Posted on Wednesday, March 16, 2011
As corporate America picks up steam -- The Economist described the current profit-reporting season as "shaping up to be one of the best ever" -- when will employee compensation catch up?
If the history of the last several decades is any indicator, it could be a while. On Friday, the Bureau of Labor Statistics released a disheartening chart illustrating the widening gap between growth of productivity for companies and real hourly compensation for workers over the 30 plus years. From the BLS:
Real hourly compensation growth failed to keep pace with accelerating productivity growth over the past three decades, and the gap between productivity growth and compensation growth widened. Over the 2000-09 period, growth in productivity averaged 2.5 percent; growth in real compensation averaged 1.1 percent over the same period.
The relationship between productivity and worker compensation illuminates the extent to which the employed benefit from economic growth. As Princeton Economist Alan Blinder wrote in the Wall Street Journal last December:
When it comes to wages, the basic story of recent decades is redolent of Scrooge. Real average hourly earnings (excluding fringe benefits) now stand roughly at 1974 levels. Yes, that's right, no real increase in over 35 years. That is an astounding, dismaying and profoundly ahistorical development. The American story for two centuries was one of real wages advancing more or less in line with productivity. But not lately. Since 1978, productivity in the nonfarm business sector is up 86%, but real compensation per hour (which includes fringe benefits) is up just 37%. Does that seem fair?
The Huffington Post Lila Shapiro