Explaining The Missing Link Between Productivity Growth And Median Wage Growth

During the post war era growth in productivity was strongly related to growth in median household income. In the period between 1979 and 2007 that link was broken.  The benefits from productivity growth were captured by the top 10% of the income distribution.  The bottom 90% captured only 8.6% of the income gains in that period.  Moreover, 60% of the income gain went to top 1%, and 36% went to the top 0.01%.

This paper examines the factors that might explain the broken link between productivity and growth in median household income.  The unequal distribution of the benefits from rising productivity and growth in compensation appears to be related to public policy decisions.