Re: How does productivity turn into higher wages?

From: Mark Monson (mmonson_at_zteck.com)
Date: 01/18/05 

Date: Mon, 17 Jan 2005 20:57:24 -0600

<zerge@hotmail.com> wrote in message
news:1105978889.741313.266740@z14g2000cwz.googlegroups.com...
> 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?

Individual workers, whether employed by others or self-employed, seek to
increase wages by increasing production.

Taken in the aggregate, this means a continuous cycle of innovation, wage
increases, rent increases that absorb increased wages, more innovation, etc.

So wages, measured before the payment of rent are rising. What really
matters however, is the measurement of wages after payment of rent
(including imputed workplace rents), which may be static or even falling as
production increases.

MM

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