Overview[ edit ] Unemployment generally falls during periods of economic prosperity and rises during recessions, creating significant pressure on public finances as tax revenue falls and social safety net costs increase. Government spending and taxation decisions fiscal policy and U.
Ravikumar and Lin Shao The widening gap between labor productivity and compensation is not unique to the current recovery. Labor compensation has grown slowly during the recovery of the U. Real labor compensation per hour in the nonfarm business sector was 0.
As recently as JuneFed Chair Janet Yellen remarked that signs that labor compensation growth might be picking up are tentative. Economic theory suggests that firms pay workers according to their productivity. One might then wonder whether the slow growth in labor compensation is simply due to slow growth in labor productivity.
We measure labor productivity as real total output divided by total hours worked and labor compensation as real total labor compensation divided by total hours worked.
Figure 1 plots labor productivity and compensation for the nonfarm business sector for 20 quarters after As the figure shows, labor compensation decreased by 0. Is the disparity between labor productivity and labor compensation unique to the recovery from the recent recession?
As Figure 2 shows, it is not: The growth in labor compensation was also consistently lower than that in labor productivity during the recovery from the recession.
Twenty quarters after Q4 the start of the recovery according to the NBERlabor productivity was 13 percent higher, while labor compensation was only 5 percent higher. In fact, labor productivity has been growing at a higher rate than labor compensation for more than 40 years.
As Figure 3 shows, labor productivity in Q1; labor compensation, on the other hand, is only 2. In other words, the gap between labor productivity and compensation has been widening for the past four decades see Domenech,and Fleck, Glaser, and Sprague,for discussions of the widening gap.
The slower growth in labor compensation relative to labor productivity during the recovery from the two most recent recessions is part of this long-term trend. The data in Figure 3 show that the productivity-compensation gap—defined as labor productivity divided by labor compensation—has been increasing on average by approximately 0.
Based on this long-term trend, the gap would have been 51 percent higher in Q1 compared with Q1; in the data, the gap is actually 47 percent higher.
In conclusion, labor compensation failed to catch up with labor productivity after the recession. Notes 1 According to the Bureau of Labor Statistics BLSthe nonfarm business sector is a subset of the domestic economy, excluding government, private households, and nonprofit organizations.
Labor compensation includes wages and salaries, employer contributions for social insurance, and employer payments to employee-benefit plans including health and life insurance. See the BLS glossary http:Jan 12, · In addition, this gap is addressed in a January essay in the Monthly Labor Review titled The compensation-productivity gap: a visual essay.
That essay looks at the gap during several periods that contain multiple business cycles.
Download Citation on ResearchGate | On Jan 1, , Susan Fleck and others published The compensation-productivity gap: A visual essay }. This gap between the two measures is the subject of this visual essay. The gap between real hourly compensation and labor productivity is one of a number of "wage gaps" that indicate whether workers' compensation or wages keep up with productivity.
Chart 5 shows the composition of the productivity–compensation gap at the sector level, which varied significantly. The difference in deflators contributed to the gap in seven of the sectors and was particularly large in the information, wholesale trade, and retail trade sectors.
The compensation-productivity gap: a visual essayMonthly Labor Review • January alphabetnyc.com in price differences, labor share, and the compensation-productivity gap, nonfarm business CThe compensation-productivity gap: A visual essayThe compensation-productivity gap: A visual essay on ResearchGate, the professional network for scientists.
Unemployment in the United States discusses the causes and measures of U.S.
unemployment and strategies for reducing it. Job creation and unemployment are affected by factors such as economic conditions, global competition, education, automation, and demographics.
This gap between the two measures is the subject of this visual essay. The gap between real hourly compensation and labor productivity is one of a number of "wage gaps" that indicate whether workers' compensation or wages keep up with productivity. Jan 12, · In addition, this gap is addressed in a January essay in the Monthly Labor Review titled The compensation-productivity gap: a visual essay. That essay looks at the gap during several periods that contain multiple business cycles. The gap between productivity growth and compensation growth has widened. Over the –09 period, growth in productivity averaged percent, while growth in real compensation averaged percent. This data, along with additional information, was published in The compensation-productivity gap: a visual essay.