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A method for comparing compensation and productivity levels across US regions

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  • Christopher D. Blake

    (Emory University, Oxford College)

Abstract

A common sentiment in popular discourse is that employed United States workers are undercompensated. This study investigates this belief and answers the question: “Are US workers really underpaid?” Answering this question requires a measure that can better assess the relationship between compensation and productivity levels. In this paper I develop a straightforward measure of workers’ real compensation relative to productivity that can be applied to different regional units of analysis and sectors in the U.S. I then estimate this “Compensation-Productivity Difference” (CPD) measure for each state over the years 2008 to 2019 for the six largest U.S. sectors. As a snapshot of average worker outcomes across the United States, CPD estimates show that, accounting for price differentials and ignoring sector, the average worker's compensation has indeed lagged behind productivity. This matches the conclusions of previous literature; however, such results become less consistent as region and sector are considered. In Midwest states, for example, productivity lagged behind productivity in some sectors over the sample. Because of its ability to display such nuanced labor market outcomes, the CPD represents a promising step in labor market research that would be of interest to researchers and policymakers alike.

Suggested Citation

  • Christopher D. Blake, 2022. "A method for comparing compensation and productivity levels across US regions," SN Business & Economics, Springer, vol. 2(12), pages 1-30, December.
    • Handle: RePEc:spr:snbeco:v:2:y:2022:i:12:d:10.1007_s43546-022-00366-4
    DOI: 10.1007/s43546-022-00366-4
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