​Labour Productivity

S L Shetty’s perceptive review of Surjit Bhalla’s new book, The New Wealth of Nations (EPW, 23 February 2019) pinpointed accurately both the stimulating insights and intellectual issues Bhalla raises. Indeed, human capital is important as a factor in overall economic and social development, as are the issues of inequality and convergence or, lack of it.

However, I wanted to raise an objection to one of his assertions. Wages and their trend are not solely determined by labour productivity. In fact, the deviation of trends in labour productivity and workers’ compensation has been a major issue for economic statistics “junkies” in the recent years. And extensive treatment of this is available for United States (US) data in “Understanding the Labor Productivity and Compensation Gap,” a 2018 US Bureau of Labor Statistics (BLS) publication available on the internet.