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How U.S. labor productivity has changed since 1950

How U.S. labor productivity has changed since 1950

Labor productivity—or the average hourly output of all workers in a country—plays a big role in improving the standard of living. Simply put, boosting productivity should enable people to get the things they want and need more quickly, allowing them to spend their time and energy focusing on goals that go beyond survival.

Three factors contribute to improvements in labor productivity: technological advancements, physical capital, and human capital. Each of these components has helped the U.S. raise its labor productivity by 299% from 1950 to 2018. But despite the increased efficiencies of workers, the adjusted median household income only went up 152% in that 68-year period—contributing to a stark wealth divide between the rich and poor. Over the last few decades, the share of aggregate income held by people in middle- and low-income tiers has shrunk, while upper-income households have seen their wealth grow rapidly. Rather than benefiting workers as much as executives, the majority of the benefits of improved productivity have gone straight to the top—leaving much of the workforce behind.

So why haven’t wages kept up with rising productivity, and how has that contributed to the wealth divide? To find out, Stacker sourced 2019 data on labor productivity released from the St. Louis Federal Reserve on March 5, 2020. The labor productivity index represents the average annual real output per hour of all persons in the nonfarm business sector. Median household income is sourced from U.S. Census historical income tables and adjusted to 2019 dollars, using consumer price index data sourced from the Minneapolis Federal Reserve.

Certain patterns of labor productivity and its influence on the median household income emerge if you look at data from the last seven decades. Read on to see how labor productivity has changed in the U.S. since 1950, and what it means for your paycheck.

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1950

- Labor productivity index: 26.52 (+6.6% change from previous year)
- Median household income: $31,830 (+9.7%)

The post-World War II period brought massive growth to the U.S. It primarily benefited the middle class and low-income families, with the poorest 20% of households seeing the biggest gains.

1951

- Labor productivity index: 27.21 (+2.6% change from previous year)
- Median household income: $36,388 (+14.3%)

In the mid-20th century, the nation was undergoing a major shift in the composition of its workforce. It would transition from being composed of primary production occupations (like foresters and farmers) to “professional, technical, and service workers,” according to an article from the U.S. Bureau of Labor Statistics.

1952

- Labor productivity index: 27.73 (+1.9% change from previous year)
- Median household income: $37,490 (+3.0%)

Companies were already starting to experiment with automation to improve productivity in the early 1950s. In 1952, General Electric began using an IBM 701 to automate engineering calculations at a jet-engine operation in Ohio.

1953

- Labor productivity index: 28.41 (+2.4% change from previous year)
- Median household income: $40,473 (+8.0%)

The first high-level programming language, A-0, was invented by Grace Hopper in 1953. It would evolve into the widely-used COBOL, which advanced the capabilities of computers.

1954

- Labor productivity index: 28.97 (+2.0% change from previous year)
- Median household income: $39,610 (-2.1%)

Many Americans were feeling pessimistic about the economy from 1953-1954 after the Federal Reserve implemented policies that caused a major swing in interest rates. That, in turn, caused a reduction in aggregate demand, potentially forcing companies to slow down the speed at which they ramped up output.

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1955

- Labor productivity index: 30.21 (+4.3% change from previous year)
- Median household income: $42,152 (+6.4%)

The world’s first hard drive was invented in late 1955. While large and bulky, it could access a file in just one second, speeding up workers’ productivity.

1956

- Labor productivity index: 30.03 (-0.6% change from previous year)
- Median household income: $44,936 (+6.6%)

The interstate highway system was created in 1956 when President Dwight Eisenhower approved the Federal-Aid Highway Act. The 41,000-mile network of highways would go across the country, allowing for faster shipment of goods.

1957

- Labor productivity index: 30.80 (+2.6% change from previous year)
- Median household income: $45,189 (+0.6%)

The Eisenhower Recession hit the U.S. from 1957-1958, dragging down gross domestic product by 3.3%. Even though labor productivity still increased, median household income fell slightly, potentially the result of a spike in unemployment.

