Wage Growth Is Slower Than Productivity Growth Independent Of Education Level

This graph, which was taken from a report on the factors contributing to unemployment, tells an important story. The graph shows that productivity has been growing at a faster rate than wage growth. Moreover, wage growth has been slower than productivity growth for college graduates as well as those without a college degree. The benefits from rising productivity have gone primarily to profits during this period. This is inconsistent with past periods since WW ll when labor and capital shared the gains from rising productivity. it also raises questions about the claim that unemployment is primarily a structural problem in the US. That is, we do not have an adequate supply of college educated workers. If demand for the college educated exceeded supply, we would expect to see wages rising for those with college degrees. It also suggests that increasing the supply of those with college degrees would contribute to the slow growth in wages for the college educated. It would not provide a solution for high unemployment. This report provides a large amount of data which indicates that the unemployment problem is primarily due to a decline in the demand for labor.

The report also provides data which show that rising inequality is not related to education level. Most of the increase in income has gone to the top .01% of the labor force. Their incomes have grown substantially faster than other college graduates that comprise the bulk of those in the top 10%. Educational inequality is a factor in social mobility, however. There is a wage premium for those with a college degree. Improving access to higher education would make a positive contribution to social mobility but it is not the solution for our current unemployment problem.

I strongly recommend this report to those who are interested in understanding our unemployment problem as well as the relationship between education and the labor market.