The Productivity–Pay Gap

Updated August 2024

Most Americans believe that a rising tide should lift all boats—that as the economy expands, everybody should reap the rewards. This outcome can be guaranteed by smart and compassionate policy choices or subverted by policymakers choosing a different path. EPI’s Productivity–Pay Tracker shows the shift toward the latter: Since the late 1970s, our policy choices have led directly to a pronounced divergence between productivity and typical workers’ pay. It doesn’t have to be this way.

The gap between productivity and a typical worker’s compensation has increased dramatically since 1979: Productivity growth and hourly compensation growth, 1948–2024

Year Productivity Pay
1948q1   100 100
1948q2 101.2224 100.7585
1948q3 100.7825 100.859
1948q4 102.1177 102.478
1949q1 102.2019 105.3803
1949q2 101.3389 106.6297
1949q3 104.7471 109.0284
1949q4 104.7364 110.3131
1950q1 108.8723 111.8143
1950q2 110.1335 112.3882
1950q3 112.1586 111.6846
1950q4 112.8913 112.1322
1951q1 111.5826 110.2063
1951q2 111.6458 111.2497
1951q3 114.4287 113.5507
1951q4 114.3274 113.8062
1952q1 114.3807 114.4272
1952q2 115.0211 115.8473
1952q3 115.3531 115.8715
1952q4 117.5749 117.4075
1953q1 120.0173 119.7173
1953q2 120.5348 120.7118
1953q3 120.2853 121.8617
1953q4 119.7519 122.7065
1954q1 120.3647 123.7449
1954q2 121.8411 124.5355
1954q3 123.7844 125.3718
1954q4 126.1801 127.1677
1955q1 128.206 127.8147
1955q2 130.5995 129.5961
1955q3 131.4314 130.7226
1955q4 131.8896 132.3935
1956q1 132.5184 134.2646
1956q2 132.3767 134.5564
1956q3 132.4324 134.9433
1956q4 134.4478 135.9284
1957q1 135.9806 136.5261
1957q2 135.4518 136.9394
1957q3 135.7934 137.2891
1957q4 136.6831 138.6305
1958q1 135.1496 137.6791
1958q2 136.422 138.1341
1958q3 139.7677 138.9453
1958q4 142.0154 140.1919
1959q1 143.5943 142.1337
1959q2 144.3773 143.1391
1959q3 144.6854 142.9913
1959q4 144.6406 143.4921
1960q1 148.9546 145.2161
1960q2 146.0806 145.7559
1960q3 146.3742 146.375
1960q4 145.1088 146.6526
1961q1 146.7386 147.7571
1961q2 151.2943 148.604
1961q3 152.9593 148.6978
1961q4 154.7853 149.9996
1962q1 155.8676 151.192
1962q2 155.7629 151.7841
1962q3 158.4039 153.2191
1962q4 159.1433 153.5229
1963q1 160.1264 154.2017
1963q2 161.2386 155.2373
1963q3 164.0396 155.5606
1963q4 164.8935 156.7498
1964q1 167.6906 158.5101
1964q2 167.2588 159.062
1964q3 169.84 160.773
1964q4 168.174 160.1893
1965q1 170.5501 161.3186
1965q2 170.8476 162.1148
1965q3 175.3211 163.6557
1965q4 177.9659 164.5323
1966q1 178.8131 164.8556
1966q2 178.4471 165.9094
1966q3 178.9881 166.1527
1966q4 179.7122 166.2315
1967q1 180.3977 167.3538
1967q2 181.2156 168.3047
1967q3 181.8779 169.2548
1967q4 182.6768 169.8076
1968q1 186.6931 171.2016
1968q2 188.7502 172.4089
1968q3 188.2602 172.8439
1968q4 189.137 174.2238
1969q1 190.1281 175.703
1969q2 189.1847 175.8024
1969q3 190.774 176.8568
1969q4 189.2837 177.1482
1970q1 190.5522 177.0935
1970q2 192.3818 177.5397
1970q3 195.7578 179.2568
1970q4 194.3567 179.5898
1971q1 200.5013 181.8354
1971q2 201.3067 182.8491
1971q3 203.7236 184.2475
1971q4 203.0908 185.6951
1972q1 205.1834 190.3615
1972q2 209.7812 192.4523
1972q3 211.5681 193.9578
1972q4 213.4589 194.0056
1973q1 215.3432 194.6084
1973q2 214.4144 192.921
1973q3 211.9744 192.4998
1973q4 212.3932 190.784
1974q1 207.2693 188.3682
1974q2 207.7652 187.9351
1974q3 206.6166 188.3849
1974q4 207.6962 187.493
1975q1 209.3333 187.2972
1975q2 212.9105 188.4237
1975q3 215.0174 187.8178
1975q4 215.4609 187.5831
1976q1 217.304 188.2701
1976q2 218.8501 189.7046
1976q3 218.2819 190.3936
1976q4 218.8123 191.1914
1977q1 219.5919 191.9768
1977q2 219.4248 192.7663
1977q3 221.3454 193.6298
1977q4 221.118 194.5295
1978q1 220.3615 196.0737
1978q2 223.5137 196.0318
1978q3 223.3659 195.9118
1978q4 224.8815 196.4933
1979q1 222.5492 196.1878
1979q2 221.5493 194.0663
1979q3 219.8124 193.3174
1979q4 217.7292 191.7634
1980q1 216.6058 189.3787
1980q2 213.3814 188.9364
1980q3 213.2651 188.5993
1980q4 215.2463 188.4181
1981q1 218.8552 187.8761
1981q2 217.3573 188.0737
1981q3 219.7654 187.9574
1981q4 216.5601 187.2807
1982q1 216.0183 188.1088
1982q2 215.7346 188.6548
