Monday, August 26, 2013

My Comment Posted On NY Times Economix About Wage Stagnation Over The Last Decade

My comment posted on The New York Times, Economix, "Wage Stagnation and Market Outcomes" by Jared Bernstein:
The problem with aggregated wage data is that it does not correct for the effect of an aging workforce, or look at the wages of the workers who are the most productive.

With the post-WWII baby boom bubble entering retirement years, more older people are giving up full-time higher paying jobs for lower paying part-time work. This effect depresses the average hourly wage. Productive workers are getting raises and this effect offsets the decline in average real wages from older workers. The two effects together make wages look stagnant.

With fewer future workers in the pipeline, companies have invested in more capital, making workers much more productive.

Given the slowdown in US birthrates since the 1960s, it is not at all surprising that in the last decade as we get to baby boom retirement age, average wages for the entire workforce will look like they are stagnating.

Averages hide many wage increases. As an example of averages hiding effects, suppose the average age of a workforce is constant over a decade, does that mean that [there] aren't many workers who are a decade older? Of course not! Likewise, a retiring but working workforce, along with new inexperienced entrants at lower wages in conjunction with more capital investment will makes wages look stagnant and far behind productivity growth.

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