Faster productivity growth would be great. I’m just not at all sure we can count on it to lift middle-class incomes: Recently, a number of economists and commentators have suggested that faster productivity growth would be a big way to boost the income of middle-class households. I’m all for faster productivity growth, though I’d argue no one knows how to reliably make it happen. But given the wedge of inequality between productivity and low and middle incomes, wages, and wealth, I’m skeptical that this would work as well as some think.
So I wrote this paper exploring the issue and adding some of my own estimates. Here’s the intro...
I tried to make a similar point here: Full Employment Alone Won’t Solve Problem of Stagnating Wages.