By Marc Chandler
| Market Overview
| Mar 08, 2013 05:48AM GMT |
This Great Graphic
was on CNN Money.
It shows the yawning divergence between real hourly compensation and productivity gains in the US.
The two moved in lock step in the first two decades after WWII. The decoupling was first evident in the late 1960s or early 1970s. This was the breakdown of the social contract and it was overdetermined--assorted economic, political and social factors played a role.
The failure of productivity gains to be shared with labor, in the form of wages had two implications in the US political economy: greater role/significance of state transfer payments as a percentage of household income, and the increased reliance on credit. Putting the US economic house back in order requires fixing this transmission mechanism that links productivity gains to real wage increases.
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