CEOs Claim Lion and Vulture’s Share of Reward from Increased Worker Productivity

More from economist Mark Thoma: a new paper from the Economic Policy Institute finds that workers are doing more and not getting paid for it. Over the last four decades, as workers have become more productive, the fruits of that productivity have gone mostly to management’s pockets:

Net productivity grew 1.33 percent each year between 1973 and 2014, faster than the meager 0.20 percent annual rise in median hourly compensation. In essence, about 15 percent of productivity growth between 1973 and 2014 translated into higher hourly wages and benefits for the typical American worker. Since 2000, the gap between productivity and pay has risen even faster. The net productivity growth of 21.6 percent from 2000 to 2014 translated into just a 1.8 percent rise in inflation-adjusted compensation for the median worker (just 8 percent of net productivity growth).

…If the hourly pay of typical American workers had kept pace with productivity growth since the 1970s, then there would have been no rise in income inequality during that period. Instead, productivity growth that did not accrue to typical workers’ pay concentrated at the very top of the pay scale (in inflated CEO pay, for example) and boosted incomes accruing to owners of capital [Josh Bivens and Lawrence Mishel, “Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay,” Economic Policy Institute, 2015.09.02].

Bernie Sanders may exaggerate income inequality—we’re only eighth worst, not the worst, for income inequality among industrialized nations—but he’s on to something. Maybe the broad failure of the economy to reward job doers instead of just the supposed “job creators” is why he’s drawing the biggest crowds on the campaign trail… and makes it inexplicable that the other guy drawing big crowds is the capitalist reveling most in income inequality.