Extended Summary

In mainstream theory, the relationship between wages and labor productivity is explained by the marginal productivity theory. According to this theory, wages are determined where they are equal to the marginal product of labor. However, studies in the literature reveal that such a relationship between wages and productivity does not exist. Especially since the 1980s, labor productivity has increased faster than real wages and employment. While there are arguments that the lack of productivity growth reflected in wages stems from technological advances or inequality, the reason for this divergence is embedded in the capitalist mode of production; it can be explained by “surplus value,” defined by Marx as the value produced by the working class and appropriated by the capitalist class without compensation.

The foundations of Marx’s theory of surplus value are based on the labor theory of value, one of the cornerstones of economics. According to Marx, this is the appropriation of a portion of living labor without compensation. With the concept of “surplus value,” produced by the working class and appropriated by the capitalist class without compensation, Marx draws attention to the problem of distribution, a problem entirely absent from classical and neoclassical theory. According to him, in any society where the means of production are concentrated in a certain group, workers must work additional hours to produce not only the necessary labor time required to ensure the survival of the working class but also the means to provide for the livelihood of those who own the means of production.

This study will demonstrate through panel data analysis that despite increases in labor productivity, wage increases have lagged far behind productivity, and that the labor-wage relationship posited by marginalist theory is actually a myth. For this purpose, the relationship between labor productivity (LP), total factor productivity (TFP), multifactor productivity (MP), gross domestic product in local currency (lnLCU), material productivity (MFP) and the average wage (W) will be analyzed using panel data. Numerous studies in the academic literature have demonstrated that increases in labor productivity are not reflected in wages. However, no studies have been found that attempt to determine the direction of the relationship between labor productivity and wages. For this purpose, unlike other studies, LP² and LP³ were added to the model. Thus, determining the direction of the relationship between wages and labor productivity makes the study original and contributes to the literature. Furthermore, the addition of total factor productivitiy, multifactor productivity and material productivityto the model is crucial for testing the validity of the results obtained from the analysis. Finally, including gross domestic product in local currency in the model is important for testing the validity of the results obtained and drawing attention to the distribution problem.

According to the study’s results, the relationship between labor productivity and wages is positive. This means that increases in labor productivity are reflected in wages to a certain extent. However, the relationship between LP² and W is negatif, meaning that wages tend to decline as labor productivity increases. Finally, the relationship between LP³ and W was found to be positive, but remained at very low levels of 0.13. This is the most significant evidence that increases in labor productivity are not reflected in wages in the long run. Furthermore, the relationship between total factor productiviy, multifactor productivity and material productivity, added to the model to test the validity of the results, is found to be negative. The negative relationship between productivity and wages is a key indicator that while profit margins increase, wages do not increase. This situation can be explained by wage losses caused by monopolization, the weakening of union power, or the reserve army of the unemployed arising from globalization. The relationship between lnLCU and wages was also found to be negatif, meaning that income increases are not reflected in wages. Consequently, all variables used in the study yielded results that supported each other.

The failure of increased labor productivity to be reflected in wages and the gradual decline in labor’s share of income should be viewed as a social problem and accepted as a structural phenomenon that must be addressed through policy-oriented efforts. In this process, measures such as increasing institutional bargaining power, linking the minimum wage to productivity growth, wage controls, steps to prevent informal employment, tax breaks for labor, prioritizing investments that reduce unemployment and create jobs, and preventing monopolies can minimize the harm to labor in this process.

This study aimed to draw attention to the distribution problem through the labor-wage relationship, using econometric methods, one of the fundamental tools of the mainstream economy. It should be noted that the countries with the highest labor productivity are also developed countries. It is quite striking that even in these countries, the problem of labor share, that is, the distribution problem, remains unresolved. Therefore, it should be remembered that the steps taken based on this study should be global, not specific to individual countries.