1982q3 215.4963 188.3419
1982q4 216.5423 187.8983
1983q1 219.368 190.0454
1983q2 221.9851 189.4936
1983q3 223.6938 189.4451
1983q4 225.8788 189.3539
1984q1 226.15 188.8803
1984q2 227.6229 188.5421
1984q3 228.9141 188.4745
1984q4 229.4068 188.3055
1985q1 230.6319 188.1152
1985q2 230.6769 188.1922
1985q3 233.286 188.4558
1985q4 233.0346 188.1202
1986q1 234.9234 188.3092
1986q2 237.875 190.2938
1986q3 238.3172 189.9818
1986q4 237.4557 190.2002
1987q1 235.2406 188.7349
1987q2 235.6077 187.6395
1987q3 235.8354 187.2748
1987q4 237.7856 187.3136
1988q1 238.4391 187.2439
1988q2 238.4714 187.03
1988q3 239.4969 186.7535
1988q4 240.3885 187.5959
1989q1 240.5406 187.7474
1989q2 240.6685 186.9796
1989q3 241.6523 187.5564
1989q4 241.2308 188.0957
1990q1 242.147 187.4809
1990q2 244.0834 187.3034
1990q3 242.6241 185.8919
1990q4 238.6094 184.7695
1991q1 239.516 185.2578
1991q2 243.2864 186.3642
1991q3 245.2206 187.2
1991q4 246.0497 187.3464
1992q1 249.9206 187.8119
1992q2 251.6125 188.1735
1992q3 254.1083 188.4343
1992q4 255.623 187.9503
1993q1 254.0963 189.0897
1993q2 252.7075 188.2978
1993q3 253.441 188.4688
1993q4 255.1901 188.6102
1994q1 256.5796 189.8571
1994q2 256.1244 189.2323
1994q3 254.8452 188.9591
1994q4 257.284 189.1304
1995q1 255.981 188.5205
1995q2 256.0143 188.251
1995q3 255.7288 188.3237
1995q4 257.5326 188.6312
1996q1 259.1014 188.4575
1996q2 259.8923 188.263
1996q3 259.7266 188.8626
1996q4 259.6332 188.6513
1997q1 259.8197 188.9004
1997q2 263.016 190.1508
1997q3 264.9808 191.0714
1997q4 265.685 192.413
1998q1 266.4552 193.7973
1998q2 267.161 195.1811
1998q3 270.3272 195.8496
1998q4 271.7016 196.6668
1999q1 274.6505 197.8043
1999q2 273.2147 198.0771
1999q3 274.6204 198.6224
1999q4 276.8704 198.66
2000q1 274.9271 198.4793
2000q2 279.5904 199.5756
2000q3 279.5187 199.9269
2000q4 282.4208 201.4682
2001q1 280.1394 201.9444
2001q2 283.4774 203.1679
2001q3 283.9923 204.4302
2001q4 287.5201 206.543
2002q1 292.5072 207.7645
2002q2 292.2707 207.8738
2002q3 293.8224 209.065
2002q4 294.1808 210.6484
2003q1 295.9907 210.7718
2003q2 301.746 212.1644
2003q3 305.8693 211.9317
2003q4 309.1752 211.6063
2004q1 309.1799 211.5796
2004q2 311.7492 211.3924
2004q3 313.4896 211.5273
2004q4 314.7269 210.848
2005q1 318.1473 211.7963
2005q2 318.6223 212.1476
2005q3 317.9135 210.6053
2005q4 318.5955 210.6313
2006q1 321.1005 211.0853
2006q2 320.3473 211.6171
2006q3 318.5199 211.573
2006q4 321.7783 214.2278
2007q1 323.3931 214.0092
2007q2 323.2545 214.5643
2007q3 325.1677 215.287
2007q4 324.6322 214.3371
2008q1 321.1595 214.1922
2008q2 321.2409 213.7276
2008q3 318.8241 212.5401
2008q4 323.8696 219.1567
2009q1 329.3948 224.0722
2009q2 333.0931 224.173
2009q3 335.7491 223.7632
2009q4 339.1306 223.7858
2010q1 340.7556 225.6749
2010q2 342.6806 226.5948
2010q3 346.6712 226.931
2010q4 346.7416 226.4612
2011q1 343.0123 225.4128
2011q2 341.196 223.7981
2011q3 340.1887 222.9265
2011q4 340.6023 223.1113
2012q1 342.1459 221.6012
2012q2 343.9474 222.1198
2012q3 341.9148 222.2
2012q4 341.6058 221.5144
2013q1 344.4001 223.0594
2013q2 345.5619 224.7863
2013q3 346.9207 225.221
2013q4 349.0968 225.711
2014q1 346.2669 225.4386
2014q2 348.0385 225.2024
2014q3 351.0635 225.6106
2014q4 350.6203 226.9267
2015q1 354.2249 229.7838
2015q2 355.8439 229.4826
2015q3 356.8215 229.8854
2015q4 355.7143 231.6308
2016q1 356.702 233.2616
2016q2 356.4604 232.8107
2016q3 357.4862 233.3005
2016q4 359.9804 233.1388
2017q1 359.9192 232.9396
2017q2 360.0144 234.1445
2017q3 363.5001 235.0553
2017q4 364.8114 234.5054
2018q1 366.2557 235.0642
2018q2 366.7028 235.7902
2018q3 367.7332 236.9186
2018q4 367.5066 238.5109
2019q1 369.4537 239.6746
2019q2 370.7367 240.0619
2019q3 373.9044 241.6013
2019q4 375.7408 241.8278
2020q1 375.401 243.091
2020q2 387.6417 255.7427
2020q3 393.6397 250.122
2020q4 391.0226 249.9645
2021q1 395.5453 250.3091
2021q2 395.76 249.1343
2021q3 394.0284 249.0241
2021q4 395.3104 248.0879
2022q1 389.8198 246.2414
2022q2 386.0947 243.8393
2022q3 384.7867 243.7039
2022q4 386.6525 244.4187
2023q1 386.7251 244.9451
2023q2 387.4294 246.1366
2023q3 391.6656 246.7619
2023q4 393.3331 247.9148
2024q1 393.8268 248.1665

