In honor of EPI’s new initiative, Raising America’s Pay, we updated our wage calculator, which shows how much you would be making if wages had kept pace with productivity. Having wages for the vast majority of American workers keep pace with productivity is a key indicator of an economy that is working for all.
Economic inequality is a real and growing problem in America, but the discussion around addressing inequality too frequently sidesteps a crucial component: the key to shared prosperity is to foster wage growth for the vast majority of Americans who rely on their paychecks to make ends meet. In fact, raising the pay for most Americans is the central economic challenge of our time—essential to ameliorating income inequality, boosting living standards for the broad middle-class, reducing poverty, and sustaining economic growth.
Crucially, the large and growing wedge between productivity and typical workers’ pay is not inevitable. For example, in the three decades following World War II, wages did rise with productivity and living standards improved throughout the income distribution. Since then, however, the rewards to a growing economy over the last three-and-a-half decades have primarily accrued to those at the top (except for the period of tight labor markets in the late 1990s). Since 1979, the workforce is more educated, is working more, and produces more goods and services in every hour worked. And yet the vast majority of workers are not reaping the rewards of their increased productivity.
The chart above shows economy-wide productivity alongside hourly compensation of production and nonsupervisory workers—i.e., wages for the vast majority of American workers. From 1948 until 1973, wages grew right along with productivity. But between 1979 and 2013, productivity grew 64.9%, while wages grew just 8.2%. Therefore, productivity grew eight times faster than typical worker compensation. (Much of this productivity growth accrued to those with the very highest wages. The top 1 percent of earners saw cumulative gains in annual wages of 153.6% between 1979 and 2012—far in excess of economy-wide productivity at 64.9%.)
What would your paycheck be if wages had kept up with productivity? Take a look, and share with your friends. And remember that the vast majority of American workers should be earning more than they are. To learn more about what has happened and what we can do about it, visit the website for the latest EPI project, Raising America’s Pay.
What should you be making?
Americans' wages have lagged further and further behind productivity gains since the late 1970s, but it wasn’t always this way. After World War II, our pay rose with productivity—the more we made, the more we were paid. Today, the gap between American workers’ productivity and their wages is at an all-time high. What could you be making if wages had grown with productivity?
If wages had kept up with productivity over the last three decades, your pay would be closer to:
Source: Economic Policy Institute | Methodology
This post was updated on 6/4/2014.