American workers are more productive than at any point in history. Since 1979, economywide net productivity has grown 80.5%. A typical worker's compensation grew 26% over the same period, according to the Economic Policy Institute. The gap of nearly 55 percentage points was built piece by piece through decisions made in Washington and in corporate boardrooms over four and a half decades.
For the three decades after World War II, productivity and wages moved together. When workers produced more, they earned more. That relationship ended around 1979, when deregulation, the erosion of union power, and corporate-led globalization began shifting the gains of economic growth away from workers and toward capital. Productivity has since grown 3.5 times faster than pay for a typical worker, according to EPI data through 2024.
How a Surplus Gets Divided
An economy produces a surplus. The question is who gets it. In the postwar era, labor had enough bargaining power to claim a fair share. Private-sector union membership peaked at 35% in the 1950s and has fallen to 5.9% today. That collapse did not happen by accident. It happened because employers fought it, and because the government let them.
The mechanisms are documented: weakening the National Labor Relations Act through administrative rulings, failing to raise the minimum wage, misclassifying workers as independent contractors to strip them of protections, and negotiating trade deals that moved production to lower-wage countries while doing nothing to protect the workers left behind. Each policy choice moved value from the wage column to the profit column.
"Growing inequalities, reflecting growing employer power, have generated a productivity-pay gap since 1979." — Economic Policy Institute
The top 1% of earners saw wage growth of 160% over this period while the bottom 90% of workers averaged just 26%. The American economy roughly doubled in real output terms. A typical worker received a quarter of those gains.
The Policy Choices Getting Worse
The Trump administration inherited this gap and moved immediately to widen it. On March 14, 2025, President Trump signed Executive Order 14236, revoking the minimum wage for federal contractors and stripping pay floors from hundreds of thousands of workers. The Department of Labor proposed a contractor classification rule that would let employers deny minimum wage and overtime protections to millions more workers.
The National Labor Relations Board, the federal agency responsible for protecting workers' right to organize, was effectively shut down. Trump fired NLRB board member Gwynne Wilcox in January 2025, leaving the board without a quorum. A federal court found the firing unlawful; the Supreme Court in May 2025 blocked reinstatement while the case continues. NLRB-overseen union elections fell sharply in 2025 as the board sat without a quorum for most of the year.
The results showed up in the wage data almost immediately. Real wages for low-wage workers declined 0.3% in 2025, according to EPI, reversing five years of unusually strong gains. Workers who had finally begun closing the gap found it reopening.
What the Data Says About the Fix
The postwar era proved something important: a regulated market economy can distribute productivity gains broadly. From 1948 through the late 1970s, productivity and typical worker pay moved in near-perfect tandem in the United States. No redistribution scheme was required. What was required was a labor market where workers had genuine bargaining power to negotiate their share of what they produced.
Reversing the productivity-pay gap means reversing the specific policies that created it. Restoring the NLRB's capacity to enforce labor law, raising and indexing the minimum wage, passing the PRO Act to make union organizing viable again, and closing the contractor classification loopholes. Tariffs do not raise wages. They raise prices. The only mechanism that reliably lifts worker pay is worker bargaining power, and that requires ending the government's four-decade project of eliminating it.
Sources
- Understanding the Labor Productivity and Compensation Gap — Bureau of Labor Statistics
- The Productivity-Pay Gap — Economic Policy Institute
- Growing Inequalities Reflecting Growing Employer Power — EPI
- Low-Wage Workers Faced Worsening Affordability in 2025 — EPI
- Trump Broke Law Firing NLRB Member Wilcox, Judge Rules — CNBC
- Executive Order 14026 / EO 14236 Contractor Minimum Wage — Department of Labor
- The No. 1 Cause of America's Affordability Problem Just Got Worse — CNN Business
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