Real Wages Fail To Match A Rise In Productivity

Real wages fail to match a rise in productivity, that is the conclusion in a recent study by the Economic Policy Institute (as reported on According to the study, productivity has been strong since 2000, employment has increased, but this economic growth hasn't helped workers at the middle and lower end salary ranges.

The study says that worker productivity has increased nearly 20% since 2000, but the real median hourly wage of all workers rose only 3%. The study goes on to state that worker productivity has risen 5%, since 2003, but the median hourly wage has decreased 1.1%. It's not all bad news, women have seen a rise in wages of 4.7% between 2000 and 2007, but real median wages for men rose just 1.1%.

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Salary Ranges, Men, Women

Breaking down the Economic Policy Institute study into specifics, high school and college workers have had hourly wage gains of almost 2.5% since 2000. However, the study says that, between 2003 and 2007, wage gains for all median workers have all been falling or are stagnate. However, for those at the highest end of the wage scale - the 95th percentile - wages have reportedly risen 5.1% since 2003.

Is the Economic Policy Institute study correct? According to, "The Employment Cost Index (ECI) showed faster growth of 5 percent since 2000. That's because unlike the measure of median wages, the ECI includes a broad range of workers and therefore gets a boost from high earners. Also, the ECI includes employer-provided benefits, which have risen faster than wages since 2000. However, even with these added advantages, the ECI has been roughly flat since 2003."

ILO: American Workers Most Productive

The pay lag is not due to lack of effort on the workers' part. American workers are producing more and working harder than European workers, according to a report by the United Nations' International Labor Organization. That report says that the average American worker produces $63,885 of wealth annually. In second place is Ireland at $55,986, then Luxembourg at $55,641, Belgium at $55,235 and France at $54,609.

The productivity numbers are calculated by dividing a country's gross domestic product by the number of people employed, and is based on 2006 figures. Americans put in more hours than their European counterparts, and thus creating more wealth, while Asian workers put in more hours and created less wealth, presumably because it was mostly low pay manual labor.

Comprehensive 2007 Salary Survey Reports

So if American workers are putting in long hours, working hard, why is there a slow growth in wages? Where is all this wealth going? Here's one clue. According to the Economic Policy Institute, the average compensation (wages and benefits) of full-time workers in non-managerial jobs is about $40K, but CEO pay is about 270 times larger than the average worker, according to the Economic Policy Institute.

How does your salary compare to the average worker? The PayScale Salary Calculator is a quick and easy way to compare positions. When you want powerful salary data and comparisons customized for your exact position, be sure to build a complete profile by taking PayScale's full salary survey. 


Dr. Al Lee


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