Larry Summers on Sectoral Productivity Disparities

He says,

people with higher wages now work more hours than people with lower wages. The time series tracks the cross section. Over time, as we have all gotten richer, the number of hours worked for many people has risen

and also

the simple fact is that the relative price of toys and a college education has changed by a factor of ten in a generation

Pointer from Timothy Taylor.

How do you connect these dots? One way is to scream “We need more government!” Because look at the inequality! Look at the low productivity in education and health care, and we know government ends up running the low-productivity sectors!

I had another way to connect the dots. You could say that the cost of living has gone way down for people who do not measure their self-worth by the prestige of the college to which their kids go and the breadth of their health insurance coverage. Many people can now afford what they think is a decent lifestyle without earning so much in the labor market. However, the anointed look at such people and say, “But you must attend an elite college. But you must have health insurance that covers all manner of medical services, not just major medical.”

3 thoughts on “Larry Summers on Sectoral Productivity Disparities

  1. Yep. And the political types consistently underestimate the many costs of doing real work for a living.

  2. To my knowledge, toys and television sets do not enjoy an federal subsidies. One way to connect the dots is that those sectors with the highest federal subsidies (health care and education) have the highest cost inflation.

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