The Widening Gap Between Company Productivity And Workers Wages 'Redolent Of Scrooge' [CHART]

As corporate America picks up steam -- The Economist described the current profit-reporting season as "shaping up to be one of the best ever" -- when will employee compensation catch up?

If the history of the last several decades is any indicator, it could be a while. On Friday, the Bureau of Labor Statistics released a disheartening chart illustrating the widening gap between growth of productivity for companies and real hourly compensation for workers over the 30 plus years. From the BLS:

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.

The relationship between productivity and worker compensation illuminates the extent to which the employed benefit from economic growth. As Princeton Economist Alan Blinder wrote in the Wall Street Journal last December:

When it comes to wages, the basic story of recent decades is redolent of Scrooge. Real average hourly earnings (excluding fringe benefits) now stand roughly at 1974 levels. Yes, that's right, no real increase in over 35 years. That is an astounding, dismaying and profoundly ahistorical development. The American story for two centuries was one of real wages advancing more or less in line with productivity. But not lately. Since 1978, productivity in the nonfarm business sector is up 86%, but real compensation per hour (which includes fringe benefits) is up just 37%. Does that seem fair?

Comments

[ladymcbeth45]

03:22 PM on 03/01/2011

If you want to see what life will be like without unions...go to PBS and type in triangle fire.....

[QuantProgrammer]

09:09 AM on 03/01/2011

Why is this posted in the business section? Why isn't there an anti-business or labor relations section instead?

[MadamRoma]

09:08 AM on 03/01/2011

When the Unions are gone, the people can get use to hard tack and flour fritters, because that's all their money will buy. This should serve the teabaggers well, they can sip their swill and gnaw on their flap-jacks.

[spinotter11]

08:27 AM on 03/01/2011

I'm sure that employers will be crushed when they are likened to Scrooge. Probably very proud of it, "We run a tight ship just like Ebenezer." No one can see any signs of Dickens' message - that human values trump wealth and possessions - in the modern-day USA.

[QuantProgrammer]

09:06 AM on 03/01/2011

Your point? The average US worker is much better off than he was in Dickensian times largely because of the successes of Capitalism.

[bluepond]

10:47 AM on 03/01/2011

Somewhat, but mainly because we have had laws and unions to protect the workers.

[ndlekas]

02:37 AM on 03/01/2011

It's funny how all these charts highlight the bad republican 'dark ages'

[lolita]

12:58 AM on 03/01/2011

H1-B visas, outsourcing and the creation of options packages are all part of the move to suppress wages that benefit the corporation and totally screw the white collar US worker.

Corporations claim that there are not enough trained workers here in the US in order to get the government to approve H1-B increases. We know this is BS. We know the real reason for the H1-Bs is to hire lower wage employees that have NO RIGHTS in this country and will be sent home the minute they are not working for their sponsor company. It is little better than indentured servitude.

Outsourcing is yet another way for corporations to take advantage of low wage workers along with lax governmental enforcement of labor and environmental laws. Our government helps by undoing any tariffs / taxes for the reimportation of these goods.

Options are a sneaky way to get employees to take low wages and poor benefits packages in exchange for betting on the success of the company. However, if the company fails, the employee loses. If the company is successful, the employee is then subject to a number of rules that ensure they are last in line to benefit from the success and that they pay every single cent of tax due. With fewer companies actually going public this is a bad deal.

Employees need to be fairly compensated for the wealth that they help to create. It is the only way we all survive and thrive.

[heartlander64]

04:08 AM on 03/01/2011

Some political party needs to use "Indentured Servants" in election sound bites and redefine
the times for what they are: "The New Feudalism"! The most important decision we will make in this century, for our sake and world, is: Do corporations exist for the advancement of societies,
or do societies exist for the advancement of corporations? Do hogs exist for the advancement of the farmer or vice-versa?
Each multinational corporation is a kingdom unto itself. Remember,.. we all WANT SMALL Business to flourish! Those so concerned with the United Nations infringing on OUR sovereignty seem oblivious to world corporations that already have. So that we're now pledging allegiance to the Republic of China!

[QuantProgrammer]

09:09 AM on 03/01/2011

I know a lot of brilliant folks here on H1B visas. We need India's and China's best and brightest to compete on a global level. A former manager and one of the best programmers I know came here on an H1B; the last thing we need is to send him back to China and have him work for a foreign company. He needs to stay right here in the US, and ideally get his citizenship here.

[bluepond]

10:49 AM on 03/01/2011

Fine, as long as he works for the same wages, and enjoys the same rights and respect. Then we will know he is hired on merit, not wage-busting.

