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Behind the Gap Between Productivity and Wage Growth

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  • Dean Baker

Abstract

Much has been written in this business cycle regarding the rapid increases in productivity and the stagnant growth in wages. From the peak of the last business cycle in the first quarter of 2001 to the second quarter of 2006, productivity increased by 17.9 percent, an average growth rate of 3.2 percent per year. But real wages have barely moved, with the average hourly wage for production and nonsupervisory workers increasing by just 1.2 percent, an average annual growth rate of just over 0.2 percent. This report explores the forces behind this difference. It looks at cyclical trends in labor and capital income, and the difference between gross and net productivity.

Suggested Citation

  • Dean Baker, 2007. "Behind the Gap Between Productivity and Wage Growth," CEPR Reports and Issue Briefs 2007-05, Center for Economic and Policy Research (CEPR).
    • Handle: RePEc:epo:papers:2007-05
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    File URL: http://www.cepr.net/documents/publications/0702_productivity.pdf
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    Cited by:

    1. Areendam Chanda & Bibhudutta Panda, 2012. "Unbalanced Productivity Growth in US States: Evidence from Factor Prices," Departmental Working Papers 2012-04, Department of Economics, Louisiana State University.
    2. Ying, Yung-hsiang & Lee, Wenli & Chang, Koyin, 2020. "Mandate-based welfare policies and the effect on real wage – The case of Taiwan," Economic Modelling, Elsevier, vol. 90(C), pages 417-427.
    3. Bibhudutta Panda, 2017. "Schooling and productivity growth: evidence from a dual growth accounting application to U.S. states," Journal of Productivity Analysis, Springer, vol. 48(2), pages 193-221, December.
    4. Areendam Chanda & Bibhudutta Panda, 2011. "Productivity Growth in Goods and Services across US States: What can We Learn from Factor Prices?," Departmental Working Papers 2011-16, Department of Economics, Louisiana State University.
    5. James D Ward & Paul C Sutton & Adrian D Werner & Robert Costanza & Steve H Mohr & Craig T Simmons, 2016. "Is Decoupling GDP Growth from Environmental Impact Possible?," PLOS ONE, Public Library of Science, vol. 11(10), pages 1-14, October.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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