Wednesday, July 17, 2013

Are people still paid their marginal product?

Economic theory says that people are paid their marginal product of labor and for a long time the data backed this up. Then in the 1970's it appeared that wages and productivity were diverging. A new study by the Heritage Foundation shows that when total compensation is considered, rather than just wages (the true cost of a worker is not just their money price), and a different yet likely more correct measure of inflation is used, economic theory indeed holds true.

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