Wages won’t track linearly with productivity because different goods and services have different demands for labour and capital. As we get better at making physical goods prices decrease or quality increases or both. A haircut or a dance recital still takes the same amount of human labour though and it gets more expensive in relative terms. If it didn’t people would leave the service industry for the higher wages available in goods production. And more advanced economies have a higher share of services than less advanced ones. That’s Baumol’s cost disease and it explains huge amounts of the growing relative costs of highly labour intensive services like education or healthcare. See Why Are the Prices So Damned High?, Helland and Tabarrok.
As well as that you have growing land use regulation making certain types of housing illegal, e.g. apartments or houses below a certain area, or flophouses/SROs. Zoning more generally does this everywhere. Most of the residential buildings in Manhattan would be illegal to build today. So land holders capture much of the gains in productivity and that doesn’t show up in the labour share of productivity growth. But land ownership is extremely widespread; this is the lower middle class and up, not just the rich capturing increases in productivity.
Less important but still significant is that due to the US tax code’s treatment of benefits compensation has gone up more than wages have. The cost of health insurance has gone up enormously since the 70’s, A’s has what you get for your money.
https://www.mercatus.org/system/files/helland-tabarrok_why-a...
Most important and revealing graph in the entire book
https://marginalrevolution.com/marginalrevolution/2019/05/wh...
As well as that you have growing land use regulation making certain types of housing illegal, e.g. apartments or houses below a certain area, or flophouses/SROs. Zoning more generally does this everywhere. Most of the residential buildings in Manhattan would be illegal to build today. So land holders capture much of the gains in productivity and that doesn’t show up in the labour share of productivity growth. But land ownership is extremely widespread; this is the lower middle class and up, not just the rich capturing increases in productivity.
Less important but still significant is that due to the US tax code’s treatment of benefits compensation has gone up more than wages have. The cost of health insurance has gone up enormously since the 70’s, A’s has what you get for your money.