Ok! Today I'm just gonna straight-up QUOTE A BLOG to highlight an overlooked subject... hell, a subject that no one even talks about, for some reason, in this country: wage growth.
In the 1990s, Japan was in the shitter in a manner very similar to where we are today. As someone who currently feels he can't leave his job, because to do so would be borderline suicidal, since there are no other options out there, these 4 paragraphs really hit home. The bolding, italics, etc., are mine. This is from the Conceptual Guerilla blog (the author is "unlawflcombatnt"), and in turn is derived from the book "Greenspan's Fraud" by Ravi Batra:
Japan experienced extremely rapid growth between 1960 and 1975. During that time there was a 168% increase in per capita GDP. Their per capita GDP increased from $2,139 in 1960 to $5,750 in 1975. Real wages increased 217% during that time. Manufacturing productivity increased 264% during these 15 years. Japan prospered and its economy grew during this period because wages, which create demand, kept up with productivity, which creates supply. There was sufficient WAGE-FINANCED demand to stimulate production. And the necessary demand was maintained by consumer income, not consumer borrowing.
After 1975, productivity growth began to outpace wage growth. The result was a much slower growth in GDP. Between 1975 and 1990, productivity increased 3% more than wages per year. During that period, wages increased 27%, while productivity increased 86%. The per capita GDP increase was 64% from 1975 to 1990. Less of the wealth produced by Japanese workers was being shared with them. As a result, business profits soared, increasing money available for investment. This caused Japanese investors to over-invest in both the stock market and housing. Japanese stock markets and real estate values soared as a result of this over-investment. Meanwhile, there was insufficient wage-financed demand to keep up with this capital investment. This necessitated increased levels of borrowing to maintain the demand that wages could not maintain.
By 1990 there was a huge Japanese stock market bubble and real estate bubble. And in 1990 this overvaluation all came crashing down. The Japanese economy has still not recovered 15 years later. By 2003, the Japanese stock market was still 80% below its peak in 1990. From 1990 thru 2002, per capita GDP increased 13%. Compare that with the 168% increase between 1960 and 1975. Compare this latter 15-year increase with the 59% increase during the 27 years from 1975 to 2002. Japan's per capita GDP increased 3 times as much during the 15 years prior to 1975, than it did during the 27 years after 1975. The pre-1975 rate of increase was 5 times faster than the post-1975 increase.
What caused this slowdown? The rise in the wage-productivity gap. Worker income that could have been put to good use buying Japanese goods was siphoned off as corporate profits. Since the benefits of investment capital are limited by consumer demand, the result was over-investment of Japanese stock and housing markets, and maintenance of consumer demand by borrowing.
Now if you look at any US wage/productivity gap chart, you'll notice the gap starts kicking in at the beginning of the Reagan years, and never lets up:
Now, I want to apologize for basically ripping off another blog wholesale, but this is important stuff, for the 15-20 of you who read this here bad boy, and after all, I can't cry over health care reform everyday. This is, actually, in the end, MORE IMPORTANT (or at least, just as) than health care reform, because if wages grew in tandem with productivity, like they're supposed to, a lot more of us could afford to buy health care from our current system (private insurers who charge you an arm and a leg) anyways.