 

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Notes: Data are for compensation (wages and benefits) of production/nonsupervisory workers in the private sector and net productivity of the total economy. “Net productivity” is the growth of output of goods and services less depreciation per hour worked.

Source: EPI analysis of unpublished Total Economy Productivity data from Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, wage data from the BLS Current Employment Statistics, BLS Employment Cost Trends, BLS Consumer Price Index, and Bureau of Economic Analysis National Income and Product Accounts.

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Productivity–Pay Tracker

Change 1979q4–2024q1:

Productivity

+80.9%

Hourly pay

+29.4%

Productivity has grown 2.7x as much as pay

What is productivity and why did pay and productivity once climb together?

Productivity measures how much total economywide income is generated (i.e., for workers, business owners, landlords, and everybody else together) in an average hour of work. As productivity grows and each hour of work generates more and more income over time, it creates the potential for improving living standards across the board.

In the figure above, pay is defined as the average compensation (wages and benefits) of production and nonsupervisory workers. The pay for this group is one appropriate benchmark for “typical worker pay” because production and nonsupervisory workers have made up roughly 80% of the U.S. workforce over the entire period shown in the figure and because the data for production and nonsupervisory workers exclude extremely highly paid managerial workers like CEOs and other corporate executives. As the figure shows, pay for these workers climbed together with productivity from 1948 until the late 1970s. But that didn’t happen by accident. It happened because specific policies were adopted with the intentional goal of spreading the benefits of growth broadly across income classes. When this intentional policy target was abandoned in the late 1970s and afterward, pay and productivity diverged. Relinking pay and productivity so that workers share in the fruits of their labor will require another pronounced shift in policy.

