Economics Stack Exchange Archive

Labor vs. Capital Income distribution

Generally increases in productivity improve real wage rates and living standards. According to this chart there is a trend change in the US around 1979. What explains this change in trend?

The fuller link to the NYT article attributes the shift to “policy” which is not much of an explanation. Seems to me there is a shift in the mix of national income from labor to capital provider.

General equilibrium arguments are preferred.

UPDATE: Here is a link to a fuller exposition in the NY Times. Still no labels on the y-axis unfortunately. Also, it looks like the productivity here matches Output-per-Hour from the St. Louis Fed.

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Answer 429

I agree with the comments to take the chart with a grain of salt. If it is accurate I would say the inequality is due to an increase education “standards”. These days everyone has a college degree thus technically more productive but since there are so many supply outweighs deman and wages stagnate.

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