At Mises CA. An excerpt:
Reich then goes on to argue that if the minimum wage in 1968 had kept pace with the growth in the “average productivity” of American workers, then today it would be more than $21/hour. Although Reich doesn’t come right out and say it, he sure implies that the workers on the bottom rungs are really getting screwed, that they are producing $21/hour of output for their bosses and yet only getting paid $7.25/hour (the current federal minimum wage).
Is this remotely plausible? Surely someone who was the Secretary of Labor can’t possibly be this ignorant of how competitive labor markets work?
To give a hint, those “average productivity” figures work by taking total GDP and dividing by the number of workers. So hypothetically speaking, if developments in fracking technology allowed the same number of workers to produce more oil, then “average productivity” would go up. In terms of marginal productivity analysis, this would obviously mean increased rents for the owners of land (which had large mineral deposits), and lesser increases in the earnings of specialized drilling equipment and high-skill workers with experience working in oil fields. There would be no reason at all to expect the statistical increase in “average productivity” to correspond to the same jump in “average wages,” let alone the average wage among unskilled workers.