U.S. Wages Aren't Keeping Up With U.S. Productivity, EPI Says

Ever feel your work isn’t being adequately represented by the final amount on your paycheck?

Turns out that nagging sense of injustice isn’t just a hunch. A recent report by the Economic Policy Institute reveals that benefits and wages haven’t kept up with the increasing productivity of American workers, both in private and public sectors.

The report, “The Sad But True Story Of Wages In America,” by economists Lawrence Mishel and Heidi Shierholz, finds that American workers across the board -- whether in the private or public sector, high school- or college-educated –- "have suffered from decades of stagnating wages despite large gains in productivity." The trend isn’t new, either. Between 1979 and 2009, EPI says, U.S. productivity increased by 80 percent, while the hourly wage of the median worker has only gone up by 10.1 percent.

Some Americans have certainly had it worse than others. Take those with no more than a high school diploma. In the private sector, high school graduates saw a real hourly-wage increase of only 4.8 percent between 1989-2009. But in the public sector, where real hourly wages have gone up only 2.6 percent for people with an equivalent education, things are even worse.

College graduates, on the other hand, have generally fared better. But exactly how much better depends on your sector. Data suggests that public sector workers have enjoyed greater benefits at the sacrifice of wages, their hourly wage rates rising 9.5 percent in the public sector and 19.4 percent in the private sector between 1989-2009. When including wages and benefits, workers in the public sector have seen an increase of 20.5 percent. Compare that to a 17.9 percent increase in the private sector.

The chart below shows the increase in total compensation -- both wages and benefits -- for public and private sector employees against the more substantial increase in productivity:

The rate at which U.S. wages increase remains far from constant. When broken down by year, it’s clear that almost all increases in wages and compensation occurred during the late 1990s, specifically from 1996 to 2002. In stark contrast, wages for both college-educated and non-college educated workers in the private and public sectors have largely stagnated since 2008.

Is this disparity between productivity and pay a result of U.S. economic policy? The report contends so. Rather than supporting jobs, EPI says, economic policies have focused on the consumer. Policies deregulating the economy, weakening unions, and promoting globalization have succeeded in lowering prices. They’ve failed in providing workers with compensation worthy of their efforts.

Comments

[imtheoz]

10:58 PM on 03/21/2011

This should not be a surprise to anyone who has been paying attention. Executive pay and corporate profits have soared as wages have stagnated and benefits have been cut to support those executive salaries and corporate profits. This is what happens when you leave the economy to unregulated corporate greed...and as is usually the case, the economy suffers with the wealthy being the last to suffer and the least to suffer.

[Butquestioning]

12:11 AM on 03/22/2011

Good comments...the interesting thing is that this has been part of the big plan of the Republicans going back to the late 60's...and we are still seeing how they pit workers against each other to help support their agenda of lowering wages and benfits even further...

[jgourlay]

02:22 PM on 03/22/2011

This should not be a surprise to anyone who understands basic economics. US real wages, tragically, will continue to drop until we are as productive (on a dollars/per object basis) as the Chinindians.

WHY WHY WHY would anyone in their right mind make something in the US? What can we do that the Chinindians can't do as well for 1/15 the price? If you want to get paid $240/day when someone else is paid $3/day for the same job, you've got to be 80 times more productive. And we are not.

Has no one pointed out to you that for the last 20 years Chinindia has invested their money into modern factories and the most advanced industrial equipment? It's not like we have a 'technology advantage'. I've been in roboticized SCATA run factories in India that are more modern than anything we have here. And their workers are HAPPY HAPPY HAPPY at $3/day.

WHY SHOULD ANY GLOBAL CORPORATION MAKE ANYTHING HERE??????

Until you can make an ECONOMIC answer to that question, stop yer cryin!

[imtheoz]

07:49 PM on 03/22/2011

Here is the "economic" answer. If we do not have jobs in this country, the cost becomes irrelevant. The conservative "supply side" economics has been a total failure because people without jobs can not buy the cheap crap from abroad no matter how cheap it is.

[santiago sherwood]

09:52 PM on 03/21/2011

this does not cure an economy.

[Butquestioning]

12:21 AM on 03/22/2011

Absolutely. It is the main reason we are not seeing any strong improvements to our economy. Wages and benefits are needed to increase spending and that creates new jobs and more wages being paid. But when we see the companies holding back hiring despite strong earnings, it keeps the economy depressed.

