American Productivity Rises, But Not Wages

On this Labor Day, David Wessel, deputy Washington bureau chief of The Wall Street Journal, talks to Steve Inskeep about wages of the American worker. Wessel says that according to new government figures, American productivity is up, but very often, wages are not.

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STEVE INSKEEP, host:

Labor Day seems like an appropriate moment to ask how American workers are doing. The government coincidentally has just released all sorts of new data that helps to answer that question.

So, to explain it all we've turned to David Wessel, Deputy Washington Bureau Chief for the Wall Street Journal and regular guest here. David, good morning.

Mr. DAVID WESSEL (Deputy Washington Bureau Chief, the Wall Street Journal): Good morning.

INSKEEP: Okay. The economy is said to be growing. Unemployment is said to be low. How are workers' salaries doing?'

Mr. WESSEL: Well, the economy is growing, and unemployment is unusually low by historical standards. But for the typical worker, wages are not going up. The new census bureau numbers to which you refer said that for workers, male workers, who work full-time, year-round, the ones at the middle of the middle of the income distribution, their wages fell last year by 1.8 percent, after adjusting for inflation. And they were actually lower in 2005 than they were back in 1998.

INSKEEP: Why would somebody's wages be going down at the same time that company's are said to be more and more productive?

Mr. WESSEL: Well, that's one of the mysteries of our current economic situation. Productivity, the amount of stuff we make for each hour of work, is up. And it's growing very fast, by historical standards. But wages aren't.

So the question is - where's the money going? And the short answer is, a lot of it is going into profits. And the other is that it is going to workers but it's not going to all workers. The best-off workers, the ones with the most education or who have sweet contracts with baseball teams or CEOs, their wages actually are going up quite nicely. And they're getting a widening slice of the pie. The people in the middle, though, are not getting a widening slice of the pie.

INSKEEP: Does that really make sense, because even if you are a big star at the company, you're relying on a lot of people below you. And if those people aren't any good you might not be any good.

Mr. WESSEL: Well, I'm not sure making sense is the right question. That's the way things are happening now, and we have to ask ourselves why. What are the economic forces that make it that way? And then people may ask, is it fair? There are a lot of people who say there's something wrong with a system in which the economy can be doing so well, but the workers at the very middle are not doing so well. Or a system in which the gap between the wages of the CEO and the average assembly line worker is widening.

I think that the Democrats, in this fall's elections, are going to try and make that case. That something's wrong with the system, and they can fix it.

INSKEEP: Democrats actually have been making newspaper headlines in recent weeks, campaigning against Wal-Mart, seeming to make a symbolic point about this broader issue that you're describing.

Mr. WESSEL: Right. Wal-Mart has become a symbol of two things: one thing is as a company which is growing its profits but not raising wages very fast for its workers or providing health insurance for them all. The second thing is Wal-Mart's efficiencies are producing low prices for millions and millions of working Americans who are their consumers.

INSKEEP: Well, let's ask whether the statistics indicate which is getting ahead - their prices or wages? Even though my wages may not be going up very much, are they going up fast enough that I can still buy more and more of these low-priced products?

Mr. WESSEL: The wages of the worker at the middle of the middle are not going up faster than inflation. But they would be worse off if Wal-Mart didn't exist and they were paying even higher prices.

INSKEEP: Can you think of an example of a company that has clearly saved consumers more money than it might be costing employees, in terms of keeping salaries low and cutting health benefits and all the other things the corporations are doing?

Mr. WESSEL: It would probably be somewhere in technology. The price of a lot of technology has come down very fast. You get a lot more for your buck when you buy a computer.

INSKEEP: Computer prices continuously go down.

Mr. WESSEL: Right. And so there's an example of an industry where probably workers have done well and consumers have also benefited.

But an economy is a very complex organism, and no one ever said that everybody would be a winner. An economy is succeeding if there are more winners than losers, it seems to me, and the question is what can you do to increase the number of winners?

But the only way an economy can succeed and grow, is if it allows some pieces of the economy to wither and die.

INSKEEP: Somebody has to fail?

Mr. WESSEL: Somebody has to fail, and the rest of the society needs to find a way to protect them or move them to a new industry. But if you have an economy where no company ever fails, where no worker ever gets fired, and no one ever sees their wages go down, you have the kind of stagnation that Americans - I don't believe - want.

INSKEEP: David Wessel, of the Wall Street Journal, good to talk to you.

Mr. WESSEL: Thank you.

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