The compensation-productivity gap
February 24, 2011
The gap between real hourly compensation and labor productivity is a "wage gap" that indicates whether workers' compensation is keeping up with productivity. Since the 1970s, growth in inflation-adjusted, or real, hourly compensation—a measure of workers' purchasing power—has lagged behind labor productivity growth.
Growth of productivity and real hourly compensation in the nonfarm business sector (which accounts for three-fourths of output and employment in the total U.S. economy) was robust until 1973, at which time growth slowed in both measures. During the 1947–73 period, the annual change in productivity averaged 2.8 percent, while real hourly compensation growth averaged 2.6 percent. Over the 1973–79 period, the averages were 1.1 and 0.9 percent, respectively.
Real hourly compensation growth failed to keep pace with accelerating productivity growth over the past three decades, and the gap between productivity growth and compensation growth widened. Over the 2000–09 period, growth in productivity averaged 2.5 percent; growth in real compensation averaged 1.1 percent over the same period.
Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, The compensation-productivity gap on the Internet at http://www.bls.gov/opub/ted/2011/ted_20110224.htm (visited March 30, 2015).
Three recent editions of Spotlight on Statistics
Trends in long-term unemployment
Long-term unemployment reached historically high levels following the recession of 2007–2009.
Housing: before, during, and after the Great Recession
looks at consumer expenditures on household items, employment in residential construction, prices for household items, and injuries in occupations involved in building and maintaining our homes.
Women veterans in the labor force examines the demographic, employment, and unemployment characteristics of women veterans.