Business & Economics: August 2017 Archives

Slow Wage Growth Due to Slow Productivity Growth

Megan McArdle connects the obvious dots: slow wage growth is due to slow productivity growth.

A lot of sectors don't have room to raise wages. There's a common pattern in internet commentary: Some article is published, full of manufacturers complaining that they can't find workers for good old-fashioned jobs, and the left half of the commentariat lowers their spectacles, looks down the bridge of their nose, and inquires "I say, old chap, did you try offering them more money?" The problem is that in many cases these employers can't offer more money, because at current wages they are just barely competitive with China (or some other country).

There are other factors, but slowing productivity growth is the critical bit. The key factor that McArdle doesn't mention is that as more humans are replaced by machines, replacing each additional human costs more and produces a proportionally smaller gain in productivity. The low-hanging fruit is quickly being picked, or has already been eaten. Mmmmm, fruit.