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Still in Sydney (next stop Tokyo), where it’s much too beautiful a day to sit inside blogging. But I did want to flag an excellent report by Josh Bivens and Larry Mishel on the productivity-pay gap.

The divergence between pay and productivity — a lot of productivity gains, almost total failure to trickle down — is one of the most striking features of American economics these past 40 (!) years. It’s also the subject of endless attempts at debunking, of claims that the divergence is somehow a statistical artifact. What Bivens and Mishel do is take on these arguments carefully, not dismissing them completely, but showing that they explain only a fraction of what we see. Rising benefits are mainly a pre-1979 issue, explaining almost nothing since then; the “terms of trade” — consumer prices rising faster than the prices of U.S. output — is also mostly pre-1979, and in any case only a fractional concern. And so on.

One thing they don’t say explicitly, but is important: the next time you hear someone claiming that middle-class families have, in fact, seen a big rise in living standards, you should know that to the extent that this is true (which is less than claimed), it’s mainly about working more hours. Pay really has almost stagnated despite rising productivity.