Productivity and Compensation in the United States
August 5, 2011
Throughout our nation’s history innovation has driven living standards by raising compensation, developing new jobs and industries, and lowering prices for consumers. However, since 1973 the pace of U.S. innovation has slowed, and consequently, wages have slowed. It is evident that when workers produce more, they also earn more. From 1947 to 1973, the inflation-adjusted hourly compensation of workers increased at a rate of 2.7 percent a year, but since then it has increased at the slower rate of 1.6 percent. What seems to be a small change has dramatically impacted the earnings of American workers today: if this slowdown had not occurred, all else equal, the wages and benefits of workers would be $18 per hour higher.