Capital versus Labor: The Great Decoupling

A couple of questions/points about the article:

1. Figure #2 purports to show the difference in total compensation vs wages. The last date (July 1, 2021) entries for compensation is 206.32 and for wages is 117.63.

A. What are the units? B. Are we meant to conclude that in July 2021, workers received like $0.95 worth of benefits for every $1 they received in wages? Really? I've worked some jobs with pretty cushy total-comp packages, but after the dot-com boom, salary has always dominated all other categories of compensation.

2. Apparently, the consumer price index has been rising much faster than the GDP deflator: Quote from the article: "Consumer prices, measured by the CPI, have multiplied by more than 10 from 1947 to 2021. For their part, general prices in the North American economy, measured by the GDP deflator, have multiplied by 6.4 between 1947 and 2020. The difference is huge."

The central thesis is that if we are comparing wages vs productivity, we should be using the same deflator for both, and, if you do, the gap largely disappears.

Is this really the correct thing to do? The GDP deflator measures how the prices of every good produced--from stealth bombers to datacenters to milk, have changed. But wage earners do not purchase stealth bombers or datacenters. They purchase things like milk. Why not deflate their wages with an index which measures the kinds of things which wage earners buy?

3. The article takes inspiration from an earlier paper by Marten Feldstein. Feldstein, when discussing this issue makes the statement:

"There are of course other questions for which using compensation deflated by the CPI or some other consumer price index is appropriate, including measuring changes in the standard of living of wage earners and in the incentive to supply labor."

For sake of argument, let's grant to the author everything he explicitly is trying to demonstrate in his article. We would have to rephrase the description of the problem--instead of talking about how growth in wages are dramatically lagging growth in productivity, we could instead say that worker's standard of living is dramatically lagging growth in worker productivity.

But rephrasing the problem doesn't make it go away! Either way you phrase it, the benefits of higher worker productivity are not accruing to the workers.