Skip to main content

The FRED® Blog

Testing theory: marginal product and wages

Economic theory tells us that, in a perfectly competitive labor market, labor should be paid according to its “marginal product.” Now, without the jargon: The last workers to be hired by a business should receive pay that is equal to their contribution to the output of that business. So, let’s compare the data with the theory…

Unfortunately, we have no data on the marginal product. But fortunately, we have data on average product. Although it’s not a certainty, these two products should be correlated. So, the graph above shows real growth rates for average product and the average wage. But again, there’s a limitation to the data: We must use the wage of production workers only if we want a series that’s long enough to compare with average product.

Ultimately, it doesn’t look like these series are closely related. The two data limitations we have here could be undermining the relationship. Or the labor market could be less than perfectly competitive. Or the theory could be wrong. It’s difficult to say. But such is the life of an economist… For some more-rigorous research on this topic, take a look at this recent Economic Synopses essay.

How this graph was created: Search for “real output per hour” and select the series shown here. In the “Edit Graph” panel, add the next series by searching for “average hourly earnings” and taking the series with the longer duration. Then modify this series by adding the CPI data series and applying the formula a/b. Select “Percent Change from Year Ago” as the units.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: AHETPI, CPIAUCSL, PRS84006091

No space in the overhead bin: The rise of the airline “load factor”

Does it feel more crowded on airplanes these days? FRED has some data on that. Specifically, we look at “load factor,” an industry term for passenger-miles as a percentage of available seat-miles, which measures how full a flight is.

The graph offers data for domestic and international flights that have clearly not been seasonally adjusted. Just look at all the turbulence: Summer months are highly popular; international flights are much less full in February; and domestic flights seem to do a double dip, first in September and again in January.

But back to our question: Yes, flights seem to be slightly fuller than before. The load during popular months hasn’t risen much. But low-load months, especially domestically, have seen large increases. So your seatback may be in the upright position more often than not. Still, it may be more likely that you’re simply on a popular, crowded flight and not more likely that every flight will be more crowded.

The most extreme signal in this graph, of course, is the steep decline in airline travel after September 11, 2001.

How this graph was created: Search for “load factor,” select the two series you want, and click “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: LOADFACTORD, LOADFACTORI

Juggling jobs

Some jobs pay less because they’re part-time. Some jobs just pay less. And these jobs may not provide enough income for workers to make ends meet, bring down debt, or pay for family health expenses. Whatever the reason, some workers have multiple jobs. Let’s consult FRED to see how common this is.

The Current Population Survey from the Bureau of Labor Statistics offers data on the fraction of workers (among all workers) who hold multiple jobs. It’s not a large number, but it’s not negligible either: Today, it’s about 5%. Its slow decline over time suggests that the need for multiple jobs, often some sort of financial distress, is becoming less frequent. By looking at the graph, we see that recessions (shown by the gray bars) seem to have no significant impact on this measure.

How this graph was created: Search for “multiple jobholders,” select the series, and expand the sample period to the maximum range.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: LNS12026620


Subscribe to the FRED newsletter


Follow us

Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo
Back to Top