Understanding the Labor Productivity and Compensation Gap
MetadataShow full item record
Brill, Michael; Holman, Corey; Morris, Chris; Raichoudhary, Ronjoy; Yosif, Noah
[Excerpt] Increases in productivity have long been associated with increases in compensation for employees. For several decades beginning in the 1940s, productivity had risen in tandem with employees’ compensation. However, since the 1970s, productivity and compensation have steadily diverged. This trend, which will be referred to as the "productivity–compensation gap," has received much scrutiny from both academics and policymakers alike. Although research on the productivity–compensation gap has existed for some time, most work in this field has been conducted at the total nonfarm business sector or similar aggregate level. However, the Bureau of Labor Statistics (BLS) publishes a wealth of detailed industry-level labor productivity and compensation data. Industry data can be used to look at this topic from a fresh perspective in order to see what is driving trends in the broader economy. This Beyond the Numbers article studies underlying trends over the 1987–2015 period in 183 industries that are driving some of the widening gap between labor productivity and compensation observed in the nonfarm business sector. Most of the industries studied had increases in both labor productivity and compensation over the period studied; however, compensation lagged behind productivity in most cases.
labor productivity; compensation; business sector