It is one of the reasons we had to rely on things like the housing bubble to stimulate the jobless recovery of 2002...Low interest rates allowed homeowners to refinance and take equity out of their homes to compensate for the stagnent wages. As this happened, home prices escalated and more equity was used to buy new homes or cars and prices and the spiral of home prices continued until they crashed when the rates and sales could not keep up with the values...and we see where it has taken us.

[maku520]

05:34 PM on 03/21/2011

I wonder where all that surplus wealth is going... Also, I wonder why CEOs are now making between 250 and 500 times that of the average worker...?

[tictactom]

05:22 PM on 03/21/2011

Wait, what? This study is full of giant holes -- you can't just compare productivity to wages! There are other reasons why productivity improves besides simply "working harder". Did they factor technology improvements into this chart? Technology is a huge factor in productivity and has nothing to do with how much you pay someone. How does the United States compare to other countries? Does this chart look the same in China? Sweden? Brazil? I agree that stagnant middle class wages are definitely a problem, but you can't simply draw a correlation between heightened productivity and working "harder". The United States should be proud that we're able to get this kind of growth innovation. Its how we can stay competitive against countries that pay their employees pennies but don't grow.

[maku520]

05:56 PM on 03/21/2011

Productivity is "the amount of goods and services that a worker produces in a given amount of time" (Wikipedia). If the worker makes more goods per hour in 2008 than in 2007, but is paid less for that same hour of labor, in the absence of productivity-improving technologies there is only one outcome: the worker is getting screwed.

Look at the chart, third quarter of 2008: there is a huge jump in productivity. Why is that? Was there some new technology that helped make work easier? Were there changes in the productivity of other nations? Was it because everyone in America started working harder?

No! Millions of workers were laid off and the remaining workers were forced to pick up the slack by taking on larger work loads and working longer hours while wages were slashed. Prices fell as demand evaporated, and more people were laid off -- all the while productivity skyrocketed! There was no innovation-led growth of which you would like to be proud; rather, the average American (if he didn't lose his job) worked harder, longer hours for less and less pay, while the CEOs raked in the cash through higher salaries, huge raises, and bonuses.

[tictactom]

08:10 PM on 03/21/2011

Yes. CEO's get paid too much, their breaking our backs, yes yes. All agreed. The fact that people are asked to produce more for less is nothing new and the view that CEO's are greedy isn't new either. My point is that the Economic Policy Institute draws conclusions that aren't really there. Your point of wage stagnation could have been made by simply showing real wages over the last 30 years. You'd see the predictable CEO's pay skyrocketing while the lower 90% not moving an inch. That being said, I think productivity has a good thing, working harder or otherwise. If I owned a business (small business here -- no greedy CEO's allowed) shouldn't I want to make a better product for less than my competitor? Shouldn't I want to hire and pay for efficient people? Or maybe I should just keep raising wages, even during down periods, so my competitor takes my customers, buys me out, lays off my workers and (for shame) starts turning himself into one of those greedy CEO's?

[iisguy]

02:07 PM on 03/21/2011

So much for working harder to climb the ladder. The faster you climb, more work you do and at the same time, the ladder just gets longer.

This is the unavoidable outcome of private enterprise. Work harder for less money. Produce less and charge more. Make fat profits and put it in your bank account. Essentially take from the poor and give to the rich. It's the obvious corallary to "trickle down" which is "torrent of mony upwards"

Of course, the republicans think this is great and in fact, want people to work even harder for less, and take away their rights to complain about abuses at the same time.

[Thordeer]

05:24 PM on 03/21/2011

This is not the inevitable result of private enterprise. The reality is worse. It's the result of 30 years straight of policies that:

make our workers compete against 3 billion poor in the world's developing countries
dismantle regulations aimed at keeping workers and consumers safe
destroy our progressive tax regimes
gut our social safety nets

in the 50s and 60s we had a much better social safety net and more progressive taxation along with a primarily free enterprise economy. the rest of the 1st world still has this. we don't.

[ClevelandTom]

12:17 PM on 03/21/2011

The chart here goes hand-in-hand with charts that show the greater concentration of wealth that has also occured. As the writer note, economic and labor policy has been a factor and tax policy has aided wealth concentration.

