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Tuesday, December 11, 2012

'Jobs, Productivity, and the Great Decoupling'

This is not starting off as the greatest day ever. Grrr. A quick one on inequality while I sort things out:

Jobs, Productivity and the Great Decoupling, by Erik Btynjolfsson and Andrew McAffee, Commentary, NY Times: ...For several decades after World War II ... G.D.P. grew, and so did productivity... At the same time, we created millions of jobs, and many of these were the kinds of jobs that allowed the average American worker, who didn’t (and still doesn’t) have a college degree, to enjoy a high and rising standard of living. ...

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But as shown by the accompanying graph, which was first drawn by the economist Jared Bernstein, productivity growth and employment growth started to become decoupled from each other at the end of that decade. Bernstein calls the gap that’s opened up “the jaws of the snake.” They show no signs of closing. ... Wages as a share of G.D.P. are now at an all-time low, even as corporate profits are at an all-time high. The implicit bargain that gave workers a steady share of the productivity gains has unraveled.
What’s going on? ... There are several explanations, including tax and policy changes and the effects of globalization and off-shoring. We agree that these matter but want to stress another driver of the “Great Decoupling” — the changing nature of technological progress. ...
The Great Decoupling is not going to reverse course... And this should be great news for society. Digital progress lowers prices, improves quality, and brings us into a world where abundance becomes the norm.
But there is no economic law that says digital progress will benefit everyone evenly. ... Designing a healthy society to go along with such an economy will be the great challenge, and the great opportunity, of the next generation. ...

As I've stressed in the past many, many times, I believe the growth in economic power and the political power that comes with it is also a factor, and this has distorted the distribution of income away from working class households (the market power and technological progress explanations aren't mutually exclusive, and may be complementary -- I should also mention political factors as well, e.g. the politics behind the demise in unions, as another cause even though I think of this as part of the economic/political power explanation).

    Posted by on Tuesday, December 11, 2012 at 10:11 AM in Economics, Income Distribution, Market Failure | Permalink  Comments (123)

          


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