1958

- Labor productivity index: 31.51 (+2.3% change from previous year)
- Median household income: $45,009 (-0.4%)

A General Electric engineer unveiled a prototype for a human exoskeleton in 1958. Dubbed Handyman, it featured robotic arms with claws and handles that came over its shoulders, bringing the sci-fi fantasy of an augmented worker to life.

1959

- Labor productivity index: 32.63 (+3.5% change from previous year)
- Median household income: $47,436 (+5.4%)

Two engineers from Fairchild Corp. and Texas Instruments developed ways to “shrink the discrete components of a computer circuit board onto a sliver of silicon…and germanium” in 1959, according to Forbes. The integrated circuit would decrease the cost of a computer, while giving it significantly more power.

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1960

- Labor productivity index: 33.01 (+1.2% change from previous year)
- Median household income: $48,548 (+2.3%)

Demand for products fell from April 1960 through February 1961—a period of recession. The domestic automobile industry in particular saw an impact, as drivers started buying up foreign-made cars.

1961

- Labor productivity index: 34.09 (+3.3% change from previous year)
- Median household income: $49,045 (+1.0%)

General Motors employed the first industrial robot, known as Unimate, on its assembly line in 1961. The 4,000-pound arm helped take die castings and weld auto bodies, improving efficiencies at plants.

1962

- Labor productivity index: 35.64 (+4.6% change from previous year)
- Median household income: $50,262 (+2.5%)

This year saw major advancements in telecommunications technology. On July 10, 1962, the first active communication satellite was launched, allowing for the broadcasting of TV shows across the Atlantic. Less than six months later, the Relay satellite came online, enabling American television to be broadcast in Japan.

1963

- Labor productivity index: 36.86 (+3.4% change from previous year)
- Median household income: $52,218 (+3.9%)

The computer drawing system Sketchpad was born in 1963. It would serve as a model for future design and drafting programs, ultimately advancing the ability to create engineering drawings.

1964

- Labor productivity index: 37.90 (+2.8% change from previous year)
- Median household income: $54,184 (+3.8%)

Massachusetts Institute of Technology pioneered an early timesharing operating system in 1964 that would go on to become the main mode of computing a decade later. It allowed a single computer to be used by many people at the same time, thus improving efficiencies. Timesharing would later influence cloud computing.

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1965

- Labor productivity index: 39.11 (+3.2% change from previous year)
- Median household income: $56,473 (+4.2%)

From the mid-1960s through the early 2000s, women started participating in the labor force in unprecedented numbers. The growth of two-earner households throughout this period of time helped prevent an overall bigger drop in middle-class household incomes.

1966

- Labor productivity index: 40.52 (+3.6% change from previous year)
- Median household income: $59,259 (+4.9%)

An invention called the Carterfone connected mobile radios to telephone lines in 1966. While AT&T banned customers from using any third-party equipment on its telephone network, the Federal Communications Commission ruled against the company, which led to big changes in telephone service. That ruling would later allow people and businesses to connect faxes, modems, and answering machines to their telephone lines.

1967

- Labor productivity index: 41.29 (+1.9% change from previous year)
- Median household income: $60,733 (+2.5%)

After building his initial prototype in 1964, Doug Engelbart filed a patent application for a device known as the “X-Y position indicator for a display system” in 1967. It was the birth of the mouse, which made computer use far more efficient.

1968

- Labor productivity index: 42.74 (+3.5% change from previous year)
- Median household income: $63,425 (+4.4%)

IBM and inventor Robert Dennard received a patent for dynamic random access memory in 1968. Combined with the first affordable microprocessors, this new technology would eventually allow for the birth of compact personal computers.

