Cutting-Edge Leadership

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Productivity Is Up, Wages Are Down: What’s Up With That?

Do you feel like you work harder, but earn less?

Do you feel like you work harder and produce more, but you still can't make ends meet financially? That's because it's true! According to a recent study, worker productivity has been on a steady increase, rising 62.5% from 1989 to 2010, but wages during that time are only up 12%.

This was not the case from post-World War II into the 1970s, when wages rose in step with productivity increases. So, our parents' generation (those of us over 40) saw a steady increase in their standard of living, while ours has remained flat. According to the study, this is true for everyone except the wealthiest Americans.

Where is the money going? Unfortunately, there is no clear answer, but two costly wars and rising healthcare costs can't be helping things. [Read the report here]

But here is something that is quite troubling: The recent fight over public employees' wages and collective bargaining in Wisconsin, coupled with the decline in unions, means that employees have lost the leveraging power to try to direct productivity increases into wage increases. The situation in Wisconsin suggests that the "have-nots" are fighting with the "have-nots." Private, middle-class workers are looking at the so-called "entitled" unionized, public sector employees and supporting the reduction of their wage bargaining power. But, that is not the problem.

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Management expert, Peter Drucker, noted in 1993 that productivity increases are the only way to increase wages and standard of living - but sadly, in our era, that simply isn't happening.

Here's an interesting and related video featuring former Labor Secretary, Robert Reich.

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Ronald E. Riggio, Ph.D., is the Henry R. Kravis Professor of Leadership and Organizational Psychology at Claremont McKenna College.

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