The wage-productivity paradox refers to a situation where wages and productivity levels are not proportionally aligned. Our empirical assessment indicates that an increase in labor productivity translates to a low wage growth.
Resolving this paradox is a common goal for policymakers and labor advocates, as it involves ensuring that workers are fairly compensated for their increased productivity, ultimately contributing to a more equitable and sustainable economic system.
A progressive wage model is a balanced approach to address wage and productivity growth simultaneously. The progressive wage model does not contribute to inflation and job losses due to its gradual and targeted approach to raising wages for low-income workers. By linking wage increases to productivity improvements, businesses are incentivized to invest in efficiency and training, offsetting labor cost hikes.