Income inequality supposedly demonstrates that the economy’s rewards are flowing, undeservedly, to those at the top. If that is what’s happening, it refutes textbook economics, which argues‧‧‧
Income inequality supposedly demonstrates that the economy’s rewards are flowing, undeservedly, to those at the top. If that is what’s happening, it refutes textbook economics, which argues that wages are determined by productivity.
Economist Edward P. Lazear confirms a strong link between pay and productivity. He argues that a relevant issue is to know whether workers are being paid for their productivity and whether changes in the productivity of low-wage workers affect the pay of that specific group.
Using data on the U.S. from 1989 through 2017, Lazear finds that pay increased faster than productivity in industries with lesser-skilled workers and slower than productivity in industries with higher-skilled workers and that “productivity inequality” may have grown faster than wage inequality over this period.
Lazear concludes that productivity growth for high-skilled workers has increased rapidly enough to account for growing inequality, as technological change disproportionately benefits the highly skilled, increasing their wages and productivity and the globalization-led shift to a services economy has reduced the productivity of goods-producing, lesser-skilled workers.
Market forces, not power dynamics, are the principal driver of inequality. #economics
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As an Investment Consultant and Specialist, Pompeo Pontone is a Professional Investor with 25 years’ experience in the fields of Investment Management and Quantitative Finance, with advanced expertise in Computer Science and Data Science.