It’s unfortunate that the outsized success of the most successful Americans is blamed for the slow growth of lesser-skilled workers, as if the economy were a pie to be divided. The outsized success of the most successful Americans increases the demand for lesser-skilled labor.
Factors independent of the growing success of the most successful Americans slow the growth of lesser-skilled wages relative to the rest of the economy. The cost of trade with low-wage economies is shared disproportionately by low-skilled workers relative to the benefits, a large portion of which are enjoyed by high-skilled workers, retirees, and the poor. Trade deficits but downward pressure on low-skilled wages when risk-averse saving sit unused even at near-zero interest rates, as they do today. And low-skilled immigrants and their adult children, who depend on the same limited pool of high-skilled workers to raise their productivity and wages, spread these constrained resources over a greater number of workers. Each of these factors, and not the success of the most successful Americans slows lesser-skilled wage growth relative to GDP.
It’s good to see that Piketty and Saez have finally incorporated the work of Richard Burkhauser. Their work now shows that median incomes have grown 50% since 1980. They still need to incorporate hours worked into their analysis, where declining workforce participation has had a significant effect on the distribution of income.
Read the full New York Times article here.