A close-up picture
At a recent presentation to the National Association of Business Economics, CEA Chair Ed Lazear presented a picture of productivity and real compensation to buttress his case that compensation will follow productivity.
Figure 4 from Lazear
I thought it would be useful to present a similar picture (but using the
BEA BLS reported data, rather than the product wage calculated by the CEA), with a closer focus on the last decade and half (in log terms).
Figure 1: Log output per hour in the nonfarm business sector (blue) and real compensation per hour in the nonfarm business sector (red), 1992=100. Source:
Since the series are plotted in log terms, this means since 1992 output per hour has risen 10 percent higher than real compensation per hour; and since 2001q4, productivity has risen about 5.4 percent higher than compensation, despite the recent surge in real compensation. (5.9 percent using the employment cost index, deflated using the CPI-urban.)
Late addition: 19 September, 6:10pm Pacific
Spencer has provided the data on CPI-RS. I’ve plotted the productivity [blue] and several compensation series that results from using the CEA’s preferred deflator (the implicit price deflator for nonfarm business) [red], using the
CPI-U CPI-RS [green] as reported by BLS, and using CPI-U [black]. (Changed graph 20 Sept, 1:30pm Pacific, to reflect fact that the BLS series uses CPI-RS)
Figure 2: Log output per hour in the nonfarm business sector (blue) and real compensation per hour in the nonfarm business sector deflated using NFB deflator (red), using CPI-U-RS to end-2005, and CPI-U thereafter, as reported by BLS (green), and using CPI-U (black), 1992=100; . Source: BLS via FRED, personal communication from Spencer England, and author’s calculations.