Did Wages Reflect Growth in Productivity?

10 Pages Posted: 17 Apr 2008 Last revised: 18 Aug 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: April 2008

Abstract

The level of productivity doubled in the U.S. nonfarm business sector between 1970 and 2006. Wages, or more accurately total compensation per hour, increased at approximately the same annual rate during that period if nominal compensation is adjusted for inflation in the same way as the nominal output measure that is used to calculate productivity. Total employee compensation as a share of national income was 66 percent of national income in 1970 and 64 percent in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62 percent in the decade of the 1960s to 66 percent in the decades of the 1970s and 1980s and then declined to 65 percent in the decade of the 1990s where it has again been from 2000 until the most recent quarter.

Suggested Citation

Feldstein, Martin S., Did Wages Reflect Growth in Productivity? (April 2008). NBER Working Paper No. w13953, Available at SSRN: https://ssrn.com/abstract=1121743

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