1969

- Labor productivity index: 42.82 (+0.2% change from previous year)
- Median household income: $65,723 (+3.6%)

Labor productivity, while still rising, started to see significantly smaller amounts of year-over-year growth in 1969. Economists have different theories to explain this slowdown in growth. The oldest and most popular hypothesis blames it on a deterioration of the skills and experience of workers, as many baby boomers were just starting to enter the workforce as young adults and were potentially less productive than more-seasoned employees.

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1970

- Labor productivity index: 43.46 (+1.5% change from previous year)
- Median household income: $65,026 (-1.1%)

After decades of development, jumbo jets linked major cities around the planet by 1970. The aviation industry would continue to see massive increases in employment and business activities for decades.

1971

- Labor productivity index: 45.16 (+3.9% change from previous year)
- Median household income: $64,935 (-0.1%)

President Nixon announced his New Economic Plan in 1971. It would freeze wages, rents, and prices for 90 days.

1972

- Labor productivity index: 46.73 (+3.5% change from previous year)
- Median household income: $67,999 (+4.7%)

Nixon’s 1971 plan successfully increased output and employment in 1972. Over the long term, the wage and price controls would worsen inflation, bringing it to 11% by the time Nixon resigned in 1974.

1973

- Labor productivity index: 48.17 (+3.1% change from previous year)
- Median household income: $69,402 (+2.1%)

From 1973 onward, hourly wages for most American workers stopped rising in tandem with economy-wide productivity. Prior to this year, the majority of workers saw their hourly compensation get adjusted to match inflation, which ultimately helped the country see wide-scale improvements in living standards.

1974

- Labor productivity index: 47.38 (-1.6% change from previous year)
- Median household income: $66,918 (-3.6%)

This year fell smack in the middle of the Oil Crisis Recession. It was a period of stagflation, and many Americans lost their jobs. Labor productivity and median household income both dropped as a result of the economic downturn.

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1975

- Labor productivity index: 48.68 (+2.8% change from previous year)
- Median household income: $65,204 (-2.6%)

In March of 1975, the U.S. finally began recovering from its recession. Retrospective analysis found that during the first 10 months of the recession, output only moderately declined.

1976

- Labor productivity index: 50.38 (+3.5% change from previous year)
- Median household income: $67,219 (+3.1%)

The fax machine started hitting offices in the mid-1970s. Networks of fax machines allowed workers to send information to each other faster than ever before, potentially helping to boost productivity.

1977

- Labor productivity index: 51.25 (+1.7% change from previous year)
- Median household income: $67,550 (+0.5%)

Production ramped up 16% by the end of 1977, an indication that the U.S. had made a full recovery from the oil recession. Increased consumer spending helped provide new jobs to more than 7.7 million workers.

1978

- Labor productivity index: 51.96 (+1.4% change from previous year)
- Median household income: $69,180 (+2.4%)

The first quarter of 1978 proved challenging for the economy. Coal miners went on strike for over 100 days, and the Northeast was slammed with one of the worst blizzards of the century. Still, labor productivity showed growth by the end of the year.

1979

- Labor productivity index: 51.89 (-0.1% change from previous year)
- Median household income: $68,986 (-0.3%)

The U.S. economy changed in 1979. After around 25 years of wages rising with increases in productivity, the two measurements diverged. The next few decades would see Americans work more productively, while the rewards would concentrate among top-level executives.

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1980

- Labor productivity index: 51.87 (0.0% change from previous year)
- Median household income: $65,238 (-5.4%)

A six-month recession hit the economy in 1980. The recovery saw one of the most historically low output growth rates.

1981

- Labor productivity index: 52.64 (+1.5% change from previous year)
- Median household income: $62,977 (-3.5%)

The U.S. plunged into another recession in 1981. The construction, manufacturing, and auto industries had massive layoffs.

1982

- Labor productivity index: 52.24 (-0.8% change from previous year)
- Median household income: $62,091 (-1.4%)

Businesses in the U.S. suffered after a regime change in Iran. The country produced much-lower volumes of oil, causing prices to skyrocket. It caused the unemployment rate to hit more than 10%, which impacted median household income.

