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Why Aren’t Workers Benefiting from Labour Productivity Growth in the United States?

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  • Lawrence Mishel
  • Kar-Fai Gee

Abstract

Changes in real wages, or wages adjusted for the cost of living, are the most direct route through which labour productivity affects living standards. Yet labour productivity in the United States increased by 80 per cent between 1973 and 2011, while median real hourly wages remained virtually stagnant. This article presents a framework in which this reality is decomposed into four components: deterioration of labour’s terms of trade, rising benefits as a share of wages, decline of the share of labour compensation in GDP, and rising wage inequality. Since 2000, the historically large gap between real median wages and productivity in the United States was driven by rising wage inequality and the decline of labour compensation as a share of GDP.

Suggested Citation

  • Lawrence Mishel & Kar-Fai Gee, 2012. "Why Aren’t Workers Benefiting from Labour Productivity Growth in the United States?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 23, pages 31-43, Spring.
    • Handle: RePEc:sls:ipmsls:v:23:y:2012:3
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    File URL: http://www.csls.ca/ipm/23/IPM-23-Mishel-Gee.pdf
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    References listed on IDEAS

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    1. Wojciech Kopczuk & Emmanuel Saez & Jae Song, 2007. "Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data since 1937," NBER Working Papers 13345, National Bureau of Economic Research, Inc.
    2. Joao Paulo Pessoa & John Van Reenen, 2013. "Wage growth and productivity growth: the myth and reality of 'decoupling'," CentrePiece - The Magazine for Economic Performance 401, Centre for Economic Performance, LSE.
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    Cited by:

    1. Elena Deskoska & Jana Vlčková, 2018. "The Role of Technological Change in Income Inequality in the United States," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2018(1), pages 47-66.
    2. Eric LABAYE & Jaana REMES, 2015. "Digital Technologies and the Global Economy's Productivity Imperative," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(100), pages 47-64, 4th quart.
    3. Andrew Sharpe & James Uguccioni, 2017. "Decomposing the Productivity Wage Nexus in Selected OECD Countries, 1986-2013," International Productivity Monitor, Centre for the Study of Living Standards, vol. 32, pages 25-43, Spring.
    4. Alicia Swords, 2019. "Action research on organizational change with the Food Bank of the Southern Tier: a regional food bank’s efforts to move beyond charity," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 36(4), pages 849-865, December.
    5. Chen, W.D., 2018. "Upward wage rigidity and Japan's dispatched worker system," Economic Modelling, Elsevier, vol. 73(C), pages 152-162.
    6. Dünhaupt, Petra., 2013. "Determinants of functional income distribution : theory and empirical evidence," ILO Working Papers 994841223402676, International Labour Organization.
    7. Mark Partridge & Alexandra Tsvetkova & Michael Betz, 2021. "Are the most productive regions necessarily the most successful? Local effects of productivity growth on employment and earnings," Journal of Regional Science, Wiley Blackwell, vol. 61(1), pages 30-61, January.
    8. Anna M. Stansbury & Lawrence H. Summers, 2017. "Productivity and Pay: Is the link broken?," NBER Working Papers 24165, National Bureau of Economic Research, Inc.
    9. repec:ilo:ilowps:484122 is not listed on IDEAS

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