Concerning the discussion of falling wages, here is a short excerpt from my labor department report on labor standards and trade: "Another way to consider the growth of wages is in relation to the growth in productivity. These two must increase at the same rate in order to maintain a constant labor share of value added. As Figure 3 indicates, however, while productivity has continued to increase during the post-1979 period, real wage growth has been negligible. The growing gap could be interpreted as resulting from a massive decline in labor's bargaining power. Care must be taken, however. The bundle of goods labor produces is not the same as the bundle it consumes (the difference is due to international trade and to the production of capital goods), and the price of the first bundle has risen less than the second. Thus, while real "consumption" wages, deflated by the Consumer Price Index, have remained constant, real "product" wages, deflated by business prices, have risen at approximately the same rate as productivity. (Lawrence, 1994) It could be argued, then, that, since unearned income has not risen as a share of the total product, labor's bargaining position can be assumed to have remained unchanged. On the other hand, the change in the terms of trade against consumption has not been offset by corresponding changes in labor's compensation, and labor's failure to achieve this, even in part, could be construed as a failure of bargaining power." Peter Dorman