1983

- Labor productivity index: 54.35 (+4.1% change from previous year)
- Median household income: $63,103 (+1.6%)

The government began to gradually raise the retirement age to 67 years old, starting in 1983. Some experts suggest that delaying retirement may help improve workforce productivity.

1984

- Labor productivity index: 55.58 (+2.2% change from previous year)
- Median household income: $65,052 (+3.1%)

In 1984, Michael Dell started offering homemade computers built to customers’ needs and preferences. Custom computers would soon become standard, allowing workers to get the exact features they needed to do their jobs.

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1985

- Labor productivity index: 56.55 (+1.8% change from previous year)
- Median household income: $65,909 (+1.3%)

In early 1985, Apple introduced the Macintosh and LaserWriter to enormous success. The laser printer sparked the beginning of desktop publishing and allowed the Mac to have real-world applications.

1986

- Labor productivity index: 58.24 (+3.0% change from previous year)
- Median household income: $68,726 (+4.3%)

Motorola engineer Bill Smith developed Six Sigma, a concept that would standardize defect measurement, in 1986. It had a dramatic impact on the improvement of business performance, and would later be adopted by General Electric and Citibank.

1987

- Labor productivity index: 58.57 (+0.6% change from previous year)
- Median household income: $69,710 (+1.4%)

At the end of the 1986-1987 academic year, the amount of master’s degrees awarded to women surpassed that of men for the first time in U.S. history. Higher education would make women more competitive for the rising share of jobs that require a postsecondary degree.

1988

- Labor productivity index: 59.53 (+1.6% change from previous year)
- Median household income: $69,579 (-0.2%)

Prairie Tek debuted a 2.5-inch hard drive specially designed for notebook computers. It would help pave the way for workers to take their projects on the go with laptops.

1989

- Labor productivity index: 60.08 (+0.9% change from previous year)
- Median household income: $70,551 (+1.4%)

British computer scientist Tim Berners-Lee laid out a revolutionary proposal for information management in March 1989. While not initially accepted, his idea would eventually become the World Wide Web, creating potential for a surge in productivity.

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1990

- Labor productivity index: 61.10 (+1.7% change from previous year)
- Median household income: $69,164 (-2.0%)

The early 1990s brought a decline in the numbers of “prime age” men (25-54 years old) participating in the labor force. It would prove to be one of many challenges affecting productivity growth and wealth inequality.

1991

- Labor productivity index: 62.11 (+1.6% change from previous year)
- Median household income: $67,471 (-2.4%)

The price of oil spiked again after Iraq invaded Kuwait in mid-1990. Manufacturing trade sales fell. The resulting rise in labor productivity, combined with the fall in median household income, suggests that Americans were more productive but getting paid less for it.

1992

- Labor productivity index: 64.89 (+4.5% change from previous year)
- Median household income: $66,655 (-1.2%)

An estimated 15% of the increase in labor productivity growth starting in 1992 and going through 2000 has been found to be related to offshoring. As a result, demand for domestic labor and wages dropped.

1993

- Labor productivity index: 64.96 (+0.1% change from previous year)
- Median household income: $65,401 (-1.9%)

Apple shipped its personal data assistant, Newton, for the first time in 1993. Some of its features were later included in handheld computers that came out in the following decades, putting more productivity tools at people’s fingertips.

1994

- Labor productivity index: 65.42 (+0.7% change from previous year)
- Median household income: $66,913 (+2.3%)

The North American Free Trade Agreement was enacted in 1994. This would lead to many jobs moving to offshore facilities and widening economic inequality in the following years.

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1995

- Labor productivity index: 66.14 (+1.1% change from previous year)
- Median household income: $68,138 (+1.8%)

In the 41-year period from 1973 to 2014, nearly all of the rises in wages given to workers occurred from 1995 to 2002. A tight labor market allowed workers to command higher wages—and seize a small portion of the rewards of productivity growth—during this time.

