Tuesday, May 1, 2012

How to Make 30-40% More Right Now!

First, get a time machine. Then, travel back to the late '70s. Finally, prevent the benefits from increases in productivity from going mostly to capital instead of labor (to, in labor, to the top earners instead of the middle).

Paul Krugman explains.

Larry Mishel has a systematic breakdown of the reasons for worker income stagnation since 1973. He starts with the familiar divergence: productivity up 80 percent, the compensation (including benefits) of the median worker up only 11 percent. Where did the productivity go? 
The answer is, it’s two-thirds the inequality, stupid. One third of the difference is due to a technical issue involving price indexes. The rest, however, reflects a shift of income from labor to capital and, within that, a shift of labor income to the top and away from the middle. 
What this says is that widening inequality makes a huge difference. Income stagnation does not reflect overall economic stagnation; the incomes of typical workers would be 30 or 40 percent higher than they are if inequality hadn’t soared.

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