When I saw the nice graph Curtis Miller created showing that productivity detached from wages in 1973, I was curious if I could duplicate it in FRED. Nothing against R but creating a graph in FRED is fast and easy since much of the Bureau of Labor Statistics data is available. After a little searching I found both series and indexed them to 1947.(Oops! I used the wrong series. I should have used the Business Sector: Real Output Per Hour of All Persons (OPHPBS) and Real Compensation Per Hour [RCPHBS].) The graph is similar to the one Curtis created except it pushes the date when productivity detached from wages back to the first quarter of 1970.
Although David Stockman argued in his book, The Great Deformation, that the era of sound money ended around this time, I am not comfortable with the idea that dumb spending policies should have an impact on real wages and productivity. I am not surprised but it does make me wonder. Is the adoption of fiat currencies and the expansion of the welfare state the reason we are seeing reduced real wages despite improving productivity?
- US. Bureau of Labor Statistics, Nonfarm Business Sector: Real Output Per Hour of All Persons [OPHNFB], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/OPHNFB, September 13, 2016.
- US. Bureau of Labor Statistics, Nonfarm Business Sector: Real Compensation Per Hour [COMPRNFB], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/COMPRNFB, September 13, 2016.