Unlike the period from 1948 to 1973—when workers’ pay grew in tandem with productivity, resulting in higher living standards across the board—since 2000 we have seen the largest divergence between the growth of productivity and a typical worker’s compensation.
The share of overall income received in wages by workers has decreased; correspondingly, the share accruing to wealth holders via unearned income (dividends, interest, profits) has increased.
The compensation of the median worker has grown much more slowly than compensation for the highest-paid workers.
Workers have suffered worsening terms of trade, meaning the prices of things workers buy have increased more quickly than the prices of things workers produce.
Scott Galloway wrote in his book;“Adrift:America in 100 Charts”
“Between 1973 and 2014, net productivity grew 72%, but hourly worker compensation grew just 9%.”
Perhaps the “K” arrived much sooner in renumeration that the economy?
between (1) average wages and productivity, and (2) top and bottom wages.
As shown in Figure 1, much of the growth in labor productivity has gone to growth in wages at the top of the distribution. Panel (A) of figure 1 shows the growing gap between median compensation and average productivity into the gap between capital and labor share, compensation inequality, and differential price growth for consumer and producer baskets. While net productivity grew by 72% between 1973 and 2014, over that period median real compensation grew only by 8%.
The pattern of inequality is also reflected in panel (B) which shows that the 90th percentile real wage grew by over 35 percent between 1973 and 2016, while the median and 10th percentile real wage grew by approximately 6 percent over the same period.
Yes. We have managed to create a secular bull market by steadily and unceasingly increasing our deficits and our national debt, and we have managed inflation by not letting the money flow into the hands of workers. Printing money to prop up capital markets apparently to infinity.
Stocks do poorly when there is inflation. Getting inflation under control around 1980 switched investor sentiment from Bear to Bull. Between 1980 and 2000, stock prices increased faster than earnings, driving the PE higher. Shiller CAPE increased sharply: 7 in 1982, 16 in 1987, 30 in 1997. Stocks were underpriced in 1982, and overpriced in 2000.
The long term S&P real total return chart follows a typical staircase pattern with periods of high return and periods of flat returns (lost decades). The long-term trend is remarkably consistent.
It’s possible, even probable. But I would ask if that is the primary cause of the secular bull market, how is it that Japan also unceasingly increased their deficits and national debt without a resulting secular bull market. There must be something else required to enable a secular bull market.
I don’t know. Maybe it has to do with the fact that we are still the world’s default economy and we can continue to print/create money without limit. Japan can’t.
I think I also know that mandatory spending on Medicare, Medicaid and Social Security and discretionary spending on wars have been the elephant in the room at least since 2010 when Simpson Bowles failed to pass because Republicans were afraid to take taxincreases to their base and Democrats were afraid to take cuts to Social Security, Medicare and Medicaid to their base.
I also think I know that NO tax increases are acceptable to Republicans given that they would not even agree to a 2 percent marginal rate increase on people earning over $2.5 M per year even when their president recommended it.
And I think I know that anti-tax ideologues falsely accuse Democrats of wanting only to increase taxes in order to ratify their own refusal to accept any tax increases ever.
The cost of building weaponry and federal employee salaries & social security/Medicare benefits have all gone up.
So tax revenue is inadequate. The national debt has grown, too large IMO. You can try to tax the middle class more. But I don’t think there is much blood one can git from that turnip.
From 1991 to 2003, the Japanese economy, as measured by GDP, grew only 1.14% annually, while the average real growth rate between 2000 and 2010 was about 1%, both well below other industrialized nations.[6][4] Debt levels continued to rise due to the Great Recession, the 2011 Tōhoku earthquake and tsunami, and the COVID-19 recession. Broadly affecting the entire Japanese economy, over the period of 1995 to 2025, the country’s nominal GDP fell from $5.55 trillion to $4.27 trillion,[7]real wages fell around 11%,[[8]] (Lost Decades - Wikipedia) while the country experienced a stagnant or decreasing price level.[9] From 1995 to 2025, Japan’s share of the world’s nominal GDP decreased from 17.8% to 3.6%.[7]
Japan’s nominal GDP per capita has stagnated around $40,000 since the 1990s, while other economies have experienced significant growth.
Under deflation, the value of cash increases as time passes. In such a situation, Japanese companies began to cut wages, research and development, and other investments, opting to hold onto cash instead. This tendency, coinciding with the acceleration of the aging population, gradually diminished the competitiveness of the economy and the potential growth rate of the country.[10] The Bank of Japan (BoJ) and the Japanese government have focused on halting the deflation and eventually achieving the 2% inflation target since the early 2000s. However, as deflation persisted, the traditional monetary policy of setting low interest rates to stimulate investment and consumption, which typically causes inflation, became ineffective. This ineffectiveness arose because a nominal rate of 0% effectively meant a positive real rate due to the increasing value of cash. This phenomenon is known as the zero lower bound.[11]
Japan’s economic miracle in the second half of the 20th century ended abruptly at the start of the 1990s. By the late 1980s, the Japanese economy experienced an asset price bubble caused by loan growth quotas dictated upon the banks by Japan’s central bank, the Bank of Japan, through a policy mechanism known as the “window guidance”.[25][26] As economist Paul Krugman explained, “Japan’s banks lent more, with less regard for quality of the borrower, than anyone else’s. In doing so they helped inflate the bubble economy to grotesque proportions.”[27] Economist Richard Werner writes that external pressures such as the Plaza Accord and the policy of Ministry of Finance to reduce the official discount rate are insufficient to explain the actions taken by the Bank of Japan.[25][26]
Trying to deflate speculation and keep inflation in check, the Bank of Japan sharply raised inter-bank lending rates in late 1989.[28] This sharp policy caused the bursting of the bubble, and the Japanese stock market crashed. Equity and asset prices fell, leaving overly-leveraged Japanese banks and insurance companies with books full of bad debt. As a result, bank credit growth stagnated.[29] The financial institutions were bailed out through capital infusions from the Government of Japan, loans and cheap credit from the central bank, and the ability to postpone the recognition of losses, ultimately turning them into zombie banks. Yalman Onaran of Bloomberg News writing in Salon stated that the zombie banks were one of the reasons for the following long stagnation.[30] Additionally, Michael Schuman of Time magazine wrote that these banks kept injecting new funds into unprofitable “zombie firms” to keep them afloat, arguing that they were too big to fail. However, most of these companies were too debt-ridden to do much more than survive on bail-out funds. Schuman believed that Japan’s economy did not begin to recover until this practice had ended
The cost of effective weaponry has gone down recently, based on the Ukraine experience. The U.S. continues to overspend on fancy weapons when lower cost options have done better recently.
The real sea change is the pace of development. In their fight for their very existence they are recovering Russian drones, missiles and armaments, studying them, designing new weapons and building them in a matter of days and weeks. We are putting together multi-billion dollar bids on massively expensive weapons that take years to design and build. They have figuratively designed the printing press printing hundreds of pages daily while we have an army of monks producing a few pages a year.
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