Because compensation rises in tandem with productivity, its share of national income has changed little in 25 years. As noted elsewhere in this report, part of the conventional wisdom about the current economic expansion is that workers' earnings have not been growing as fast as they should.
Critics argue that companies have been unwilling to raise employees' wages.
The economy is booming, goes the story, corporate profits are soaring, but workers are afraid to ask for raises out of fear of downsizing. Even Alan Greenspan has argued that worker anxiety is partly responsible for restrained wage pressures. This is one of the best established theories in economics and for the economy as a whole the correlation between productivity and compensation is almost perfect. Indeed, Figure 1 shows that there has been no divergence from this trend in recent years. Over short time periods, productivity and compensation may diverge slightly, but over longer periods the two move in unison.