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6/04/2004

When do workers get their share?

When do workers get their share?:

"Despite recent good news on employment growth, the current economic recovery, now approaching its third year, remains the most unbalanced on record in respect to the distribution of income gains between corporate profits and labor compensation. Essentially, rapid gains in productivity have been translating into higher corporate profits without increasing the wage and salary income of American workers."
Economics Question: On what basis to employers set their wages? In a competitive labor market, do they prepare compensation packages based on take home pay?

Bush's reductions in the lowest marginal tax rates had the effect of slightly increasing a wage-earners take home pay. It seems like employers may view that increase in take-home as a proxy pay increase, and feel less pressure to increase compensation accordingly. This, of course, would mean that the true beneficiaries of the reductions in marginal rates would be employers, who extract the rents through lower labor costs. All of this is contingent on a slack labor market.

I did some research on this a couple of months ago, but couldn't find anything other than articles about efficiency wages. Not so helpful.

 

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