The Effects of Productivity on Labor Costs

If labor costs are really going up, that might result in the employer trying to squeeze workers to earn less or to get a smaller raise. What the workers actually get is just one part of an employer's overall labor costs. But whatever extra health insurance costs the employers have to bear, well, that's going to be part of labor costs. So rising unit labor costs like that are bad. If we're getting falling productivity, it's going to work in reverse. Then you add inflation on top of that and it makes it worse. There's only one way that you can get real wages to go up. And that's if productivity goes up.