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Did wages reflect growth in productivity?


  • Feldstein, Martin


The level of productivity doubled in the U.S. nonfarm business sector between 1970 and 2006. Wages, or more accurately total compensation per hour, increased at approximately the same annual rate during that period if nominal compensation is adjusted for inflation in the same way as the nominal output measure that is used to calculate productivity. Total employee compensation as a share of national income was 66% of national income in 1970 and 64% in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62% in the decade of the 1960s to 66% in the decades of the 1970s and 1980s and then declined to 65% in the decade of the 1990s where it has again been from 2000 until the most recent quarter.

Suggested Citation

  • Feldstein, Martin, 2008. "Did wages reflect growth in productivity?," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 591-594.
  • Handle: RePEc:eee:jpolmo:v:30:y:2008:i:4:p:591-594

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    References listed on IDEAS

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    1. Kemeny, Thomas & Storper, Michael, 2012. "Specialization and regional economic development," LSE Research Online Documents on Economics 58538, London School of Economics and Political Science, LSE Library.
    2. Maura Francese & Carlos Mulas-Granados, 2015. "Functional Income Distribution and Its Role in Explaining Inequality," IMF Working Papers 15/244, International Monetary Fund.
    3. Boudreau, James W., 2010. "Stratification and growth in agent-based matching markets," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 168-179, August.
    4. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
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    6. repec:pal:easeco:v:44:y:2018:i:1:d:10.1057_eej.2015.50 is not listed on IDEAS
    7. Mathieu Dufour & Özgür Orhangazi, 2016. "Growth and distribution after the 2007–2008 US financial crisis: who shouldered the burden of the crisis?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(2), pages 151-174, April.
    8. Rita Duarte & Carlos Marques, 2013. "The dynamic effects of shocks to wages and prices in the United States and the Euro Area," Empirical Economics, Springer, vol. 44(2), pages 613-638, April.
    9. Freddy, Liew, 2011. "Productivity-wage-growth nexus: an empirical study of Singapore," MPRA Paper 34459, University Library of Munich, Germany.
    10. Peeters, Marga & Den Reijer, Ard, 2011. "On wage formation, wage flexibility and wage coordination : A focus on the wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States," MPRA Paper 31102, University Library of Munich, Germany.
    11. René Cabral & André Varella Mollick & Eduardo Saucedo, 2016. "Violence in Mexico and its effects on labor productivity," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(2), pages 317-339, March.
    12. Bental, Benjamin & Demougin, Dominique, 2010. "Declining labor shares and bargaining power: An institutional explanation," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 443-456, March.
    13. Manuela Goretti, 2008. "Wage-Price Setting in New EU Member States," IMF Working Papers 08/243, International Monetary Fund.
    14. Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2013. "Are government wages interlinked with private sector wages?," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 697-712.
    15. Mefford, Robert N., 2009. "Increasing productivity in global firms: The CEO challenge," Journal of International Management, Elsevier, vol. 15(3), pages 262-272, September.
    16. Javier Pérez & A. Sánchez, 2011. "Is there a signalling role for public wages? Evidence for the euro area based on macro data," Empirical Economics, Springer, vol. 41(2), pages 421-445, October.
    17. Kumar, Saten & Pacheco, Gail, 2012. "What determines the long run growth rate in Kenya?," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 705-718.
    18. Balázs Lengyel & Rikard H. Eriksson, 2017. "Co-worker networks, labour mobility and productivity growth in regions," Journal of Economic Geography, Oxford University Press, vol. 17(3), pages 635-660.
    19. Marga Peeters & Ard den Reijer, 2014. "Coordination versus flexibility in wage formation: a focus on the nominal wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States," Applied Economics, Taylor & Francis Journals, vol. 46(7), pages 698-714, March.
    20. Margarita Katsimi & Sarantis Kalyvitis & Thomas Moutos, 2009. ""Unwarranted" Wage Changes and the Return on Capital," CESifo Working Paper Series 2804, CESifo Group Munich.
    21. World Bank Group, 2017. "Global Economic Prospects, January 2017," World Bank Publications, The World Bank, number 25823.
    22. Sotirios Theodoropoulos, 2011. "A Wage Policy for External Balance and Employment in EMU Environment: A Theoretical Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 61(3-4), pages 85-102, July - De.
    23. Seip, Knut Lehre & McNown, Robert, 2015. "Does employees’ compensation vary with corporate profit?," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 281-290.
    24. Aretz, Bodo & Busl, Claudia & Gürtzgen, Nicole & Hogrefe, Jan & Kappler, Marcus & Steffes, Susanne & Westerheide, Peter, 2009. "Endbericht zum Forschungsauftrag fe 13/08: "Ursachenanalyse der Verschiebung in der funktionalen Einkommensverteilung in Deutschland" (Aktenzeichen I A 3 - Vw 3170/08/10035)," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110510.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs


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