Posted 5 years ago on Sept. 4, 2015, 11:28 a.m. EST by factsrfun
from Phoenix, AZ
This content is user submitted and not an official statement
Updated September 2015
Most Americans believe that a rising tide should lift all boats—that as the economy expands, everybody should reap the rewards. And for two-and-a-half decades beginning in the late 1940s, this was how our economy worked. Over this period, the pay (wages and benefits) of typical workers rose in tandem with productivity (how much workers produce per hour). In other words, as the economy became more efficient and expanded, everyday Americans benefitted correspondingly through better pay. But in the 1970s, this started to change.
Disconnect between productivity and a typical worker’s compensation, 1948–2014 Year Hourly compensation Net productivity
1948–1973:Productivity: 96.7%Hourly compensation: 91.3% 1973–2014:Productivity: 72.2%Hourly compensation: 9.2% ChartData Note: Data are for average hourly compensation of production/nonsupervisory workers in the private sector and net productivity of the total economy. "Net productivity" is the growth of output of goods and services minus depreciation per hour worked. Source: EPI analysis of data from the BEA and BLS (see technical appendix of Understanding the Historic Divergence Between Productivity and a Typical Worker's Pay for more detailed information) Share Tweet Embed Download image Productivity–Pay Tracker Change 1973–2014: Productivity +72.2% Hourly pay +9.2% Productivity has grown 7.8x more than pay Updated September 2015
Since 1973, pay and productivity have diverged. From 1973 to 2014, net productivity rose 72.2 percent, while the hourly pay of typical workers essentially stagnated—increasing only 9.2 percent over 41 years (after adjusting for inflation). This means that although Americans are working more productively than ever, the fruits of their labors have primarily accrued to those at the top and to corporate profits, especially in recent years.
Why this happened—and how we can fix it Rising productivity provides the potential for substantial growth in the pay for the vast majority. However, this potential has been squandered in recent decades. The income, wages, and wealth generated over the last four decades have failed to “trickle down” to the vast majority largely because policy choices made on behalf of those with the most income, wealth, and power have exacerbated inequality. In essence, rising inequality has prevented potential pay growth from translating into actual pay growth for most workers. The result has been wage stagnation.
For future productivity gains to lead to robust wage growth and widely shared prosperity, we need to institute policies that reconnect pay and productivity, such as those in EPI’s Agenda to Raise America’s Pay. Without such policies, efforts to spur economic growth or increase productivity (the largest factor driving growth) will fail to lift typical workers’ wages.
Resources Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay: Why It Matters and Why It’s Real | September 2, 2015
This paper provides an updated analysis of the productivity–pay disconnect and the factors behind it, and explains the measurement choices and data sources used to calculate the gap.
Raising America’s Pay: Why It’s Our Central Economic Policy Challenge | June 4, 2014
Broad-based wage growth is the key to reversing the rise of income inequality, enhancing social mobility, reducing poverty, boosting middle-class incomes, and aiding asset-building and retirement security.
How to Raise Wages: Policies That Work and Policies That Don’t | March 19, 2015
Wage stagnation is not inevitable. It is the direct result of public policy choices on behalf of those with the most power and wealth that have suppressed wage growth for the vast majority in recent decades. Thus, because wage stagnation was caused by policy, it can be alleviated by policy.
2014 Continues a 35-Year Trend of Broad-Based Wage Stagnation | February 19, 2015
2014 was yet another year of poor wage growth for American workers. With few exceptions, real (inflation-adjusted) hourly wages fell or stagnated for workers across the wage spectrum between 2013 and 2014—even for those with a bachelor’s or advanced degree. Of course, as EPI has documented for nearly three decades, this is not a new story.