Look At the Full Picture
3 November 2006
Editor, The Boston Globe
Dear Editor:
For months we've been warned that the current economic recovery differs ominously from past recoveries because worker pay now is rising more slowly than worker productivity. But in today's paper we read that "Growth in productivity - the key ingredient for rising living standards - skidded to a standstill in the late summer while workers' wages and benefits shot up at the fastest clip in more than two decades" ("Pay outpaces productivity: inflation feared," Nov. 3). In other words, workers' pay is catching up with their productivity, just as economics predicts.
Economies are long-run processes; they should be evaluated as such. What happens in any arbitrary time period - a month, a quarter, or even a year - typically is too filled with short-run distortions and lags to present a reliable picture of an economy's long-run trajectory.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Boston Globe
Dear Editor:
For months we've been warned that the current economic recovery differs ominously from past recoveries because worker pay now is rising more slowly than worker productivity. But in today's paper we read that "Growth in productivity - the key ingredient for rising living standards - skidded to a standstill in the late summer while workers' wages and benefits shot up at the fastest clip in more than two decades" ("Pay outpaces productivity: inflation feared," Nov. 3). In other words, workers' pay is catching up with their productivity, just as economics predicts.
Economies are long-run processes; they should be evaluated as such. What happens in any arbitrary time period - a month, a quarter, or even a year - typically is too filled with short-run distortions and lags to present a reliable picture of an economy's long-run trajectory.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Tuesday June 12, 2007 at 6:02pm