11/22/11 The compensation-productivit\ gap

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Februar\ 24, 2011 (The Editor¶s Desk is updated each business day.)

The compensation-productivity gap

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 inflationadjusted, or real, hourly compensation2a measure of workers' purchasing power2has lagged behind

labor productivity growth.

[Chart data]

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.

These earnings data are from the Productivity and Costs program. To learn more, see "The

compensation-productivity gap: a visual essay" (PDF) in the January 2011 issue of the Monthly Labor

Review.

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11/22/11 The compensation-productivit\ gap

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Compensation costs _ Earnings and wages _ Productivity

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