Study Shows that Growth in Wages Lags Growth in Productivity

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Conservative politicians have done a good job on turning one class of workers who have not benefitted from productivity growth, against another group of workers who also have not benefitted from productivity growth. Its not uncommon to hear a private industry worker complain about the higher pay received from public employees. In other words, conservatives have been engaged in the politics of resentment. They call it class warfare when people complain about the rich, but it is not class warfare when one group of middle class workers complain about the other. Its easy to see why they like that kind of class warfare. This study by the Economic Policy Institute (EPI), shows that there has been little growth in wages, compared to growth in productivity, in both classes of workers. Productivity has grown almost three times the rate of wage growth. Moreover, 56% of the growth in real wages has gone to the top 1% of wage earners.

The EPI study only showed the growth in productivity and wages for the last 30 years. If they had shown the data for the years prior to the 1980's they would have seen another picture. During that period there was a strong relationship between growth in productivity and growth in wages. About half of the growth in productivity went to wages in the pre-1980 period. Economics textbooks displayed the data from that period to show how wage growth depended upon growth in productivity. Today the message would be that growth in productivity only benefits top executives. This is probably what Ronald Reagan meant when he referred to "Morning in America". It would be better to call it "Mourning in America" from the standpoint of the middle class.

We should also note that the change in the relationship between productivity growth and wage growth was not accidental, or due to some strange abstraction that we all the labor market, it has been closely connected to changes in public policy. The GOP attack on public employee unions today is simply a continuation of GOP policies that began with Reagan.