Technology People and Productivity - Average Earnings And Productivity

Much as an educated workforce is said to cause productivity to rise, so productivity is said to cause earnings to rise. The complexities hidden behind the last generalization are shown in this chart. It shows indexes for three series: (1) productivity (output per hour for Business), (2) average earnings of those who have college degrees and higher, and (3) average earnings of those who have high school education and higher. The last category includes the second. All series are based on constant dollars (inflation removed) and are expressed in index format where 1975 equals 100.

In the 1975-1999 period, productivity grew 49.6%, earnings of those with college and higher degrees increased 21.3%, and those with high school and higher degrees 19%. (GDP, in that same period, grew 117%).

Aside from the lower overall growth of earnings, note the following points:

Real earnings growth is much more affected by inflation and downturns in the economy than productivity growth. Average earnings headed down as productivity flattened in 1978 and 1979 due to inflationary pressures. Earnings continued to fall as the 1980 and 1981-82 recession hit and also slipped in the 1990-1991 recession, college-plus earnings falling less than those of the larger high school-and-higher group.

Before 1984, in this series, those with college and higher degrees grew at a lower rate than the more inclusive category. After 1984 — with the coming of what might be called the "second computer age," those with higher educational attainments grew earnings at a higher rate than the larger group which includes them.

The growth gap between productivity and earnings has widened. Midway through this period, productivity and earnings were 18 points apart. By the end of this period, productivity and earnings about 30 points apart. As covered in the panels of the last topic, automation and structural alignments are making people more productive; fewer people, especially those of lower educational attainment, are needed. This reflects in earnings growth. Another possible conclusion is that more of the gains of productivity were being converted, in this period, to tool up for the cybernetic age; less of these gains went to people whose primary earnings are salaries and wages.

Earnings data reflect a survey of 144.6 million people of both sexes; of these, those with high school and higher education represent 127.9 million; and of those, people with college and higher were 39 million.

The earnings themselves are presented in the next panel.

Sources: Data on earnings from Current Population Surveys, March 2000. Productivity data are from Bureau of Labor Statistics. The Consumer Price Index, published by the BLS, was used to deflate current dollar earnings estimates.