It’s a bit old, but a relative linked to it on Facebook, and I thought I would look into it. It is the “Wages Haven’t Kept Up With Productivity” mantra:


“Something happened in the mid-70′s”

Well, I went to BLS.GOV, and plotted Series PRS85006093 (Nonfarm Business, Labor productivity (output per hour)) and Series PRS85006103 (Nonfarm Business, Hourly Compensation). Guess what? The results don’t match!

In fact, adjusting the index to 100 in 1970, the productivity index was 231.7 in 2016, and the hourly compensation index was a whopping 887.2! Relative to their productivity, people were earning almost FOUR TIMES what they should have in 2016.

(This is a semi-log scale, which is more appropriate for the data.)

So how could this be? What could account for this discrepancy?

Well, I did more digging, and found Series PRS85006153 (Nonfarm Business, Real hourly compensation). This index is inflation-adjusted, while the others are not. This is the data series they were using in their comparison. They were comparing inflation-adjusted wages with non-inflation-adjusted productivity.

So, what happened in the mid-70′s? INFLATION.