[lolita]

01:36 PM on 03/01/2011

I know a lot of brilliant people who have come here in H1-B visas, stayed and naturalized. My point is that these people come here as indentured servants not that they aren't brilliant. The government needs to stop helping corporations exploit labor no matter where they come from. It depresses wages here, undermines educational efforts to train more people for these positions domestically and can land some of these people in conditions that you and I would never agree to work under. Some companies under the guise of "helping them" force these people to share a house and car, confiscate their passports and virtually keep them ignorant of their surroundings in order to better control them. Only once they are finished with their contracts are they able to leverage any US based connections they may have in order to stay or find new employment.

[jeburr24]

11:18 PM on 02/28/2011

Sometimes it seems like increased productivity means fewer people doing more work for less money.

[axt113]

02:18 AM on 03/01/2011

Why only sometimes?

[bluepond]

10:50 AM on 03/01/2011

That's pretty much what it means these days.

[Apathy Man]

09:37 PM on 02/28/2011

Here the thing, people have been talking about culture wars, well the have been going on for a while, the top 2% just didn't to tell anyone that they were waging it.

[regulargal]

08:05 PM on 02/28/2011

Why so much Reagan worshipping by the corporate rethuglians, just look at the real hourly wage compensation of the 80's.

[QuantProgrammer]

09:12 AM on 03/01/2011

Some of that period occurred under Carter, too. 1979-1980 were a terrible time to be a worker in this country, especially with out-of-control inflation. Mind you, Carter took some steps to get inflation under control with the Volcker Fed and moderate deregulation, but it would be intellectually dishonest to pin all of this on Reagan- the inflation in 1979-1980 was easily larger than the productivity gains from 1981-1990.

[Uniongrl]

07:41 PM on 02/28/2011

Why do you think there is a backlash against unions at this time? If a company can afford to pay each employee $400 per week and negotiates that with the union workers, that is their bargain. If the company turns around and pays their non-union workers $300 per week and keeps the rest for profit, who is the criminal? Not the union worker. He is not overpaid. An agreement was made. This is what is being presented to the American public to divide the middle class. I an not an overpaid Union worker! You are underpaid.

[donbsea]

02:53 AM on 03/01/2011

Amen to your post. Thank you.

[Uniongrl]

06:39 AM on 03/01/2011

Solidarity!

[QuantProgrammer]

09:15 AM on 03/01/2011

With the private sector, absolutely. But with the public sector, the taxpayer is the employer. And he is required by law to employ the unions. So the dynamic changes a little bit. If state employees should be allowed to unionize and strike, why would taxpayers go to jail if they were to try the same thing?

[schnauzergirl]

03:28 PM on 03/01/2011

Less than half of state public sector workforces are in unions. It is mostly the service jobs that have some unions. Very few "white collar" jobs have union representation.

At my state's public universities only the food services, janitorial staff and campus police (through the county police unions) have unions available to them. The rest of us (in cluding faculty) are still state employees, no unions. Its not even an option.

[Uniongrl]

07:09 PM on 03/01/2011

The employer (taxpayers) are the payor, not the payee, so they don't strike. You would be striking to not pay teachers, firefighters, police, trash collectors (if not private) etc. The argument for privatization leads to these problems. Do you want a worker with middle class wages and benefits protecting you and teaching your children, or do you want minimum wage workers who don't care about their jobs? contrary to what is being thrown out there, public union workers don't live in mansions and retire to lifestyles of the rich and famous. Most union workers don't. We work hard and bargain for a fair contract. I don't want, "you get what you pay for" to take care of the important things in my community.

[cue]

05:28 PM on 02/28/2011

In a nut shell...no increase in real wages = no increase in aggregate demand = no increase in business investment = no increase in production = no increase in jobs (in fact employment suffers as productivity increases in the face of stagnating demand) = the economy continues its meteoric lateral arabesque.

The deficit is not the problem, folks...lack of demand is the problem. As you cut spending and hold workers wages down, the problem just gets worse...just what the conservatives are counting on to bring about the change in administrations they are desparate to achieve.

[spinotter11]

08:36 AM on 03/01/2011

Human beings are the most wasteful animals ever born. We need to reduce our consumption and not increase it every year.

[Clearing-Brush]

05:19 PM on 02/28/2011

It's getting "hard to put food on my family"

[regulargal]

08:08 PM on 02/28/2011

That's a good, old, classic Bushism. Oh how I used to cringe. With time as distance it's easier to laugh.

[Clearing-Brush]

05:17 PM on 02/28/2011

I've even stopped taking laundry to the cleaners. So there I stand like a schmoe each night over the ironing board.....

[spinotter11]

08:37 AM on 03/01/2011

Does you good.

[iowamiddleguy]

04:22 PM on 02/28/2011

still waiting for that trickle down....

[jdevans]

05:23 PM on 02/28/2011

30 years and waiting...

[Clearing-Brush]

05:26 PM on 02/28/2011

Yup. I got a trickle....then the gas station took it back.

[RJVegas]

06:39 PM on 02/28/2011

I got a trickle, too, but my Doctor said it's my enlarged prostate, NOT Reaganomics.