"The post-1995 productivity growth revival did not automatically signal good news for the majority of American workers and households," conclude Gordon and Dew-Becker. "Indeed, to the extent that the productivity growth 'explosion' of 2001–2004 was achieved by cost-cutting, layoffs, and abnormally slow employment growth...the historical link between productivity growth and higher living standards falls apart. Not only have the bottom 90 percent of American workers failed to keep up with productivity growth, many have been harmed by it."
Significant or not, the gap between pay and productivity is a subject that won't go away, particularly now that control of Congress is passing to the labor-friendly Democratic Party. There is much talk of raising the federal minimum wage from its current $5.15 per hour, perhaps to $7.25. Jared Bernstein says that lawmakers could reintroduce the Employee Free Choice Act, which would make it easier for unions to organize. Expect politicians to explore other, perhaps more dramatic, ways to bring pay and productivity together.
Edward Teach is articles editor of CFO.
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