econ quiz

Efficiency Wages

Figure 1. Productivity and real wages since 1948

What has happened to real wages and to labor productivity since 1948?

Looking only at the period 1948-70, was rising productivity associated with rising real wages? Would you reach the same conclusion if you looked only at the period since 1970?

Why might we expect wages and productivity to move together? Give an explanation from neoclassical and efficiency wage perspectives. Do you think either approach is supported by data?

Table 1. Annual change in wages and productivity

	1948-75	1976-2018
productivity	0.02686	0.017857
real wages	0.02067	-0.00101

Productivity growth has also slowed in the United States since the mid-1970s.

Some have argued that an exogenous slowdown in productivity growth explains declining wage growth. Would you agree? Disagree?

Read Arthur MacEwen, “unions and economic inequality” chapter 8.5 in Real-World Micro. How would he explain stagnant wage growth? Do you agree?

Labor productivity (output per hour)

1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1.025315 1.058656 1.132016 1.161834 1.184120 1.212883 1.237385 1.291753 1.284025 1.317848 1.348510 1.396543 1.413403 1.460823 1.528062 1.580909 1.625800 1.678667 1.740200 1.773580 1.836754 1.840431 1.868246 1.942547 2.011740 2.075081 2.042144 2.100132 2.174938 2.212228 2.243417 2.238934 2.238934 2.272771 2.254662 2.349024 2.401275 2.444890 2.519348 2.534509 2.575387 2.598671 2.643226 2.685857 2.809482 2.812293 2.832048 2.863372 2.924139 2.980229 3.074063 3.193125 3.300256 3.390577 3.539551 3.676643 3.784826 3.869015 3.911809 3.978879 4.022888 4.170350 4.314580 4.314580 4.353587 4.375409 4.414965 4.472735 4.486173 4.544874 4.604343 real wages

1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1.000000 1.048989 1.090430 1.110653 1.145895 1.214238 1.233992 1.294850 1.348153 1.369525 1.371105 1.419440 1.446312 1.466006 1.497300 1.523208 1.546162 1.575892 1.595143 1.617153 1.654470 1.668811 1.660359 1.698930 1.763927 1.781223 1.742357 1.742446 1.783618 1.825464 1.847603 1.805411 1.730832 1.725429 1.727586 1.740419 1.736486 1.741711 1.744099 1.714707 1.694520 1.665311 1.643930 1.629903 1.620519 1.614039 1.618609 1.614896 1.620310 1.631746 1.645217 1.657790 1.657838 1.662168 1.695004 1.706056 1.703863 1.690336 1.662717 1.659997 1.644698 1.695599 1.701595 1.677871 1.656169 1.650859 1.647709 1.675402 1.698424 1.699105 1.709598

Year

Index