Why is there a gap between productivity vs wage, that began in the 70s?

Question

I think everyone’s seen the famous graph from the Economic Policy Institute, that show that while Productivity has been growing in a steady and linear fashion decades after decades, wage began to stagnate in the 70s.

Since the 70s, wage have grown about +0.6% per year, while productivity has grown at an average of 1.4% per year. That gap is enormous and it is compounding over time.

Can someone me why it’s happened?

In: Economics

Answer 1

1. The most important reason is they started using a different measure of inflation for productivity and wages.

2. The wages graph does not account for benefits such as medical insurance which has been an increasingly larger part of total compensation.

3. Productivity measures everyone but the wages are only measuring hourly non supervisory workers. Much of the productivity gains were from computers and globalization which benefitted salary workers more.