News from EPI Workers have not benefited from productivity growth in almost four decades

For Immediate Release: Thursday, April 26, 2012
Contact: Phoebe Silag or Karen Conner, news@epi.org 202-775-8810

 Workers have not benefited from productivity growth in almost four decades

The vast majority of workers have not benefited from productivity growth in the United States since the mid-1970s, a new EPI paper finds. The greatest divergence between the growth of productivity and a typical worker’s compensation has occurred in the period since 2000. In contrast, from 1948 to 1973, workers did benefit as their pay grew in tandem with productivity, resulting in higher living standards across the board.

In The wedges between productivity and median compensation growth, EPI President Lawrence Mishel identifies three “wedges” that have stood between growth and the experience of American workers since 1973 and especially in the past decade. He also explains that the divergence of pay and productivity is largely responsible for the growth in income inequality in the U.S. The report previews data from the 12th edition of “The State of Working America,” which will be released in August.

Mishel identifies the following wedges between the growth of productivity and median compensation:

  • The share of income that is wage income for workers has decreased as, correspondingly, the share for unearned income (dividends, interest, profits) accruing to wealth holders has increased.
  • The compensation of the median worker has grown much more slowly than compensation for the highest-paid workers.
  • Workers have suffered worsening terms of trade, meaning the price growth of things workers buy has grown more quickly than the price growth of things workers produce.

The growing inequality of compensation was the most significant factor driving the gap between productivity and median compensation in the entire 1973-2011 period. However, from 2000 to 2011, when the gap grew the fastest, the shift of income from labor to capital played the largest role.

“We are often told that greater competitiveness and higher productivity are the keys to higher living standards,” said Mishel. “In fact, productivity growth only establishes the potential for improved standards of living. In the past four decades, and especially recently, it has not translated into proportionate gains for working families.”

Reporters interested in receiving an advance copy of “The State of Working America” should contact the EPI media relations department at news@epi.org.