What broke the link between pay and productivity?

Starting in the late 1970s policymakers began dismantling all the policy bulwarks helping to ensure that typical workers’ wages grew with productivity. Excess unemployment was tolerated to keep any chance of inflation in check. Raises in the federal minimum wage became smaller and rarer. Labor law failed to keep pace with growing employer hostility toward unions. Tax rates on top incomes were lowered. And anti-worker deregulatory pushes—from the deregulation of the trucking and airline industries to the retreat of anti-trust policy to the dismantling of financial regulations and more—succeeded again and again.

In essence, policy choices made to suppress wage growth prevented potential pay growth fueled by rising productivity from translating into actual pay growth for most workers. The result of this policy shift was the sharp divergence between productivity and typical workers’ pay shown in the graph.

From 1979 to 2020, net productivity rose 61.8%, while the hourly pay of typical workers grew far slower—increasing only 17.5% over four decades (after adjusting for inflation).

A closer look at the trend lines reveals another important piece of information. After 1979, productivity grew at a significantly slower pace relative to previous decades. But because pay growth for typical workers decelerated even more markedly, a large wedge between productivity and pay emerged. The growing gap amid slowing productivity growth tells us that the same set of policies that suppressed pay growth for the vast majority of workers over the last 40 years were also associated with a slowdown in overall economic growth. In short, economic growth became both slower and more radically unequal.

If the fruits of economic growth are not going to workers, where are they going?

The growing wedge between productivity and typical workers’ pay is income going everywhere but the paychecks of the bottom 80% of workers. If it didn’t end up in paychecks of typical workers, where did all the income growth implied by the rising productivity line go? Two places, basically. It went into the salaries of highly paid corporate and professional employees. And it went into higher profits (i.e., toward returns to shareholders and other wealth owners). This concentration of wage income at the top (growing wage inequality) and the shift of income from labor overall and toward capital owners (the loss in labor’s share of income) are two of the key drivers of economic inequality overall since the late 1970s.

How can we fix the problem?

For future productivity gains to lead to robust wage growth and widely shared prosperity, we need to institute policies that firmly connect pay and productivity and build worker power. For a description of many promising policies, see EPI’s Policy Agenda—notably the sections on worker power, good jobs, and full employment. Without policy interventions, economic growth will continue to sputter, and the growth we do see will largely fail to lift typical workers’ wages.

Where can I learn more about the productivity–pay gap and how to close it?

A series of EPI reports over the last several years track wage trends and racial wage gaps and their relation to the productivity–pay disconnect. Two foundational papers explain in detail how we measure the productivity–pay gap and why broad-based wage growth is our central economic challenge.

How does EPI construct the productivity–pay graph? 

EPI makes a series of data choices to construct the indices of productivity and pay in the chart above. Our data choices reflect our end goal: to compare growth in the typical worker’s pay with the potential growth in living standards (consumption) that productivity growth represents.  

In brief, we begin with a measure of labor productivity—economywide income divided by total hours worked in the economy. We measure productivity for the broad economy—not just the “nonfarm business sector”—by accessing nonpublic data sources that count outputs from farms, government agencies, and nonprofits. We adjust these calculations for depreciation, and then further for price inflation.   
 
The pay measure starts with the average hourly wage of production and nonsupervisory workers in the private sector, who account for roughly 80% of private-sector workers and thus are a good proxy for the “typical” worker. We adjust this wage for inflation and add inflation-adjusted estimates for benefits.

How does EPI’s productivity–pay graph compare with other versions?

EPI’s productivity–pay graph helps answer a very important question: Do typical workers in the United States share in the benefits of economic growth? The big and growing gap between productivity and pay growth answers that with a resounding “no.” But in order to see this clearly, all of the adjustments we have made to the data are necessary. Failing to understand the role of these data adjustments in highlighting the failure of productivity growth to redound to the benefit of typical workers has led many to focus on inappropriate measures of both productivity and pay, and this has led them to come to wrong conclusions.

How much of the productivity–pay gap is driven by inequality?

Beginning with the August 2021 update, the entire gap in EPI’s productivity–pay figure is associated with rising inequality—inequality among wage earners and the rising share of overall income going to owners of capital rather than to workers for their labor. However, since researchers and analysts may still be interested in factors that account for various parts of the wedge between our measure of pay and other measures of productivity, we decompose these gaps further.