Re: How does productivity turn into higher wages?

zerge_at_hotmail.com
Date: 01/17/05 

Date: 17 Jan 2005 15:01:45 -0800

wilfred wrote:
> <zerge@hotmail.com> wrote in message
> news:1105994298.131535.139850@z14g2000cwz.googlegroups.com...
> >
> > r...@telus.net wrote:
> > > On 17 Jan 2005 08:21:29 -0800, zerge@hotmail.com wrote:
> > >
> > > >As productivity increases in an industry or in a country,
salaries
> > tend
> > > >to rise.
> > > >Can anyone explain the cause-and-effect that leads to this
dynamic?
> > And
> > > >I mean at the decision maker level: what happens in the minds of
the
> > > >employers and employees?
> > >
> > > It's just that the increased production has to go _somewhere_.
> > >
> > > -- Roy L
> >
> > Yes, I understand it at THAT level. Supply is demand etc.
> > I just don't understand the thought processes of the employers and
> > employees, see? What specific market pressure makes the employers
> > decide to pay more and/or employees ask for more?
>
> Increased production leads to higher profits, should wages remain
constant,
> but employees tend to notice that a larger share of the pie goes to
the top,
> and negotiate higher wages. Employers may be more willing to grant
wage
> increases as they are increasingly able to. I suppose in the very
long term
> wages should tend towards the marginal product of labour, but will
usually
> be prevented from reaching that level.

Thank you. This is what I suspected, but wasn't sure. Do you know if
this has been confirmed empirically?

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