Real and Nominal Wages

Source: US Department of Labor, Bureau of Labor Statistics, http://stats.bls.gov/lpc/data.htm It is a remarkable fact that, even though US real GDP is now more than 150 percent greater than it was in the early 1970s, real wages are still significantly lower than they were at that time. What is going on here? Part of the story is that other forms of nonwage compensation have become increasingly significant over the past few decades. The most important of these are health-care benefits. When these and other benefits are included, we find that overall compensation has increased reasonably steadily and is about 50 percent greater now than in the early 1970s. [5] Total compensation is, in fact, a better measure than real wages. Even so, total compensation has been increasing at a far slower rate than real GDP over the last few decades. Noneconomic Indicators of Welfare We turn finally to some noneconomic measures of societal welfare, such as statistics on health and education. Table 3.8 “Noneconomic Indicators of Welfare” shows some examples of indicators for four countries. [6] Large differences in GDP per person, such as the difference between the United States and Argentina, are reflected in these other measures. GDP per person is about three times greater in the United States than in Argentina, and the United States also has higher adult literacy, higher secondary school enrolment, lower infant mortality, and higher life expectancy.