Wednesday, May 21, 2008

Productivity growth should raise all boats

"...which is a fancy way of saying [increased] productivity is coming from upscale workers."

I always thought that productivity growth came from higher tech diffused throughout the labor force -- often eliminating the need high skilled workers: the xerox machine replaced millions of high speed typists with a button, the much more reliable jet engine reduced needed maintenance and the needed mechanics 95%. The cell phone makes everyone more productive.

The highest tech workers of all, physicians and scientists, don't even get their real world productivity counted in economics: doctors are considered more productive if the treat more patients in the same time frame -- not if the get better results from MRIs, etc.

As far as income distribution is concerned, isn't equating higher tech productivity with higher pay in some danger of invoking the labor theory of value? As overall productivity (and overall pay) grows we may be willing to pay more for someone to flip hamburgers for our more affluent selves even if flippers have not added to their productivity since fast food began.

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