Note 3-6

6 Caution should be exercised with respect to the assumption that wages are reflected in productivity. If a formula explaining the economic growth rate from the Divisia Labor Index and capital stock is computed (Appended Table 3-6), coefficient of the Divisia Labor Index is not significant. What may have contributed to this to some extent is the fact that wage levels have been excessive compared to productivity amid the rise in the labor share since the 1990s as seen in Chapter 1. However, the recent adjustments in wages have been reflected in the quality of labor, which means that labor quality can be expected to have a significant effect on the economic growth rate.