Productivity Growth and Real Wages Essay Example | Topics and Well Written Essays - 500 words

Productivity Growth and Real Wages - Essay Example The common man is actually not getting the benefits from the productivity growth 1. An appreciable rise in both productivity and wage structure was witnessed through the 1950s and 1960s, which slowed down in the 70s and 80s 5. However, the 1990’s saw a good and steady rise in productivity and therefore the benefits of the growth were seen by the increase in the wages 1. In the US, the real wage growth was weak in the early 1990s, but it rose from 1994, in response to the accelerating productivity, up to 2004 after which it showed a downward trend mainly attributed to increasing energy costs 3. The recession witnessed in the early 2000s resulted in a downward trend with respect to wages, even though the productivity was high 1. According to a report the median real wages for all workers increased by 1.4% per year between 1995 and 2003, which was less than half the rate of productivity growth 2. Another news article published in a website quotes a 2% decline in the median hourly wages for American workers since 2003, despite the steady rise in productivity 5.This inequality in wage distribution can be attributed chiefly to the bargaining power of workers in case of high productivity. Employee unions play a vital role this bargain. However, the workers ability to bargain has considerable diminished, thus preventing them from enjoying the fruits of the ir own labor 1. Some reasons cited for this reduced bargaining power include global trade, immigration, layoffs and technology 5. Inflation shares an inverse relationship with wage distribution and so does fringe benefits such as health care 1, 5. Education status and working skills of workers also plays a vital role in determining the wages 4. Another point made is that only the top 10% enjoyed the real benefits of productivity growth leaving the rest of the 90% with very less growth in terms of wages 3, 4.According to the Baumols Law, mobility in labor will result in an increase in wages so