WHY THE PRODUCTIVITY TIDE WILL LIFT ALL BOATS

Little wonder. Over the past two decades, real wages have been virtually flat, and the productivity-led recovery of the 1990s hasn't improved the situation. And in a nation where equality has always been a central idea, income inequality is rising. Dozens of books by liberals and conservatives alike, from Jeremy Rifkin's The End of Work to Sir James M. Goldsmith's The Trap, are stoking end-of-an-era pessimism in ways that echo the 1848 Communist Manifesto of Karl Marx and Friedrich Engels: ''The modern labourer...instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper, and pauperism develops more rapidly than population and wealth.''

REAL WEALTH. But just as Marx far underestimated the eventual payoffs from the Industrial Revolution, so, too, are today's pessimists missing the coming gains from the Information Revolution. America's economic glass should be seen as half-full rather than half-empty.

For one thing, workers may be doing better than the recent wage data suggest. Real wages have declined by 0.2% annually over the past five years. But a congressionally appointed panel of economists, headed up by Michael Boskin, former head of the Council of Economic Advisers, argues that the consumer price index has been overstating inflation by at least a percentage point. If that's the case, then real wage gains are 0.8% a year. And hourly compensation--which includes retirement and medical benefits--would be up about 1.3%.

Many workers are also sharing in the boom in stocks and bonds for the first time ever, thanks largely to tax-deferred retirement savings plans such as 401(k)s and individual retirement accounts. Over the past five years, the value of equities and mutual funds held by households has jumped by $2.4 trillion, to $4.5 trillion, according to Joseph Carson, chief economist at Dean Witter Reynolds Inc. And it's the workers who will reap the market gains from their retirement savings, not the companies as in traditional pension plans.

Workers are also bound to do better as fatter paychecks follow higher productivity. Over long periods of time, productivity and wages track each other closely. From 1948 to 1973, productivity rose by 2.5% a year, and real worker earnings gained 3%. When productivity slowed to 0.9% a year from 1973 to 1993, wage gains slipped to a mere 0.7% annual rate. This relationship is also true for Germany and Japan: The big wage gains in those countries coincided with rapid productivity growth after World War II.

But from one year to the next, wages and productivity don't necessarily move in lockstep. When Japan enjoyed an enormous surge in manufacturing productivity, starting in 1968, real compensation did not catch up until around 1973. And in the U.S., it took several years for the sharp productivity drop of the late 1970s to trickle down into a slowdown in real wage growth.

Wage inequality could also narrow as America's high-productivity economy kicks into high gear. Up to now, companies have been paying premium wages for skilled labor in this high-tech era. For instance, employees who use computers are paid on average about 15% higher wages than those who don't. The average annual earnings of male college graduates are some 70% higher than those of high school graduates; at the end of the 1970s, the premium was 42%.

''EVERYONE LEARNS.'' Yet the skill level of American labor is improving, with more workers getting the education and training employers require. A whole generation is picking up skills at community colleges and technical institutes. Moreover, software companies are making their products more accessible to the masses, even as computer learning aids for the technologically illiterate proliferate. ''When a new technology comes in, initially the better-educated workers are better at adapting to the technology,'' says Kevin Murphy, economist at the University of Chicago. ''But,'' he adds, ''eventually, everyone learns, and the premium for knowledge falls back.''

That's what happened at the turn of the century. The introduction of typewriters, addressing machines, dictaphones, mimeo machines, and other innovations made many office tasks simpler to do, according to research by Claudia D. Goldin and Lawrence F. Katz, economists at Harvard University. At the same time, the percentage of Americans with high school diplomas rose sharply. As a result, the wage premium paid to white-collar office workers fell between 1914 and the early 1920s, even while overall living standards were rising.

Cold comfort to a laid-off middle manager or a worker who hasn't gotten a pay raise in years. Still, today's high-tech productivity bonanza will have a double-barreled impact on living standards. It will raise wages as the country becomes ever more productive. The march of the microprocessor will also increase economic mobility as workers upgrade their skills and move up the earnings ladder. When the payoff comes, the wait will have been more than worth it.