Not very productive

By | September 27, 2013

How do you make a major mistake like this when the data is so easy to find?

The return of high wealth-to-income ratios has one key cause – the slowdown of productivity and population growth.

I’m referring to the phrase “slowdown of productivity” as the mistake specifically, though the other bit is likely voodoo economics as well.

As the graph below from the BLS shows, productivity was clearly rising (right up until the recession), during which inequality was in also in a period of enormous increase.

Nonfarm business productivity bar chart

Also, this data is noisy, but productivity seems to be back up to its historic rate of late – not surprising given all the automation that is being invested in now. (This might be terrible for the average worker, but increases measured productivity in most cases.)

How do you make such a large mistake? I don’t understand it. As near as I can tell, productivity has nothing at all to do directly with wealth disparities one way or the other. At least no academic seems to be able to link those conclusively, but in general I’d guess that productivity increases actually increase the likelihood of high wealth inequality. That is at least what the data suggest.