America’s problem with productivity — and wages

November 15, 2013

Yesterday, the Bureau of Labor Statistics Released third quarter productivity and labor costs data. Non-farm worker productivity grew at an annual rate of 1.9% versus a 1.8% increase in the previous quarter, while non-farm labor costs fell at an annual rate of 0.6%. In other words, workers aren’t getting much more productive, and, by one measure, wages aren’t really increasing either.

First, here’s the BLS’s chart of the productivity numbers:

Notice that the red line, which is the change in productivity growth from the previous year, is flat. In other words, compared to the third quarter of 2012, Americans haven’t gotten any more productive. A 1.8% increase in output, says the BLS, was offset by a 1.8% increase in hours worked.

Reuters’ charts the relationship between increases in productivity, labor costs, and GDP growth:

Harold Meyerson has a great piece in American Prospect the connection between income, productivity, and what he calls “the age of anxiety”. The Tl;dr version: productivity, Meyerson writes, “has increased by 80%, but median compensation (that’s wages plus benefits) has risen by just 11%”. During the same period, more and more households relied on two wage earners instead of one, workers worked more hours, and household debt rose.

Here’s a chart from Meyerson’s story showing post-war compensation growth compared to productivity increases:


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When the economy went through a difficult time, many employers (not all) took advantage of employees by demanding more out of them and giving no or fewer pay raises to those they did not fire or lay off. Those abused employees got depressed or angry and ultimately productivity fell off.

While stupid managers can find opportunities to abuse their employees, they never really get away with it. The employees will eventually get back at them, one way or another.

Posted by BC5000 | Report as abusive

That’s ok I plan to join the 47% that get everything from the people that work. Washington thank you for the free stuff! To think I criticized you. I am so sorry! You are not as big of idiots as we all thought?

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