A few days, I got a report from the good folks at the Center for Economic and Policy Research on a topic that hasn't gotten the attention it should--the break between productivity and wages. CEPR's report focuses on looking at productivity and how that relates to wage growth and income inequality. Some of the conclusions:
From 1973 to 2006, the rate of total economy productivity growth has been 0.3 percentage points less than the rate of productivity growth in the non-farm business sector. This is due to the fact that reported productivity growth in the government, household, and institutional sectors is considerably lower than the rate of productivity growth reported for the non-farm business sector.
There has been a growing gap between gross output and net output in the years since 1973 as an increasing share of GDP goes to replace worn-out capital goods. Only net output can raise living standards, since the portion of output that goes to replacing depreciated capital equipment cannot directly affect living standards. A net measure of annual productivity growth is nearly 0.2 percentage points lower than a gross measure for the years from 1973-2006. By contrast, the two measures were nearly identical over the period from 1947 to 1973 as the share of output going to depreciation changed little over this period.
The consumption deflator used to measure real wages has shown a much higher rate of inflation than the output deflator used to measure productivity growth. This is due to the fact that the price of many consumer goods and services, like health care and education, have risen more rapidly than investment goods like computers.
If the U.S. economy could have sustained its 1948-73 rate of productivity growth it would be more than 80 percent larger today. This could have allowed for major increases in incomes and/or more leisure time.
The rest of the report is here.