But beneficiaries of these policies should be wary. At least two inevitable products of these trends threaten their advantageous situation:

1. By depressing middle and working class wealth, you are starving the goose that lays the golden eggs for business. The American consumer is that goose. Businesses may reason that growing middle classes in places like China and India can replace them. But they should bear in mind that both countries, especially China, have a high liklihood of political instability in their futures for both political and economic reasons. Nor should they assume that either nation's economic policy will be as open to foreign business involvement as America has been.

2. Throughout history, wealth disparity has eventually led to political unrest. The U.S. has largely avoided that so far. But we came very close to serious political problems during the Great Depression. Fortunately, FDR headed that off with the New Deal. Republicans disparage the New Deal, of course. But they refuse to recognize that political stability was one of, if not THE, primary motivations behind it.

In short, the American wealthy class, through the corporations they depend on for that wealth and through their political support of those who create these policies, are sowing seeds that will eventually reduce their wealth.

[bluepond]

11:57 AM on 03/21/2011

It doesn't matter how low costs are if you are unemployed or underemployed, on a fixed income or disabled. You can't afford even bare necessities (food, heat, minimal housing, minimal utilities, health care not covered by some insurance), never mind any sort of beneficial consumption. It doesn't take more than common sense to see that stagnant wages do little for the economy except prevent inflation and depress various markets.

[rgilley]

11:13 AM on 03/21/2011

American workers across the board -- whether in the private or public sector, high school- or college-educated –- "have suffered from decades of stagnating wages despite large gains in productivity." "The trend isn’t new, either. Between 1979 and 2009, EPI says, U.S. productivity increased by 80 percent, while the hourly wage of the median worker has only gone up by 10.1 percent."

In this same period the top 2% of richest people have seen their incomes rise 245% .
From 1980 to 1990:
Maddow said that "from 1980 to 1990, the top 1 percent saw their income go up by roughly 80 percent" and that at the same time "the median wage in the country over 10 years went up 3 percent."
http://www.politifact.com/truth-o-meter/statements/2011/feb/03/rachel-maddow/rachel-maddow-tanglles-wall-street-journals-steve-/

"Between 1979 and 2005, the mean after-tax income for the top 1% increased by 176%, compared to an increase of...6% for the bottom quintile."
http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States

This is the results of 30 plust years of republican conservatism and it's attempt to make America a two class Oligarchy of the richest 2% of corporate elite.

[bluepond]

11:58 AM on 03/21/2011

Worked pretty well, I guess. Props to the rich for cleverness in the short-term. Petards for the long term.

[iisguy]

02:02 PM on 03/21/2011

Clever is not the right word.

[Larry Motuz]

12:00 PM on 03/21/2011

Very good comment. Thanks for the links.

[bluecatb]

10:46 AM on 03/21/2011

Chap 99 vs 4 -13

In those days the antions shall be stirred up
And the families of the nations shall arise on the day of destruction
In those days the destitute shall go forth and carry off their children
And they shall abandon them, so that their children shall perish through them
Yea, they shall abandon their children that are still suckilings and not return to them
And sahll hvae not pity on their beloved ones (Casey in Florida)

And again I swear to you ye sinners that sin is prepard for a day of unceasing bloodshed And they wo worship stones, and gave images of gold silver and wood and clay and those who worship impure spirits and demons and all kinds of idols not according to knowledge, shall get no manner of help from them
And they shall become godless by reason of folly of their hearts
And their eyes shall be blinded through fear of their eharts
And through visions in their dreams
Through these they sahll become godless and fearul
For they shall have wrought all their work in a "lie"
And shall have worshiped a stone
Therefore in an instant shall they perish
Butin thos days belssed are all they who accept the words of wisdom and understand them
And observe the paths of the Most Hight and walk in the path of His righteousness
And become not godless with the godless
For they shall be saved

[INDIVIDUALTERRY]

11:28 AM on 03/21/2011

Its Bush's fault ?

[mtrem]

01:33 PM on 03/21/2011

Clearly....Started with Regan though...

[StopMakingSense2]

01:35 PM on 03/21/2011

A large part of it, yes! It's plain to see unless your a republican.

[ScottWhite]

07:47 AM on 03/21/2011

I read the article, but not the EPI link, and some comments. Maybe I missed something by not reading the EPI link.

