Real wages The chapter has presented data on relative wages of high-skill and low-skill workers. In this question, we look at the evolution of real wages.

a. Based on the price-setting equation we use in the text, how should real wages change with technological progress? Explain. Has there been technological progress during the period from 1973 to the present?

b. Go to the Web site of the most recent Economic Report of the President (https://www.whitehouse.gov/sites/default/files/ docs/cea_2015_erp.pdf) and find Table B-15. Look at the data on average hourly earnings (in nonagricultural industries) in 1982-1984 dollars (i.e., real hourly earnings). How do real hourly earnings in 1973 compare to real hourly earnings in the latest year for which data are available?

c. Given the data on relative wages presented in the chapter, what do your results from

(b) suggest about the evolution of real wages of low-skill workers since 1973? What do your answers suggest about the strength of the relative decline in demand for low-skill workers?

d. What might be missing from this analysis of worker compensation? Do workers receive compensation in forms other than wages?

The Economic Policy Institute (EPI) publishes detailed information about the real wages of various classes of workers in its publication The State of Working America. Sometimes, EPI makes data from The State of Working America available at www. stateofworkingamerica.org.