The cumulative percentage change in productivity since the late 1940s is 253%, while wages have grown by only 144% over the same span. But beginning in the late 1970s, the growth rate for compensation began to level out, even as labor productivity continued to increase. Experts term this phenomenon the “ productivity-pay gap.” From the late 1940s to the late 1970s, the cumulative growth for both labor productivity and compensation for nonsupervisory employees closely tracked one another. In recent decades, however, the link between productivity growth and wage growth has weakened. Productivity growth can simultaneously benefit businesses through increased profits, consumers through increased availability of goods and services, and workers through increased compensation. Productivity is a useful metric for assessing the economy because it reflects the economy’s ability to generate goods and services from the same amount of work. The Bureau of Labor Statistics reported a 7.5% decline in labor productivity during the first quarter of 2022, the steepest decline since 1947. Many low-productivity jobs were eliminated early in the pandemic, while major infrastructure investments and the accelerated adoption of automation and artificial intelligence created conditions for productivity to rise.īut more recent data has shown productivity declining. is headed toward recession, one of the many concerning signals is a sharp decline in labor productivity.Īfter more than a decade of below-average productivity growth, the COVID-19 pandemic raised the prospect of a productivity boom. With numerous economic experts predicting that the U.S. Photo Credit: Aleksandar Malivuk / Shutterstock