Econ 181 - Lawrence Article Notes

Econ 181 - Lawrence Article Notes - U.S. Wage Trends in the...

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U.S. Wage Trends in the 1980s: The Role of International Factors Poor average wage of US reflects sluggish rise in US labor productivity, which results from poor productivity performance outside of the manufacturing sector, not because of: o Deindustrialization (US trade deficit in manufactured goods has eroded supply of highly paid manufacturing jobs) US manufacturing trade deficit is too small o Relative decline In 1970s there was a decline in TOT, but in 1980s there was an improvement in TOT of 5.2% while the consumer price index only went up 1.5% o Factor price equalization US compensation per worker increased with output per worker Real wage growth lagged because Productivity growth in capital good industries (workers don’t really buy these) Relative price of housing increased (workers consume but don’t produce) Due to correlation between rising wages and increasing inequalities, many analysts argue that trade with developing countries is putting downward pressure on relative wages of unskilled workers. But:
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Econ 181 - Lawrence Article Notes - U.S. Wage Trends in the...

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