What is the Productivity–Pay Gap?
The chart below was drawn from a study from the Economic Policy Institute.
It shows the productivity-pay gap with the growth in productivity in yellow and the growth in hourly pay in red since 1948.
The detachment of productivity from hourly pay around 1972 is pretty clear, with hourly pay increasing only 25% compared to productivity's 155% increase over 45 years.
The growth in productivity and hourly pay had been consistent since 1948. But in 1972, productivity kept growing while hourly pay almost “mysteriously” ground to a halt.
So what had happened just before 1972 that could have weighed down the growth of hourly pay?
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