The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.

the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.

The causality for the decline in union membership runs [collapse of Bretton Woods system] -> [U.S. dollar becomes global reserve currency] -> [U.S. manufacturing becomes uncompetitive abroad] -> [American manufacturing firms go bankrupt, allowing them to renegotiate or renege on union contracts] -> [decline in union membership]. Step 3 had a lot of help, between poor corporate governance and quality control at American corporations, the rest of the world rebuilding from the ashes of WW2, the collapse of communist systems in China and the eastern bloc, and globalist policies from Washington. But probably the most significant factor is that the dollar is overvalued, which makes American exports overpriced, which makes all but our highest-productivity industries uncompetitive.

The causality for inflation-lowered wages is [U.S. dollar is global reserve currency] -> [U.S. must "print" an excess amount of dollars to satisfy foreign demand - here really referring to interest rates, since physical currency is a minority of foreign trade] -> [excess dollars flood financial markets, causing asset inflation] -> [ordinary workers lack the bargaining power to divert some of these excess dollars to themselves, falling behind in purchasing power]. Note that when ordinary workers do have this bargaining power - like when they work for Goldman Sachs, or when they're paid in Google/Apple/Facebook stock - they actually have shared in this inflated prosperity.

The causality for growth of the financial industry is [U.S. dollar is global reserve currency] -> [a significant number of foreign transactions require trade in dollar-denominated assets] -> [more jobs are needed to manage these money flows] + [manufacturing careers in the U.S. suck, per second paragraph] -> [smart, ambitious people go into finance because it's where the money is, literally].

It was plain to see Nixon's purpose was to destroy unions at the time.

And it had to be an overwhelming salvo, or there could be no guarantee it would outlast his crooked regime.

Turns out it has lasted longer than anyone would have wanted, so you get nothing but finger-pointing after a few decades, mainly by people who were not even there or into financial math at the time.

https://wtfhappenedin1971.com/

The productivity growth is not a constant number. The productivity of a Machine Learning engineer has increased much more than the productivity of a gas station attendant.

TL;DR:

1. The pay line is for the bottom ~80% of workers, while the productivity line is for all workers. If you graph all workers wages vs all workers productivity, then the gap shrinks quite a bit. (Of course, maybe we should redistribute wealth from top workers to all workers, but that's another discussion.)

2. Average hourly wages doesn't take into account workers' increase in benefits.

3. The lines aren't adjusted for inflation in the same way, which makes the gap look worse.

There is a pretty good reason for that. Most of the increase in benefits has been in the form of increased healthcare costs, which only somewhat reflect increased value, as much of that value is unrealized due to high deductibles incentivizing people to not use medical services if they can avoid doing so (which preserves an odd form of household rainy day fund dedicated to medical catastrophes).

Meanwhile, the segment of workers that are (precariously, so with litle to no leverage even in aggregate) holding one or more part-time jobs instead of a full time job with benefits has grown as well.

I can't help but feel /r/badecon's rebuttal is dishonest. For many people benefits haven't increased, so the fact that it is excluded is a non-issue. E.g. The growing number of workers who are kept below full time hours to avoid being given fulltime benefits as one of many examples I could list.

Regardless, if it is accurate I'm very curious what the growing employer benefits has been.

"Growth in productivity and hourly compensation since 1948"

"Real GDP, Real Wages and Trade Policies in the U.S. (1947-2014)"

"Real family income between 1947 and 2016, as a percentage of 1973 level"

As for the remaining graphs, for a number of them;

>The lines aren't adjusted for inflation in the same way, which makes the gap look worse.

In spite of this discrepancy, the outlooks experienced over these decades are still even worse than they look.

Nixon was quite bent on the effort to remove the potential for building middle-class wealth any more for unionized workers. His people didn't like the way it had already occurred to a good extent before he got there. The objective was to not only stop but reverse the trend.

And unionized workers were paid much more than average plus had some excellent benefits which were so essential to an upward class move that non-union companies had to mostly have similar benefits even while lower average wages prevailed.

So it took them and all average-paid-or-lower workers down by removing cash buying power directly from their earned income & savings. Not just a notch like levying income taxes & instituting the Fed to remove gold from circulation as legal tender, then prohibit its possesion, and the subsequent currency devaluations had done much earlier in the century. Instead was the most devastating thing they could come up with at the time since income tax and central bank had already been done, and they had all the gold in the US under their control. Generations after the safety net of silver had been a lost memory after the Founding Fathers' wise reliance on both silver & gold as the standards when designing US currency to begin with had been compromised leaving only gold.

By 1976 average people had lost half their wealth and with hindsight much more than half their wealth potential, just like it seemed was going to happen back in 1971. While the truly wealthy mostly lost half their dollar-denominated wealth too, but they were still rich and their outlook has done nothing but improve in spite of the devaluation of the dollar.

Everyone else was set back decades and here we are.

Never did it seem like there was any objective other than inequality being preferred over prosperity, even for the top Wall Streeters who numerically lost more millions than any working person to the market crash [0], and inflation which had to be accepted as never-ending at the time, from that point forward until a major reckoning.

Still overdue but the wealth removal from the general population needed to continue without more inflation after a certain point or the graphs would have gotten really revealing much too early for those who had yet to cash out.

[0] was watching it live on a Quotron: https://en.wikipedia.org/wiki/Quotron

The price for goods did go down. Everything from food to toys to tools got much cheaper than it was before.

However, the price for cornerstone needs that govern access to opportunity - i.e. healthcare, housing, education, physical security - and the percentage of income and average net worth that these consume went up dramatically.

Furthermore, these things became ever more correlated with each other, meaning that if you have bad access to one, you are likely to have bad access to the others, and if you have great access to one, you likely have great access to the others.

But sure, it's never been cheaper to buy random widget X at a big box store.

First, I wholeheartedly agree that this is the major stakes. I mentioned consumer goods prices because they're immediately tangible. The differences in the others are all too easy to handwave away as improvements.

> Everything from food to toys to tools got much cheaper than it was before

I don't know about toys, and they seem hard to compare. Food has gone up over the past few decades (groceries that used to cost $2 now cost $3, $3->$4, etc). From one of the first hits for historical milk price (https://www.in2013dollars.com/Milk/price-inflation): "Between 1997 and 2020: Milk experienced an average inflation rate of 1.73% per year". Note that I'm talking about sticker prices here, not any "but they actually went down with inflation", as the original argument was referencing stationary wages.

Tools are being made much more flimsy and disposable - eg real high speed steel has been replaced by inferior foreign steel with gimmicky coatings to "prolong" its poor wear characteristics. If you look at good quality tool brands today, the prices are higher than what tools cost several decades ago. This goes for appliances as well - take a look at "commercial" offerings that are built to be maintained.

In the US. But in other societies they have been "governed" such that they are more accessible. The kind of governing makes a big difference.

And there's a lot of pseudo-productivity here that is mostly just rising healthcare spending (without commensurate changes in outcomes) and land value. This sort of makes sense since these sectors have massive capture problems.

Tech itself is the exception that proves the rule. Its progress is so strong that it's becoming less expensive in spite of inflationary policy.

How about 95% of economy: education, houses, food, heating, electricity, fuel? What about industrial goods: Bricks, steel?

But oh, you can now live in poverty unable to afford cancer treatment with a TV.

For $500 + being subjected to ads.

More accurate to calculate how it still regularly costs a million poor people a dollar each to make one person a new millionaire.

But we all know a $Million doesn't buy what it was supposed to any more, so all million-and-one of them are screwed anyway.

And poor people actually used to be able to afford this kind of spending.