Final answer:
While increased productivity usually leads to increased wages, exceptions occur in scenarios like automation causing job loss, education not matching job opportunities, government wage policies, and labor union negotiations. These conditions can disrupt the expected correlation between productivity and wages.
Step-by-step explanation:
The logic of how increased productivity is associated with increased wages is generally understood in economics to mean that when workers produce more output per hour (improved productivity), their wages should also increase as a result. The premise is that more productive workers create more value for a company and therefore the company can afford to pay them higher wages.
However, there are situations where this does not hold true. For example, consider automation leading to job loss (a). If a company invests in automation technology, it may lead to increased productivity but at the same time could result in job losses, as fewer workers are required to produce the same amount of goods. In this case, the workers who are displaced by automation do not experience higher wages, despite the overall productivity gains of the company.
Another situation could be increased education without job opportunities (b). It's possible for an individual or a workforce to become more skilled or educated, thus increasing their potential productivity. However, if the job market is saturated or the economy is in recession, these more educated workers may not find employment that pays higher wages commensurate with their productivity potential.
Additionally, government intervention in wage setting (c) can override the productivity-wage relationship. If the government sets minimum wages that are not in line with productivity levels, employers may be required to pay wages based on legislation rather than productivity gains. Conversely, strong labor unions (d) may negotiate for wages that do not necessarily align with productivity, either due to political reasons or to maintain employment levels, potentially leading to wage stagnation despite productivity increases.
In all these cases, wages may not rise in tandem with productivity due to factors like technological change, labor market conditions, governmental policy, or collective bargaining dynamics. Moreover, theories suggest that wages are 'sticky' and tend not to move downward, indicating that wages may stay the same or only fall very slowly even when productivity decreases, thus breaking the direct link between productivity and wage levels.