Dr. Perryman responds to the announcement and how it will affect the economy and labor force.
Productivity, or the output of the US worker, in the second quarter grew by 2.3%. While that's not terrible, Dr. Perryman takes a look.
One idea currently getting a lot of attention is increasing the minimum wage to $15 per hour. A wage floor is an artificial impediment to the smooth functioning of the labor market, but one with some justification. It's complicated.
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.