Productivity and pay

An interesting column in The Wall Street Journal a while back addressed the decoupling of compensation from productivity that is shrinking the American middle class.

“Closing the Productivity and Pay Gap” by William A. Galston said the trend that has begun in recent decades to not link pay to increases in productivity continues and shows no sign of ending.

Galston argues that for stability and growth in society, the link has to be re-established and that companies must be forced to restore it. That can be done either by sharing with workers the gains resulting from increased productivity or by paying more in taxes to support public programs made necessary by their failure to do so.

In theory, Galston’s argument sounds good but it is very hard to put into practice. Mechanization in the mid-20th century increased workers’ productivity. It did not, however, in most cases result in massive job losses.

Conversely, computers vastly increased workers’ productivity in the 1980s and beyond. But, as they evolved, in many cases they replaced workers. It was not a question really of remaining employees becoming more productive but rather entire classes of workers being replaced by machines.

Let’s face it, if your job can be done by a robot, it puts downward pressure on your wages and benefits. Companies no longer look at streamlined manufacturing as increases in productivity by remaining workers, but rather as the efficient use of unmanned machines.

Between the increase in mechanization and competition from citizens of developing countries who will work for smaller wages, there is immense pressure on blue-collar workers in the United States.

Galston’s plan for taxing thriving companies to pay for “public programs” is not the answer, unless by “public programs” he means education. In the long run, the best hope for blue collars — and the middle class — in the United States is to turn most of them into white collars.

* Editorials reflect the opinion of the publisher.