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PROGRESS AND PERFORMANCE
US Productivity and Wages Diverging
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Cum Change in Per Hour Wages and Productivity
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Why is it that US hourly compensation has flatlined for nearly 50 years?
There are many different versions of the graph above that have been included in a flood of reports about
economic performance. They are all pretty clear about the reality that wage earners have not shared
very much in the benefits of improved productivity during the period from the 1970s to the present,
while during the period from the end of the Second World War until the 1970s productivity and hourly
compensation improved together.
The US economy had a massive shock in 1973 when the OPIC oil cartel got to control oil prices and the price of oil went instantly from $3.50 a barrel to $13.50 a barrel. This eliminated a huge element of the international competitive advantage enjoyed by the US manufacturing industry ... that is low energy costs.
In retrospect, one has to wonder how it was that OPIC succeeded in imposing its will on the global oil industry, and it is likely that many important actors stayed quiet because it was in their interest for oil prices to go up. The Netherlands and the UK got advantage from the OPEC price increases as did all the major integrated international oil companies. Consumers everywhere got to pay the price ... not to mention wage earning workers!
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