1996

- Labor productivity index: 67.53 (+2.1% change from previous year)
- Median household income: $68,936 (+1.2%)

Labor productivity started to see larger-than-average upswings from 1996-2000. Companies were investing heavily in the latest information and communication technologies, thus helping to create more output. Productivity and wages climbed accordingly.

1997

- Labor productivity index: 68.84 (+1.9% change from previous year)
- Median household income: $71,003 (+3.0%)

Rising rates of efficiency (and subsequent increases in labor productivity) saw the length of the average workweek for some American workers decrease. In 1997, the average production worker clocked in for 35 hours a week, compared with the standard 40-hour workweek in 1950.

1998

- Labor productivity index: 70.96 (+3.1% change from previous year)
- Median household income: $73,317 (+3.3%)

Labor productivity continued to rise in 1998. This growth throughout the late 1990s is largely attributed to the information-technology-producing sectors (and sectors that adopted information technology) that started to see big breakthroughs.

1999

- Labor productivity index: 73.66 (+3.8% change from previous year)
- Median household income: $74,946 (+2.2%)

By 1999, 44% of U.S. households owned a computer, thrusting the country firmly into the Second Machine Age. Some economists warn that traditional GDP measurements fail to capture the full value of digital goods and services (such as Wikipedia articles and YouTube videos) that improve the consumer experience, potentially downplaying economic prosperity.

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2000

- Labor productivity index: 76.11 (+3.3% change from previous year)
- Median household income: $75,332 (+0.5%)

Most large companies had adopted Enterprise Resource Planning systems by 2000. This vastly improved supply chain data accuracy and availability.

2001

- Labor productivity index: 78.20 (+2.7% change from previous year)
- Median household income: $74,222 (-1.5%)

The year 2001 was a tough one for Americans. Between the burst of the dot-com bubble and 9/11, workers saw their median household income fall and the economy undergo a mild contraction.

2002

- Labor productivity index: 81.57 (+4.3% change from previous year)
- Median household income: $73,455 (-1.0%)

Business investment dropped a significant amount in both 2001 and 2002, thus “slowing the growth in capital deepening,” according to a 2007 report from the Congressional Budget Office. Capital deepening is considered to be a primary reason why labor productivity growth accelerated through 2005.

2003

- Labor productivity index: 84.68 (+3.8% change from previous year)
- Median household income: $73,208 (-0.3%)

Congress passed the Jobs and Growth Tax Relief Reconciliation Act in 2003. It provided tax incentives that encouraged capital investment, which may have had an impact on labor productivity.

2004

- Labor productivity index: 87.12 (+2.9% change from previous year)
- Median household income: $73,178 (0.0%)

Despite gains in the economy, the median household income remained virtually the same from 2003 to 2004. The rewards from the productivity growth went into the pockets of the wealthy, boosting the real income of the top 1% of Americans by around 12.5%.

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2005

- Labor productivity index: 89.02 (+2.2% change from previous year)
- Median household income: $73,573 (+0.5%)

Advancements in genetic modification techniques lead to greater efficiencies in agriculture and medicine. Around the year 2005, scientists were able use animals to develop organs for transplant into humans.

2006

- Labor productivity index: 90.00 (+1.1% change from previous year)
- Median household income: $74,081 (+0.7%)

Annual rates of productivity growth fell between 2005 and 2007. The productivity growth rate for this period was less than half of what it was in the nine years prior, according to The New Yorker. Home prices also nosedived this year, soon igniting the Great Recession.

2007

- Labor productivity index: 91.57 (+1.7% change from previous year)
- Median household income: $75,680 (+2.2%)

After the relatively short recession of March to November 2001, household incomes took years to recover. Median household income was finally restored in 2007 to the level it was at in 2000. The rapid start of the Great Recession would soon hit households hard once again.

2008

- Labor productivity index: 92.61 (+1.1% change from previous year)
- Median household income: $73,065 (-3.5%)

The workforce started seeing a “loss of productive workers” in 2008 when the first baby boomers could begin collecting Social Security. That issue, combined with the Great Recession, proved to be a double whammy for the economy.