There are many business sectors, each unique, and have their own way of measuring productivity (output v. input; sales v. goals; completed v. tasked, etc.) and their own unique compensation scales. In my view...one couldn't even comment on this article because the information needed on the data isn't there. The graph is for what sector, etc.

The only way I can comment intelligently is to base my comment on truth for all business sectors/models, etc., et. al. And, that is: The only way for one to close the gap the graph/data suggests is to be able to negotiate/bargain/deal for one's services in return compensation/benefit package...then perform those services as negotiated/bargained/dealt. Other than that...one is receiving compensation, and increases, based on the business financial return goals.

One comment, rightly, pointed out though, as you can see from the graph, that the workers compensation, for whatever sector this graph covers, gained vs. productivity during -- what for it -- the Clinton administration.

[vippy]

05:34 AM on 03/21/2011

Nahhh, tell me it ain't so!  How else would we gain 199 more billionaires in the last  two years?

[bluecollaramerican]

05:34 AM on 03/21/2011

Workers continue to cannibalize each other by working harder for less money while the "haves" kick back and watch them slave.

[wagthedog1001]

08:29 AM on 03/21/2011

Unfortunately that is very true. They even go so far as to bring down their local firefighters, police, teachers, and bureaucrats.

[traumabob]

10:52 AM on 03/21/2011

So true! Instead of workers demanding they get what their elected officials now have, they instead demand their neighbors lose what they no longer have.

[mtrem]

01:38 PM on 03/21/2011

Yep...that's the word coming down from on high (Koch et al)...bring the country down to third world status...you haven't got it so they can't have it either.....don't encourage the working class to evolve upward

[Scalian]

02:14 PM on 03/21/2011

That is the long proven tactic, divide and conquer, poor whites against African Americans, American workers against undocumented immigrants, heterosexuals against homosexuals. The CEOs and Wall Street are palying us like a fish.

[Birdman372537]

05:15 AM on 03/21/2011

Rising productivity has benefitted one class in America in the extreme; the wealthy. While cutting workers, corporate bottom lines and CEO pay has gone through the roof. Trickle down, voodoo economics has been a disaster for most in our wonderful country. Health, peace of mind and job satisfaction have been the main casualties.

[JamesJerico]

05:05 AM on 03/21/2011

When imports are incorrectly being identified as productivity gains what do you expect. A company can lay off hundreds from a subassembly manufacture operation, import the manufactured part, then identify the result as a "productivity gain" claiming they produced the same result with fewer workers.

http://www.manufacturingnews.com/news/newss/houseman930.html

[Isthisalreadyinuse]

03:21 AM on 03/21/2011

Productivity growth exceeding wage inflation is a key part of the foundation of our economy. Else inflation would be much higher (in theory it would equal productivity growth over time), and we would all be treading water as a whole. There certainly does not have to be such a large gap, and I'd love to see my wages consistently exceed inflation (but not productivity), but some gap between wage growth and productivity is essential in our economy.

[AllAmericanAmericanBoy]

08:09 AM on 03/21/2011

That gap has to exist, it's the part that is skimmed by those who produce nothing. It's the hidden tax that lets your boss own the fruits of your labor.

[ScottWhite]

09:15 AM on 03/21/2011

I missed your comment. Sorry. I can't just "walk" by. (PG = Productivity Growth, WI = Wage Increase (Inflation))

Please, expound on why PG>WI is a "key" part of the US economic "foundation"/principals, and not a key part of business profit foundation/principals. And, please, base your answer on the understanding that all that profit money doesn't flow back into the US economy 30-40 percent of the time (through retooling purchases, dividends, etc.) thereby keeping original cash amounts circulating. A portion of cash is removed from the economy.

Your second point states, if it's the other way around, if WI>PG...workers will have more money, but they will produce less products. So, in simplistic terms, inflation occurs (prices increase). What about anti-inflation...demand for those high priced products. Are you talking micro-economics...the workers will have more money (for other products/services), but the ones they produce will decline so there may be layoffs...so, it's in the best interest of the worker, in the long-term, to go with the gap? Y/N? What about decreasing margins on those products to reduce that threat? Would a business do that no matter the curve forecasts/financial implications?

Obviously, people read these comments and the comments need to be clear on why the reader should, or shouldn't, be upset.