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Does Productivity Growth Still Benefit American Workers?

June 13, 2007

In the last few years many have argued that the middle class has not been receiving its fair share of economic growth. When this is contrasted with the rise in productivity, CEO pay and corporate profits, the natural conclusion is that the system is rigged and needs changing. As a result, the focus of many, particularly those on the left, has shifted from promoting growth, particularly productivity growth, to redistribution. Since growth no longer appears to benefit “working” Americans, it’s better, they argue, to focus on policies like universal health care, stronger retirement security, and other redistributionist programs as a way to raise living standards for this group of Americans.

In a new ITIF report released at this event, labor economist Steve Rose finds that over the last 25 years the fruits of productivity growth have actually been harvested by most working Americans. Much of the difference in productivity and median income growth can be explained by demographic change and rising non-wage benefits.

Moderated by Rob Atkinson, ITIF hosted a debate on whether productivity still benefits working Americans. Steve Rose presented the findings of the study and argued that the historical link between productivity growth and wage growth is not broken and it would be a grave mistake for the future of our nation if Democrats gave up on growth. Christian Weller presented his comments on Steve’s paper. He takes the view that American workers have not shared equitably in the productivity gains of recent decades and that addressing this problem will require both attention to innovation and income growth.