The capital intensity factor that contributes to the United States Skilled Worker’s Average Wage Stagnation

Abstract

Over the past 45 years, whereas the GDP has grown, skilled workers in America have experienced trivial increase in real wage. We find the stagnation a result of two periods of increase and one period of decrease in wage. This research aims to analyze this phenomenon and contributes to the study of the causes of wage fluctuation through a microscopic lens. This paper is unique from previous studies in methodology. We present our analysis by combining both macro and micro indicators. We incorporate capital investment and Marginal Revenue Productivity Theory, which we relate to productivity, in our study. Further, we use a multiple linear regression to establish a more solid quantitative support to the discussion. The variables we use in the regression are work hours, productivity, capital input, capital intensity, and real wage. The paper finds a strong correlation between average wage and capital intensity. This conclusion could help policymakers to design policies beneficial to skilled workers in the future.