Alan Blinder is excellent:
When it comes to wages, the basic story of recent decades is redolent of Scrooge. Real average hourly earnings (excluding fringe benefits) now stand roughly at 1974 levels. Yes, that’s right, no real increase in over 35 years. That is an astounding, dismaying and profoundly ahistorical development. The American story for two centuries was one of real wages advancing more or less in line with productivity. But not lately. Since 1978, productivity in the nonfarm business sector is up 86%, but real compensation per hour (which includes fringe benefits) is up just 37%. Does that seem fair?
Not to me. But I think that progressive discussions of this phenomenon wind up overcomplicating things when contemplating the causes. Over the past 30 years the Federal Reserve has proven itself to be much better at preventing inflationary episodes than at preventing recessions. There’s no long-term tradeoff between inflation and unemployment. A perfect central bank should be able to produce full employment and price stability all the time. But no real central bank is perfect. And what the Fed has done for 30 years is err on the side of letting aggregate demand get too low. Sluggish median compensation growth is a straightforward consequence of this decision.