The Decline of Purchasing Power in Modern Economies is evident. Why is wage growth no longer keeping up with the rising cost of living?

The Decline of Purchasing Power in Modern Economies is evident. Why is wage growth no longer keeping up with the rising cost of living?

Trend of Global Wage Share in Global GDP (2000–2024)

The visualization below illustrates this decline, highlighting the persistent macroeconomic mismatch between global productivity gains and labor compensation. [1]

The following would be Gemini/AI's response, if you were to ask IT:

"The decline in purchasing power in modern economies is the result of profound structural, macroeconomic, and political transformations that have occurred in recent decades. The discrepancy between wage trends and the cost of living is not due to a single factor, but to a set of interconnected causes.

1.Productivity-wage decoupling/Asymmetric growth: Until the 1970s, increases in worker productivity and real wage growth went hand in hand. The gap: Over the past forty years, productivity has continued to rise thanks to technological innovations, while median wages have remained essentially stagnant. Wealth distribution: Gains from productivity spikes have been channelled into corporate profits, shareholder dividends, and top executive compensation, rather than redistributed to the workforce.

2. Globalization and delocalization/Downward competition: The opening of global markets has pitted workers in advanced economies against low-cost labor in developing countries.

3.Loss of bargaining power: The threat or actual practice of industrial relocation has forced unions and Western workers to accept wage moderation in order to preserve their jobs. Automation and technological progress/Job polarization: Technology has automated routine tasks, drastically reducing the demand for medium-skilled professionals (clerks, skilled workers).

 4. Oversupply: Workers excluded from these sectors have flocked to low-skilled service sectors, where the oversupply of labor keeps wages low.

5. Structural changes in the labor market/Flexibilization: The growth of the so-called gig economy, on-call contracts, fixed-term contracts, and bogus self-employment has made employment precarious.

6. Union Weakness: Union membership has plummeted in most OECD countries, reducing workers' ability to bargain for collective wage increases in line with inflation.

7. Nature of Modern Inflation/Essential Goods: Recent inflation has disproportionately affected non-substitutable, frequently purchased goods, such as energy, food, and rent.

8. Adjustment Lag: Even when nominal wages rise, they do so with a significant time lag (wage lag effect) compared to the immediate surge in consumer prices, eroding real wealth in the short and medium term.»

Gemini/AI does not mention them, but probably there are many other reasons, including ideological and contemporary ethics, linked to the popular conflict against the ruling elites who demand total control, for example, through the financialization of the economy, derivatives and crypto-currencies, extensive-automation of any process, etc., which deserve extensive, multidisciplinary research to uncover and demonstrate the evidence.