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April 13, 2009

Are workers being short-changed?

Historically there's been a close relationship between the value of what a worker produces - termed productivity - and that worker's wage or salary. But some people say that tie has broken in recent years as productivity improvements exceeded gains in wages and salaries. Is this a problem? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, this is an example of knowing what and how you're measuring. You're absolutely right. If you look at wages and salaries, what people get in their paychecks, they have not grown commensurately with the productivity of those workers. But that's missing an important point. And the important point is that over the last, really, 50 years what we call benefits - that is, what a worker gets paid but not in their paycheck but in the form of benefits . . . the most important benefit being health insurance but also vacation, disability and sick leave benefits - those benefits have been growing faster than wages and salaries. Now that's still a cost to the business, and it's still, obviously, something the worker is receiving, just not in the form of pay in their paycheck. Now economists have a term for when you put wages and salaries and benefits all together; we call that worker compensation. And, indeed, worker compensation has been growing just as fast as worker productivity. So I think to answer your question as to whether workers are being short-changed, we would say, no, it's simply that workers are being paid in a different way over the last few decades."

Posted by Dave at April 13, 2009 08:00 AM