers to provide this production. Again, increased labor demand increases not only the number of those working, but the wages of those already working.

These tax changes are the 1st thing we could do. These changes are the most likely to get popular support. There are MANY more things I would do, however. I'll put them in subsequent letters.

TO BE CONTINUED

[AJH032]

23. makes sense

nice explanation. thanks.

[unlawflcombatnt]

24. Outsourcing

Outsourcing is another huge issue, and will become even bigger in the future with the passage of CAFTA. I'll have to come back later to post more on this, however, due to some current time constraints. I also want to do some research on a bill to withdraw the U.S. from the WTO. I think Congessman Dennis Kucinich has sponsored legislation to that effect.

unlawflcombatnt

[unlawflcombatnt]

25. Outsourcing Reduces American Wages

Until fairly recently, American corporations had been unable to destroy their own consumer market, because they were forced to maintain wages at a certain level. This was due to the limited supply of workers in our country. The labor force supply-and-demand effect created upward pressure on wages. This prevented American industry from reducing wages below a certain level. In turn, this maintained aggregate labor/consumer income at a high enough level to purchase American products.

Unfortunately, with global labor competition, wages can be reduced drastically. With this reduction, however, comes reduction in the consumer income that purchases American products. This drastic reduction in aggregate consumer income will lead to a drastic reduction in consumer demand. If the average American worker is making $4/day due to global labor competition, who will buy American products? CEOs? Congress? Bill Gates? Martians? Can the super rich really buy enough computers and SUVs to maintain American consumer spending and demand? If not, then where will the profits come from with drastically reduced sales? Can profits be made without selling any goods? Can labor costs be reduced enough to make profits without any sales?

Corporate America fails to understand that maintaining worker wages is to their advantage. It's not only to their advantage, it's a necessity. American labor "costs" actually provide the income to buy American products. (Labor costs = consumer income. Labor cost reduction = consumer income reduction. In reality, it's worse than this. Consumer income reduction is greater than labor cost reduction.) To restate this, as corporations lower labor costs, they lower consumer income as well.

Corporations decrease the size of their own market by reducing aggregate consumer income. If they continue to increase profit margins by reducing labor income, they'll eventually be unable to sell their products. There won't be enough income to purchase America's production. Remember slavery? Slaves never bought any products. They didn't have any income. If we all become slaves, we won't have any income either. And corporate America won't be able to sell their products to anyone. Corporate America will have destroyed itself, due to its own greed.

Henry Ford said that he paid his workers well so they could buy his cars. Corporate America should take heed of this. The most productive economies we've ever had were when worker wages were at their highest inflation-adjusted level. Some basic economic principles are being ignored by Corporate America. Consumer spending is 2/3 of economic activity. That makes consumer spending the biggest part of the Gross Domestic Product equation.

(GDP=Consumer spending+investment+govt spending+trade balance)

In reality, investment spending will be self-limited if consumer spending isn't maintained. The benefits of investment are limited by investment "opportunities." Those opportunities are created by consumer demand for production. In turn, that demand is created by consumer spending. Such spending is limited by consumer income. Since outsourcing reduces consumer income, it reduces the investment opportunites created. Any further capital investment simply overvalues the assets and equities in which it has been invested. It provides excessive capital which can then be siphoned off into corporate profits, stockholder dividends, lobbyist payments, payments to think-tank propagandists, and Republican campaign contributions. Thus, outsourcing facilitates reduction in consumer demand. It also creates excessive capital, and increases the inappropriate "expenditures" that result.

Corporate America claims opening foreign markets will compensate for loss of American consumer demand. But exports depend on foreign labor income.That foreign income supplies the spending power that creates foreign consumer markets. With the exception of Japan, South Korea, and Europe, average foreign worker income is miniscule. The total dollar-value of the demand they can provide is also minuscule. CAFTA countries, for example, have a GDP of $32 billion. This is less than 1/2 of 1% of our $12 trillion GDP. How much can they really add to our GDP? Almost nothing. As such, they cannot provide large export markets for American products. In contrast, CAFTA workers can potentially add another 20-35 million to America's 149 million labor force. This will put many Americans out of work, and create severe downward pressure on the wages of those Americans who are still working. This will shrink consumer income, and reduce the 2/3 contribution it makes to our GDP. It will shrink demand for production. It will shrink our economy.

Imports will continue to subtract from GDP, as long as slave-labor wages, which our our free trade agreements encourage, are allowed to drive foreign production costs down. Imports further reduce demand for American production, and the labor required to create that production. Again, the reduced labor demand reduces the number of Americans working, and the wages of those still working. The reduction in aggregate consumer income further reduces the "consumer spending" component of the GDP equation. It further reduces GDP, and further "shrinks" our economy.

In conclusion, free-trade agreements give Corporate America the rope to hang itself. Free trade agreements allow Corporate America to shop globally for the cheapest labor. As wages decline in the United States, which is the world's biggest consumer market, so will the dollar-value of that market. There will be less money to buy goods, and less goods will be sold. Due to its overwhelming greed, Corporate America is sacrificing long-term gains for short term profits. Corporate America is killing the consumer market that purchases its products.


unlawflcombatnt

[unlawflcombatnt]

22. Labor Force Participation Rate

I thought it would be worthwhile to post a link to this article by Katherine Bradbury, senior economist at the Boston Fed. In this article she describes how the labor force participation rate may be understated, making our true unemployment rate higher. She estimates that correction of the understated labor force participation rate would add 1 to 3 percentage points to our current unemployment rate calculation. In other words, it would be 6% to 8%, instead of 5%. Her calculations come from the belief that 1.5 to 5 million workers have been incorrectly excluded from the "participating" labor force, causing the calculated unemployment rate to be much lower. Here is a link to the article:

http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh68281_2005-07-18_16-29-03_n18253010_newsml

[unlawflcombatnt]

26. Graphs & Links

I finally figured out how to link directly to the wage charts at BLS. In addition, if I include the link that includes graphs along with the statistics, it will link directly.

"Real," or inflation-adjusted wages have not kept pace with productivity growth during Bush's presidency. Real wages increased 2.5% from January 2001 through December of 2004. (Real hourly wages have actually declined from $8.29/hr. in December of 2002 to $8.21/hr. in June of 2005.) In contrast to wages, productivity increased 13.7% from January of 2001 through December 2004.

Below is a graph of hourly wages from 1995 to the present:


The link to hourly wages from the Bureau of Labor Statistics is:
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0500000049

Below is a graph of weekly earnings from the Bureau of Labor Statistics:


The link to weekly earnings from the BLS is:
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0500000051

Compare the charts on wages vs. the chart on productivity from the BLS. (I didn't include the graph here, because it is completely worthless.) The link to productivity is below.
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=PRS85006092

I hope this is useful. This provides very measurable evidence that wages are lagging far behind productivity. Workers simply are not being compensated for their increased production. The result is that
American workers are unable to purchase their own production through income alone. This has resulted in growing consumer "deficit" spending. This cannot be maintained indefinitely.

Though this month's hourly wages increased 0.37%, the current estimated increase in the Consumer Price Index is 0.40%. Thus, inflation is again expected to increase more than wages.

unlawflcombatnt