Widening Productivity and Wage Growth Gap

Chart Widening Productivity and Wage Growth Gap

A main driver of economic advancement, productivity growth has disappointed over the last decade. Considering the meaningful technological innovation in the U.S., one would expect stronger productivity growth. Instead, worker productivity has only increased by 0%-2% per year for the better part of the last ten years. Meanwhile, wage growth has steadily increased over the same time frame, creating a gap between worker output and cost. If this gap widens further, we expect businesses to experience increasing margin pressure. Businesses may still find a way to successfully integrate new technology and processes to drive productivity higher; however, it may take an increase in business investment to achieve.