2009

- Labor productivity index: 95.92 (+3.6% change from previous year)
- Median household income: $71,629 (-2.0%)

The 2008-2009 recession saw labor hours nosedive and hourly output increase—a phenomenon that can be partly attributed to “the changing quality of the workforce,” according to the National Bureau of Economic Research. Economists have hypothesized that employers were also trying to maintain production with less labor, thus boosting overall labor productivity.

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2010

- Labor productivity index: 99.16 (+3.4% change from previous year)
- Median household income: $70,621 (-1.4%)

The second decade of the 2000s would see GDP gains driven largely by quality improvements (“the same, but nicer,”) rather than increases in quantities sold or major innovations, according to a Bain & Company report. It points to coffee as an example of the way a low-tech product can see improvements that “create more economic value.” People moved from making coffee at home in run-of-the-mill drip pots to using Keurig machines and buying premium beverages from high-end cafes.

2011

- Labor productivity index: 99.15 (0.0% change from previous year)
- Median household income: $69,324 (-1.8%)

With 0% change from 2010, 2011 marked the start of the slowest five-year period of labor productivity growth since 1977. It may indicate that businesses have been investing in staff and equipment in an effort to reap long-term growth which had yet to be realized.

2012

- Labor productivity index: 100.00 (+0.9% change from previous year)
- Median household income: $69,316 (0.0%)

Labor productivity may have been hindered by Hurricane Sandy in 2012. It had a severe impact on East Coast counties with high numbers of labor-force participants and caused around $65 billion in economic damage.

2013

- Labor productivity index: 100.50 (+0.5% change from previous year)
- Median household income: $70,032 (+1.0%)

During the “Age of Productivity Recovery” (1995-2013), labor productivity grew 2.3%. The increased gains didn’t benefit most workers, though. The top 1% of earners saw their share of income grow four percentage points, while the bottom 90% of workers saw their income share drop 6.5 percentage points.

2014

- Labor productivity index: 101.36 (+0.9% change from previous year)
- Median household income: $71,981 (+2.8%)

In 2014, the U.S. saw its biggest rate of job growth since 1999. A slowdown in productivity is what allowed for decent employment gains amid slow GDP growth.

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2015

- Labor productivity index: 102.73 (+1.3% change from previous year)
- Median household income: $76,275 (+6.0%)

After 15 years of stagnation, the 2015 median household income finally surpassed its year-2000 level. It would mark the end of an unprecedented period of stagnation over the previous five decades.

2016

- Labor productivity index: 102.99 (+0.3% change from previous year)
- Median household income: $77,463 (+1.6%)

By the end of 2016, only families in the upper-income bracket had built on their wealth since 2001. Consequently, the median net worth of middle-income families had shrunk by 20%, while low-income families saw their median net worth plummet by 45%, largely because middle- and low-income people rely more heavily on home equity as a wealth-builder than upper-income people.

2017

- Labor productivity index: 104.36 (+1.3% change from previous year)
- Median household income: $79,222 (+2.3%)

After years of near stagnant wages, American workers finally started earning more money in 2017 than they did in 2007, by some measurements. However, not all workers benefited equally. Economists still identified pay inequalities among groups of different genders, races, and salary levels.

2018

- Labor productivity index: 105.81 (+1.4% change from previous year)
- Median household income: $80,087 (+1.1%)

By 2018, it had been almost two decades since American households saw significant income growth, despite rising productivity. Households saw their income grow by 0.3% on average every year between 2000 and 2018.

2019

- Labor productivity index: 107.79 (+1.9% change from previous year)
- Median household income: not available

After decades of seeing little gains in wages despite being more productive, American workers have started to take note of gaps in pay between the rich and the poor. A 2019 survey from Pew Research Center found that 61% of respondents felt that there’s too much wealth inequality across the nation.

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