The Productivity–Pay Gap

Updated May 2021

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 benefited correspondingly through better pay. But in the 1970s, this started to change.

The gap between productivity and a typical worker’s compensation has increased dramatically since 1979: Productivity growth and hourly compensation growth, 1948–2019

Year Hourly compensation Net productivity
1948 0.0% 0.0%
1949 5.8% 1.6%
1950 9.9% 9.3%
1951 10.9% 12.2%
1952 14.4% 15.5%
1953 20.2% 19.4%
1954 22.5% 21.5%
1955 27.4% 26.4%
1956 32.3% 26.6%
1957 35.0% 30.0%
1958 35.8% 32.7%
1959 39.6% 37.6%
1960 42.0% 40.1%
1961 44.2% 44.4%
1962 48.2% 49.8%
1963 50.3% 55.0%
1964 65.0% 60.0%
1965 69.2% 64.9%
1966 71.1% 70.0%
1967 73.4% 72.0%
1968 77.7% 77.1%
1969 80.9% 77.9%
1970 83.3% 80.4%
1971 87.9% 87.1%
1972 97.2% 92.2%
1973 95.4% 97.0%
1974 90.8% 93.8%
1975 90.4% 98.1%
1976 92.2% 103.6%
1977 95.4% 106.1%
1978 97.7% 108.3%
1979  95.0% 108.1%
1980 89.8% 106.8%
1981 88.6% 110.5%
1982 89.1% 108.4%
1983 90.0% 114.5%
1984 88.5% 120.2%
1985 88.0% 123.7%
1986 89.6% 128.3%
1987 87.6% 128.8%
1988 86.9% 132.0%
1989 87.4% 134.1%
1990 86.2% 137.0%
1991 86.1% 138.5%
1992 87.8% 147.5%
1993 88.2% 148.5%
1994 88.8% 150.6%
1995 88.0% 151.6%
1996 88.4% 156.3%
1997 90.7% 160.8%
1998 95.5% 166.3%
1999 98.4% 173.5%
2000 99.6% 179.5%
2001 102.5% 183.8%
2002 106.6% 191.6%
2003 108.7% 201.3%
2004 107.8% 209.4%
2005 107.0% 215.4%
2006 107.3% 217.7%
2007 109.4% 219.8%
2008 109.4% 221.5%
2009 117.8% 228.8%
2010 119.7% 238.3%
2011 116.8% 238.3%
2012 114.7% 239.6%
2013 116.9% 241.0%
2014 117.5% 243.0%
2015 121.2% 246.5%
2016 123.3% 247.3%
2017 123.6% 250.6%
2018 125.2% 254.5%
2019 128.5% 258.4%
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The data below can be saved or copied directly into Excel.

Notes: Data are for compensation (wages and benefits) 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 less depreciation per hour worked.

Source: EPI analysis of unpublished Total Economy Productivity data from Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, wage data from the BLS Current Employment Statistics, BLS Employment Cost Trends, BLS Consumer Price Index, and Bureau of Economic Analysis National Income and Product Accounts

Updated from Figure A in Raising America’s Pay: Why It’s Our Central Economic Policy Challenge (Bivens et al. 2014)

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Productivity–Pay Tracker

Change 1979–2019:

Productivity

+72.2%

Hourly pay

+17.2%

Productivity has grown 4x more than pay

Since 1979, pay and productivity have diverged.

From 1979 to 2019, net productivity rose 72.2 percent, while the hourly pay of typical workers essentially stagnated—increasing only 17.2 percent over 40 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 and restore worker power, such as those in EPI’s First Day Fairness Agenda and the 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

The State of American Wages 2017: Wages Have Finally Recovered from the Blow of the Great Recession but Are Still Growing Too Slowly and Unequally | March 1, 2018

Rising wage inequality has been a defining feature of the American economy for nearly four decades. Although we are seeing broad-based wage growth in 2017 data, ordinary workers are just making up lost ground rather than getting ahead.

First Day Fairness: An Agenda to Build Worker Power and Ensure Job Quality | August 22, 2018

First Day Fairness is the right of all workers to a fair system of work from their first day on the job. EPI’s First Day Fairness Agenda is a systematic, wide-ranging policy agenda to shift economic leverage back to workers.

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.