A Key Chart: Do Workers Share in Economic Gains?

Chart showing rise in productivity but not wages

If  you want to understand what has been going on with the economy since World War II, you should start with this chart from the Talking Points Memo website.  (You should also start with the accompanying story there, of course, but the chart — the original version where you can more easily line up the dates is here — speaks loudly for itself.)

The orange line shows the increase in worker productivity in the post-war years.  The green line shows non-supervisory workers’ real wages (adjusted for inflation.)  Where the lines overlap, as they did more than a quarter century after the war, increases in productivity are matched by increases in wages.  In other words, we were becoming a more efficient society and we were all sharing in the benefits of it.

Eyeballing the chart, it looks like the first big downward jag in wages came at the time of the Yom Kippur War in 1972, which led to the first big “oil shock.”  (Do younger people even know about the oil shocks of 1973 and 1978-79?  We haven’t had anything quite like them since.  We have “gas lines” every day at Costco but not the sorts of ones that we had everywhere back in those days, where the state only allowed people to get gas on certain days depending on their license numbers.  You can look it up.)  Even then, after 1973 wages recovered and began to move parallel to — although at a lower level than — productivity.

After then, virtually none of the gains in productivity (or efficiency) have gone into increasing worker income.  Workers below the supervisory level have not shared in the benefits of technology and other efficiencies at all.

When people talk about how industry is hurting, remember this chart — and ask people to explain it.  My explanation is — employers have taken gains that used to be shared across society and kept them for themselves and their closest agents.  Pretty simple, pretty devastating.

About Greg Diamond

Somewhat verbose attorney, semi-retired due to disability, residing in northwest Brea. Occasionally runs for office against bad people who would otherwise go unopposed. Got 45% of the vote against Bob Huff for State Senate in 2012; Josh Newman then won the seat in 2016. In 2014 became the first attorney to challenge OCDA Tony Rackauckas since 2002; Todd Spitzer then won that seat in 2018. Every time he's run against some rotten incumbent, the *next* person to challenge them wins! He's OK with that. Corrupt party hacks hate him. He's OK with that too. He does advise some local campaigns informally and (so far) without compensation. (If that last bit changes, he will declare the interest.)