The Productivity–Pay Gap

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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  0.0% 0.0%
1949 6.3% 1.5%
1950 10.5% 9.3%
1951 11.8% 12.3%
1952 15.0% 15.6%
1953 20.8% 19.5%
1954 23.5% 21.6%
1955 28.7% 26.5%
1956 33.9% 26.7%
1957 37.1% 30.1%
1958 38.2% 32.8%
1959 42.5% 37.6%
1960 45.5% 40.0%
1961 48.0% 44.3%
1962 52.5% 49.8%
1963 55.0% 55.0%
1964 58.5% 60.0%
1965 62.5% 64.9%
1966 64.9% 70.0%
1967 66.9% 72.0%
1968 70.7% 77.2%
1969 74.7% 77.9%
1970 76.6% 80.4%
1971 82.0% 87.1%
1972 91.2% 92.0%
1973  91.3% 96.7%
1974 87.0% 93.7%
1975 86.8% 97.9%
1976 89.7% 103.4%
1977 93.1% 105.8%
1978 96.0% 107.8%
1979 93.4% 108.1%
1980 88.6% 106.6%
1981 87.6% 111.0%
1982 87.8% 107.9%
1983 88.3% 114.1%
1984 86.9% 119.7%
1985 86.3% 123.4%
1986 87.3% 128.0%
1987 84.6% 129.1%
1988 83.9% 131.8%
1989 83.7% 133.6%
1990 82.2% 137.0%
1991 81.9% 138.9%
1992 83.0% 147.5%
1993 83.4% 148.4%
1994 83.8% 150.7%
1995 82.7% 150.8%
1996 82.8% 156.9%
1997 84.8% 160.5%
1998 89.2% 165.7%
1999 91.9% 172.1%
2000 92.9% 178.5%
2001 95.6% 182.9% 
2002 99.5%  190.7%
2003 101.6% 200.2%
2004 101.0% 208.3%
2005 100.0% 213.6%
2006 100.2% 215.6%
2007 101.7% 217.8%
2008 101.8% 218.3%
2009 109.7% 224.9%
2010 111.5% 234.4%
2011 109.1% 234.8%
2012 107.3% 236.6%
2013 108.3% 236.9%
2014 109.0% 238.7%
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The data below can be saved or copied directly into Excel.

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)

Source: Economic Policy Institute analysis of data from the Bureau of Economic Analysis' National Income and Produce Accounts and the Bureau of Labor Statistics' Consumer Price Indexes and Labor Productivity and Costs programs (see technical appendix of Understanding the Historic Divergence Between Productivity and a Typical Worker's Pay for more detailed information)

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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.