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Comment by NominalNews | Hacker News Reader

Hi! Author here! You are correct - that we have real wage growth. However, it is worth nothing that productivity has gone up 3-4% over the last several quarters (see FRED data). Wages should grow by this amount in real terms at least. That's where the standard assumption of 3.5% nominal wage growth comes from (2% inflation + 1.5% productivity growth). So the 1.8% real wage growth is, in my opinion, very low given the economy.

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Labor productivity data can be hard to interpret over the short term because of its definition as real output / hours worked. If, for example, the government sends all non-essential workers home while continuing to pay them through PPP, productivity will rise because hours worked has gone down (as it did in 2020), even though no layperson would say that people were more productive during COVID. Similarly, if companies are laying off people without significant declines in output (as in the 2023 tech industry), this also shows up as increased productivity. If CPI is dropping but nominal output and hours worked remain constant, this also shows up as increased productivity (real output goes up, because of lower inflation), though this scenario should be pretty rare since actual prices are a major component of nominal output.

I'm reminded of a coworker who produced absolutely nothing of value for 18 months (his project was canceled at the end without ever launching), collected ~$1.5M in total comp, and worked 3-4 hour days. His productivity was sky-high: $1.5M in economic transactions for ~1000 hours worked. It's just that the economic transactions were basically lighting money on fire. For that matter, his department of ~3000 burned around $6B over ~5 years and is currently in the business of bricking otherwise-useful devices. It just had massive layoffs, but he transferred to another department, made his bosses look very good there, and survived the layoffs.

You really need a long enough time period to know whether the shitty quality products you put out will result in fewer transactions before you can interpret productivity data. Long-term (multi-year) productivity growth usually presages real wage gains. But short-term (couple quarters) productivity growth could just be an indicator of layoffs coming, which usually means real wage cuts.

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