Why do you think wages haven't kept up with productivity?
The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.
I’d say it probably has something to do with the collapse in union membership, deregulation and growth of the finance sector, and capture of the political system by those who can afford billions of dollars worth of advertising, but it’s a complicated story. Are you suggesting that wages haven’t kept up with productivity because inflation has been consistently high since the US abolished the gold standard?
Also, the massive rise in economic power of the rest of (western) world around that time.
the US was the only major world power left standing after world war 2 without colossal damage, and rebuilding (western) europe took the better part of 25 years to fully complete.
Yes, mostly. I'd say that high inflation, declining union membership, and growth of the financial system are all consequences of the U.S. dollar's status as a fiat reserve currency.
The causality for the decline in union membership runs [collapse of Bretton Woods system] -> [U.S. dollar becomes global reserve currency] -> [U.S. manufacturing becomes uncompetitive abroad] -> [American manufacturing firms go bankrupt, allowing them to renegotiate or renege on union contracts] -> [decline in union membership]. Step 3 had a lot of help, between poor corporate governance and quality control at American corporations, the rest of the world rebuilding from the ashes of WW2, the collapse of communist systems in China and the eastern bloc, and globalist policies from Washington. But probably the most significant factor is that the dollar is overvalued, which makes American exports overpriced, which makes all but our highest-productivity industries uncompetitive.
The causality for inflation-lowered wages is [U.S. dollar is global reserve currency] -> [U.S. must "print" an excess amount of dollars to satisfy foreign demand - here really referring to interest rates, since physical currency is a minority of foreign trade] -> [excess dollars flood financial markets, causing asset inflation] -> [ordinary workers lack the bargaining power to divert some of these excess dollars to themselves, falling behind in purchasing power]. Note that when ordinary workers do have this bargaining power - like when they work for Goldman Sachs, or when they're paid in Google/Apple/Facebook stock - they actually have shared in this inflated prosperity.
The causality for growth of the financial industry is [U.S. dollar is global reserve currency] -> [a significant number of foreign transactions require trade in dollar-denominated assets] -> [more jobs are needed to manage these money flows] + [manufacturing careers in the U.S. suck, per second paragraph] -> [smart, ambitious people go into finance because it's where the money is, literally].
There is no mathematically sound explanation for that.
It was plain to see Nixon's purpose was to destroy unions at the time.
And it had to be an overwhelming salvo, or there could be no guarantee it would outlast his crooked regime.
Turns out it has lasted longer than anyone would have wanted, so you get nothing but finger-pointing after a few decades, mainly by people who were not even there or into financial math at the time.
It shouldn't be surprising that regular people wages haven't kept up with productivity because they aren't what's driving it. A quant in 2020 is doing completely different work from a quant (or equivalent) in the 70s. The same can't be said for most ordinary workers.
The decoupling of wages from productivity started around 1971-1973, which is suspiciously close to the Nixon Shock and beginning of the 1970s inflation. In periods of inflation, firms with high bargaining power (notably monopolistic corporations, corporate executives, and right now, software engineers & quants) can extract the excess money floating around. Firms in highly competitive industries (notably restaurants, family farms, and ordinary workers) get undercut every time they try to raise prices. Therefore all the gains go to the rich.