Wedges and income gap

A recent issue of Economist has reported US population under poverty line ($23,201/year for a family of four) has surged from 11% a decade ago to more than 15% now. It reminds me an article I read several months ago, "The wedges between pr

oductivity and median compensation growth", and its two revealing illustrations. 1st Figure shows US productivity increases by 254.3% from 1948 to 2011 and the workers' pay increased in tandem with productivity until 1973 and, since then, had significantly lagged behind to only 113.1% in 2011. 2nd Figure is more revealing. From 1973 to 2011, productivity has increased 80.4% while average pay (i.e., including CEOs and janitors) has only increased 39.2%. But if you take a look at median pay (i.e., if your company has 100 employees and your pay stands at 50, your pay is the median pay), it has only increased 10.7%. This implies that, since 1973, most of the financial benefits from ever-increasing productivity have NOT gone to the workers who generate these productivity growths. Rather, most of the benefits have gone to the capital gains, i.e., money not from working but from financial speculation and investment. These two curves tell all the stories where the income inequality has been from. It is true for US and should be also true for Taiwan.