"Of course, that return to pre-recession level earnings hasn’t translated into job or wage growth for America’s workers. In fact, inflation-adjusted wages fell last year. Big companies are also squeezing more productivity out of their workers, with annual revenue generated per worker increasing by more than $40,000 over the last five years. CEO pay, meanwhile, increased 15 percent last year." - [Link]
"According to a study by researchers at Northeastern University, during the first nine months of the recovery, pretax corporate profits rose by $388 billion while total wages and salaries rose by only $68 billion. Of the total, therefore, corporate profits received 85%.....By contrast, in four previous recoveries since 1980, the share going to corporate profits averaged just 19%. As a result, corporate profits are now at their highest level since World War II." - Time Magazine : Why aren't there more jobs
"The drive to boost published profits has pushed down business investment in both the U.S. and the U.K. This has boosted the relative wealth of owners of capital compared to the rest of the population. Because the rich consume less than the rest, this has had a dampening effect on wider incomes and economic growth" Wall Street Journal
American workers saw large productivity increase without corresponding increase in wages. With higher productivity, US businesses achieve higher profits. They don't have to hire more workers hence we have the weak employment figures. With the income of workers stagnant, aggregate demand reminds weak and that has hindered the economic recovery.
With most of the wealth going to the rich, there is a dampening effect on consumption as the rich spend only a fraction of their income while middle class and below spend most of their income.
Without increase demand, businesses are reluctant to invest and expand ,,,,they rather give out profits as dividends or keep a cash hoard,.
Why are wages stagnant despite increase in productivity? There is a lot of slack in the US labor market with unemployment rate of 8.2% so there is no pressure to increase wages even as profits increase,
What has all this got to do with Singapore? Remember all the talk by the PAP that productivity has to go up before wages....
"This year, with the booming economy, we will definitely need more foreign workers so that we can create more jobs in Singapore. A few months ago, I mentioned to the press that we could need more than 100,000 foreign workers more this year. There was a big ooh which you could almost hear. Well, since then, we have recalculated. Maybe, we will get by with a few less, perhaps 80,000 workers. But I said this to highlight the trade-off which we face and which we cannot avoid" - National Day Speech 2010 PM Lee
Typically when our economy gets stronger, the govt lets in more foreign workers. This keeps wages down and companies don't have to increase wages even if productivity has increased. So productivity increase may not result in rising income. When Singapore businesses expand they have access to foreign workers, we see cost pressures building up in other areas such as office rentals, transport, housing etc. Everything else goes up while wages remain stagnant. This boosts the wealth of "owners of capital", e.g the large businesses that own the office buildings etc and this worsens our income gap.
Most Singaporeans are wage earners. Unless we change the current economic model so that wealth generated is distributed in a more equitable manner, we will not see an end to the rising discontent and the increased polarization of our society.