Sunday, November 01, 2009
An economics lesson
Dr. John B. Taylor, a professor of economics at Stanford asks his economics class to explain why, over the past 50 years, US real wages+fringe benefits have tripled:People who have grown up believing in the propaganda from the "unbiased" media expect the answer to be unions or minimum wage or anything other than productivity. Here is a plot of real non-farm productivity and real compensation (wages and benefits) plotted against year:If you think about it, it is obvious: the annual income per worker is the amount that is produced during a year divided by the number of workers. The only sustainable way that that can increase is by increasing productivity. It follows, for example, that union work rules, which limit productivity, while they may 'benefit' that union's workers, will reduce the average national income.