Sunday, March 06, 2016

Explaining wage increase when productivity slowdown is for real

The faculty union at the university where I work delivered to its members, and the rare non-members like me, significant salary raises.

Despite the large increase, some aren't happy, apparently.  The other day I heard a full-professor complain to another full-professor about the salary compression at the top of the scale.  I wanted to ask them: if we all do the same work then shouldn't we receive the same pay?  As "comrades" shouldn't they, therefore, complain about the unequal pay?  But, I did not.

Meanwhile, Oregon's legislature has decided to increase minimum wages in the state.

The student newspaper on campus had a front page story on whether student jobs were now at risk.  I took a copy of the paper with me to class and asked students whether any of them had read the student newspaper.  None had.  I held up the paper, and then read out the following from the report:
Western Oregon University may be affected by this bill, especially those student workers who are employed on-campus.
“Based on my early calculations, I believe it [Senate Bill 1532] could add up to 3-5% on student employee costs next fiscal year in my area,” stated Patrick Moser, the Director for Student Leadership and Activities.
“How that affects student employment in my department is highly dependent on how the Incidental Fee Committee chooses to address the budget issues of minimum wage increases,” Moser continued.
I reminded them that every business will have to engage in such calculations.  And also pointed out the uniqueness of the university--fees can be increased in order to account for the higher wages and that the fees will come from students.  Businesses with a profit bottom-line cannot simply increase prices, which means a different kind of decision-making.

The campus economics seems to be in alternate universe that is disconnected from the real world in which the vast majority complain--legitimately--about not having had any real increase in earnings.  While the super-rich have certainly added to their Richie Rich lives, the rest of the folks have to deal with stagnation or worse.  Tyler Cowen, who is by no means any friend of the left, writes:
American middle class wages haven’t been rising as rapidly as they once were, and a slowdown in productivity growth is probably an important cause.
Cowen cites recent research and points out that the tech sector hasn't delivered on productivity.
Information technology is still one of the most dynamic sectors of the American economy, and it probably will remain so, and grow yet more influential, even if its absolute impact is not as large as the optimistic revisionists suggest.
That still leaves us with a big productivity problem. We need to acknowledge that while many Internet entrepreneurs are economic heroes, statisticians are also pretty good at what they do, and we may simply need to accept some of the lessons embedded in their numbers. America’s productivity crisis is real and it is continuing. 
I wonder what my faculty colleagues and students think about that essay by Tyler Cowen.  Students can be excused if they don't read it; but, what excuse do faculty have if they don't read such essays and think about it, especially when it is not from the manically pro-business Wall Street Journal but from the publication that is dear to liberals?

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