BTC Brief: Workers’ productivity up, wages down

BTC Brief: Workers’ productivity up, wages down

- in Must Reads

During the current economic recovery, North Carolina’s workers have increased their productivity and gotten paid less for the first time in 30 years, a new report by the North Carolina Budget & Tax Center finds.

According to the report, the economic recovery from the Great Recession is different from any recovery in the last 30 years, with unprecedentedly sluggish job creation and — perhaps most obviously — falling wages. One unique feature of the current recovery is the productivity gap, in which rising worker productivity is not being rewarded with new job creation or higher wages.

A key measure of economic growth, productivity can be measured by the amount of goods produced by each worker. And as a worker improves his efficiency, he increases the economic output of his employer while reducing his employer’s costs and expanding its profits. In past business cycles (including the recoveries from the recessions of 1981, 1990, and 2001), these savings were passed along to workers in the form of new job creation and higher wages. Unfortunately, the reality of the current recovery is very different than in the past — despite increasing productivity by 1.5% since the end of the Great Recession, North Carolina’s workers have seen their wages fall by 4% and employment fail to return to pre-recession levels, the report finds.

“North Carolinians are working harder than ever before, and the economy is clearly not working for them,” said Allan Freyer, Public Policy Analyst with the N.C. Budget & Tax Center. “For the first time in 30 years, an economic recovery is seeing improved productivity rewarded by lower wages instead of pay raises.”

Moreover, this productivity gap has contributed to the emergence of a two-tier labor market, with growth in low-wage and high-wage occupations, but little growth in between. According to the report, the result is the worst wage inequality seen in 30 years, in which earnings for the bottom fifth of wage-earners fell at almost three times the pace of the top 10% of wage earners. The report also examines the importance of workforce development and career pathway programs in addressing this wage inequality.

The report can be found at: