So… are wages stagnating?
When, in a speech Sunday, Peter Thiel wasn’t lamenting Silicon Valley’s failure to produce a working warp engine or musing about “seemingly treasonous” actions by Google executives, he was suggesting a familiar economic argument. Well, familiar on the left — at least until the populist surge on the right. It’s an argument easily summed up by this chart from economist Robert Lawrence, one included in a recent paper by my AEI colleague Michael Strain, “The Link Between Wages and Productivity Is Strong”:
The intended take-away from the above chart is that link between productivity growth and higher living standards — as measured by worker compensation — has been severed. The link between wages and productivity is most definitely not strong. Slightly different versions of this chart are pretty common in news pieces about American’s “broken economy” or how “capitalism is broken.” In this case, the chart might suggest all the cool stuff coming from Silicon Valley hasn’t done much for the middle class.