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If Worker Productivity is Continuing to Go Up, Why is the Buying Power of So Many of Us Going Down?

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First some well documented facts to support the argument and answers that follow:

As Pulitzer Prize winning investigative reporter David Cay Johnston recently stated, "American paychecks shrank last year, just-released data show, thereby further eroding the public's purchasing power, which is so vital to economic growth.

"Average pay for 2013 was $43,041 -- down $79 from the previous year when measured in 2013 dollars. Worse, average pay fell $508 below the 2007 level, according to new Social Security Administration data.

"Flat or declining average pay is a major reason so many Americans feel that the Great Recession never ended for them. A severe job shortage compounds that misery not just for workers but also for businesses trying to profit from selling goods and services to them.

"Last year, overall median pay (half of Americans make more, half make less) was $320 below the 2000 median. It also was slightly lower than the 1999 median of $28,109, which is a troubling measure of long-term wage stagnation that is eroding the American work ethic and discouraging individual investments in acquiring and refining job skills.

"A good way to grasp the loss of American purchasing power is to compare earnings from jobs, to population and the size of the economy. This reveals that the slice of the economic pie going to workers is thinning while the slice for profits is fattening."

And, as economist Robert Kuttner has recently reported,

"From 1947 through 1972, productivity in the United States doubled, and median household income also doubled. However, in recent decades, as economists Robert Gordon and Ian Dew-Becker have shown, allproductivity gains have accrued to the wealthiest 10%. In 1955, near the peak of union strength, the wealthiest 10% received 33% of the nation's personal income, whereas by 2007, they received 50%.

"Profits have been growing at wages' expense. Today, wages and benefits make up the lowest share of America's gross domestic product since World War II. Wages have fallen from 53% of GDP in 1970 to 44% today. Michael Cembalest, J.P. Morgan's chief investment officer, has calculated that reductions in wages and benefits accounted for 75% of the increase in corporate profits between 2000 and 2007.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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