NC Budget and Tax Center

Working hard for an economy that’s hardly working: Workers’ productivity up, wages down for first time in 30 years

North Carolinians are working harder than ever before, but the economy doesn’t seem to be working for them. At least, that’s the verdict of a new Budget & Tax Center report, which finds that during the current economic recovery, North Carolina’s workers have increased their productivity and gotten paid less for the first time in 30 years, yet another sign that the current economic recovery is barely living up to its name.  In fact, this productivity gap—in which rising worker productivity is not rewarded with new job creation or higher wages—is one of the most troubling features of the current recovery.

A key measure of economic growth, productivity, can be measured by the amount of goods produced by each worker.  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.

So where are the savings from these productivitygains going? Corporate profits, dividend income to investors, and cash reserves, the report finds.

Additionally, 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.

In order to reverse these troubling trends, the report highlights the importance of workforce development and career pathway programs for providing the vehicles for workers to improve their skills, increase their productivity, and do so in occupations that earn higher wages.

15 Comments

  1. david esmay

    July 26, 2012 at 7:24 pm

    In a state that has always had low wages, it doesn’t bode well for the future of the working class. High unemployment and economic woes allow businesses to suppress wages to those working. Knowing that a lot of people are waiting to replace you makes you think twice about asking for a raise. Businesses and corporations are exploiting this to achieve record profits, while at the same time whining that taxes and regulations are holding them back. The money isn’t going back into the business, but is being sucked out of it by executives and board members lining their pockets and promoting retrogressive social issues through political contributions. It’s anti-American. If you want to see how low they’re willing to stoop, check out Virginia Foxx’s shameless display on the House floor today.

  2. Alex

    July 27, 2012 at 7:17 am

    David should open his eyes , and realize that everyone is faring worse with the Obama economy. There are less people working now than when he took office, and actual unemployment is probably above 12 %, in spite of putting us another $ 6 Trillion dollars in debt.

  3. david esmay

    July 27, 2012 at 10:02 am

    Alex should quit being a right wing tool and realize that mandatory spending from gov. bush’s unfunded programs is what is increasing our debt. That 6 trillion figure retardlicans like to throw around, is, according to the Washington Post, mathematically impossible. Of all our accumulated debt, including all presidents, bush is responsible for 42%. The only people faring worse are the poor and middle class.
    http://www.politifact.com/texas/statements/2012/jul/19/paul-sadler/paul-sadler-says-national-debt-doubled-under-georg/

  4. Jeremy

    July 27, 2012 at 10:07 am

    Alex, that’s rich – labeling this the “Obama” economy! Last anyone who lives in reality checked, the economy tanked in 2007-08, the end of EIGHT years of George W. Bush. But keep on with your magical thinking. It’s not TOTALLY transparent or anything.

  5. Frank Burns

    July 27, 2012 at 10:22 am

    Obama failed to do address the poor economic situation in this country, he had other priorties. I reckon its time to give the other guy a chance.

  6. Alex

    July 27, 2012 at 10:47 am

    Bush was handed both a recession and a Wall St. technology meltdown in 2001 when he entered office. Unemployment never went beyond 55 during the Bush years.

  7. Alex

    July 27, 2012 at 10:48 am

    That should be 5% instead of 55 !

  8. Doug

    July 27, 2012 at 10:53 am

    Evidently david has a lot of trouble reading charts. If you go to http://www.whitehouse.gov/omb/budget/Historicals the numbers are quite clear and agree to Alex’s totals. They always say English majors have a tough time with simple math.

  9. gregflynn

    July 27, 2012 at 1:18 pm

    Under Bush the unemployment rate started out at 4.2%, got to 6.3% in June 2002, got as low as 4.4% late 2006/ early 2007 and then headed back up to close out at 7.8% January 2009. It continued higher in 2009 to peak at 10.0% in October 2009. It has since declined and stabilized at 8.2% for 2012.

    It took Bush 5 years to get back within 0.4% of where he started. It has taken Obama 3 years to do the same. At this point in Bush’s first term unemployment was 1.4% above what he started with. At this point in Obama’s term unemployment is 0.4% above what he started with.

    Source: BLS

  10. Frank Burns

    July 27, 2012 at 2:14 pm

    It never was a priority for Obama, he kept “pivoting” to the economy but nothing happened. Passing Obamacare was his big focus, so that he could be truly “historic”. I never saw how sending money to augment state and local budgets was ever going to do much to help the economy, but maybe that’s just me. Clearly Obama has a fundamental misunderstanding on the private enterprise system. We can see from his recent comments “You didn’t build that” , and “the Private Sector is doing fine, “that he doesn’t get it.

    I think Obama actually believed that the economy would heal itself, since he declared that the economy would be fine by now. Sometimes I get the feeling that Obama actually thinks that he could part the Red Sea too. He is most definately a legend in his own mind, to the rest of us, he’s what we call a failure.

  11. gregflynn

    July 27, 2012 at 2:46 pm

    Obama was referring to roads and bridge, the public infrastructure that supports private enterprise. You know, one of the few kinds of government spending that conservatives would admit creates jobs and stimulates the economy. After Moses parted the Red Sea he went mountain climbing and found and set of instructions for life. One of those was “Thou shalt not bear false witness against thy neighbour”.

  12. Frank Burns

    July 27, 2012 at 3:24 pm

    Hey Greg,
    You don’t need to explain. I saw the video for myself and heard what he said and how he said it. He sounded like a preacher too and the crowd was agreeing with him. If you actually watch the video, you will see the disdain he shows for business owners. It was quite pathetic.

    Obama also is recently claiming that his economic plan worked. He must actually believe that as well as all the yes men and women who work for him. Too bad nobody else does. We can see for ourselves it didn’t work.

    My conscience is clear but you need to get those rose colored glasses off and start dealing with reality. We made a serious mistake in electing Obama, one that we certainly will not repeat in November.

  13. david esmay

    July 27, 2012 at 4:48 pm

    Maybe this will clarify it for you Frank.
    http://www.huffingtonpost.com/2012/07/26/jon-stewart-you-didn‘t-build-that_n_1705264.html?utm_hp_ref=comedy

  14. david esmay

    July 27, 2012 at 4:49 pm

    The President’s plan is working, bush/GOP plan, not so much.

  15. Allan Freyer

    July 27, 2012 at 6:02 pm

    What do people think about the productivity gap? Why are corporations holding down wages while jacking up profits, sitting on cash, and making capital distributions instead of paying higher wages to their workers?