NCPA - National Center for Policy Analysis

EPF Backgrounder: Downsizing And Wages

May 19, 1998

Some say workers' increased job insecurity due to downsizing is restraining wages. The outplacement firm Challenger, Gray & Christmas says job-cut announcements in the fourth quarter of 1997 were one-third higher than in the same period a year ago, and the January 1998 number was the highest monthly total in two years. But many economists say there is no connection between anxiety and wages.

  • Overall wage growth in the 1990s has been consistent with measured productivity growth, and the share of national income going to wages has remained relatively stable.
  • Meanwhile corporate profits have recovered from their historic lows of the mid-1980s (see figure).
  • And the length of time workers stay at any one job hasn't shrunk; for instance, Princeton University economist Henry Farber says "there has been no systematic change in the overall distribution of job duration over the last two decades."

In the long run, say economists, real factors, such as rates of technological change and innovation, and increased efficiency in the organization of work, determine the path of real wage growth, not worker "anxiety."


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