It is widely known that, in general, more education leads to higher incomes. The US Bureau of Labor Statistics tracks median weekly earnings by education level, and recently released a summary of results going back to 2010. The differences are striking and undeniable.
If a rising tide is supposed to lift all boats, why have we seen worker productivity rise so much faster than wages? From the 1940s through much of the 1970s, productivity growth and wages followed a generally similar pattern. However, since the 1970s, productivity has been increasing faster than compensation, and some use the gap to argue that we need proactive policies to deal with wage stagnation. It is clearly an important issue, as the key to long-term improvement in living standards is increasing compensation in a non-inflationary manner as a result of gains in productivity. However, many of the simplistic comparisons between productivity and wage growth leave out essential aspects of the issue, thus missing the real underlying challenge.