US Workers are Hugely Productive
US workers are hugely productive and aren’t getting paid for it.
The consequences of not restoring the link — and, thus, a rising standard of living for most workers — are grim, and point to either persistent sluggish growth or recurring asset bubbles. But to accomplish this, Mishel argues, will require divisive policy shifts impossible in the current political climate. “It is hard to see how reestablishing a link between productivity and pay can occur without restoring decent and improved labor standards, restoring the minimum wage to a level corresponding to half the average wage (as it was in the late 1960s), and making real the ability of workers to obtain and practice collective bargaining.”
Tags: Economy
Productivity always goes up during times of unemployment. That’s because productivity is:
output / hours worked
If you think you are suddenly more productive, thank an unemployed person.
@ puck, your grasp of facts isn’t based in reality. Unemployment and Productivity aren’t related in this chart. It’s about salary. And any relationship between unemployment and productivity is just theory right now.
No, Nemski, he’s right. Productivity’s denominator is hours worked, so if we have 10% unemployment, we generally have 10% fewer hours worked, so productivity can rise, so long as the dollars earned don’t drop as dramatically.
However, one would expect that compensation to stay in line with the productivity gains, rather than flatten.
I’d love to see the same chart with executive compensation superimposed.
@ lg, in general, I would agree with your formula. However, the chart shows productivity going up and up. Unemployment has most definitely is cyclical. How can one explain productivity always increasing when unemployment is going down?
That’s the problem in relating the unemployment and productivity.
nemski is right about the long-term trend. There’s nothing new about that observation that workers are retaining less of what they produce, the chart is just another way of looking at it. The sharp divergence in the mid-70s is striking and worth looking into. Something clearly broke there. It does seem to coincide with the birth of the modern conservative movement.
@puck, yes, something broke and it was Reagan in the 80s and @liberalgeek is correct about executive compensation which took a big jump in the as well.
As far as the late 70s, those were dark days.
“As far as the late 70s, those were dark days.”
There’s a lot of urban legend about how dark those days really were. The economic numbers weren’t that bad. The Reagan recession was a hell of a lot worse. Compared with what we are dealing with now the 70s were positively boom times.
Remember we had TWO worldwide OPEC-induced oil price shocks in the 1970s, without which all of the numbers would have been even better. The markets took care of OPEC within a few years regardless of US policy.
Reagan and crew spun the economy to make it sound worse than it was, and now the “dark times” are basically an implanted memory.
Reagan’s campaign team elevated mockery of the President to a super-weapon. A lot of the urban legend comes from bad feelings about the Iran hostage crisis, and unwarranted political animosity focused on Carter, but that is not reflected in an objective look at the economic statistics.
Well there was the Levittown Gas Riot in Pennsylvania. (pdf)
Nemski, demand changes, which are cyclical, are largely factored out on this chart. As demand drops, the amount of stuff that needs to be produced drops.
Productivity has risen mostly because of technology improvements. In 1980, if you wanted to notify all of your employees about a change in policy it required a lot of work, including the steno pool, the printing group (with mimeographs), fax machines, bulletin boards, mail room workers, etc.
Today, someone writes the copy, sends it to a decision-maker via email, a return email confirms the copy and it gets emailed to 5,000 employees in 5 minutes.
And don’t even get me started on online ordering…
The reason for the productivity increases doesn’t matter. Until the 1970s, productivity increases tracked wage increases, until suddenly they didn’t.
I don’t know puck–the 70’s were real tough to get a job as a high schooler, we took anything. And then gas went up to a whopping 37 cents and then all the way up to 53 cents!! We had odd/even gas line days, sugar prices sky-rocketed, killing my bakesale committee members commitment, and thermostats dropped that winter to a 65 degree hold–and some to 62. Schools adjusted start and end times, resulting in 4 day weeks…..it was different, and it was felt. Whether it was real or not–it was really felt.
I was there too, Joanne. Yes, we know all the anecdotes, but average unemployment rate under Carter was 6.5% vs. 7.5% for Reagan. The energy-related problems were taken care of shortly by worldwide market forces; not by any US policy.
One thing that was different in the 70s was that there was inflation, but it was wage-price inflation, meaning that wages kept up with prices. Now we have price inflation alone, but real wages are stagnant ore dropping. Now we deal with price increases by shopping at Walmart, not by getting raises.
In the 1970s the corporations desparately wanted to break the power of workers to demand and receive wage increases. They wanted to keep the benefits of productivity increases for themselves. And Reagan helped them with that, starting by breaking PATCO, which sent the signal to employers that it was OK to screw their unions. After that, every year workers’ ability to demand wages dropped, and workers began keeping less and less of their increased productivity.
Nemski’s chart shows the worker losses starting in the early 70s though, so I’ll have to look into that.
Why workers are so willing to let wages stagnat while profits go up is the real mystery. I sorta get why working class Republicans accept it. They are sheep. Working class Dems have a tradition of class awareness though. I don’t get thier compliance.
“Why workers are so willing to let wages stagnat while profits go up is the real mystery.”
It sort of correlates to when consumer credit cards were invented and began supplementing worker incomes. As I recall when Reagan took office, credit cards were pretty much for businesses only. I think the big one back then was Diners Card. Soon after Reagan took office though they were selling us all credit cards with our football team’s logo out of a converted supermarket in Ogletown.
Credit cards let you steal from potential retirement savings to maintain your standard of living.
Well, also the evil inflation gave people that bought a house in the early 70’s (like my parents) a huge asset that went from being 20K to 200K in 20 years. Like puck says, this is potential retirement money that was spent freely until the real estate bubble burst.
Ya load sixteen tons and whadda ya get?
Another day older and deeper in debt.
St. Peter don’t cha call me ’cause I can’t go.
I owe my soul to the company store.
That’s why I don’t work hard and still get paid better than most!
Suck it serfs!