Business Review Board / April 19, 2016

The Myth of the Productivity-Pay Gap

The government’s statisticians committed several errors while calculating.

The Obama administration is wrong about its assessment of the productivity-pay gap. Year over year, American workers grow more productive. They log an hour; they get more done — less time on social media, perhaps. However, as many in America’s labor force can attest, the hourly wage has stayed flat for years. The Obama administration thinks part of the cause is that Americans are working overtime yet are not getting paid for those efforts. So it wants to force a solution. As economist Veronique de Rugy writes, the Department of Labor recently moved to force employers to pay more employees overtime. This will, of course, result in less pay and fewer jobs for workers.

According to numbers crunched by the Mercatus Center, the average hourly growth has barely risen — which leads to the government’s worry — while total compensation rises with productivity. The problem is that the government’s statisticians committed several errors while calculating the two lines. For example, the government’s number crunchers measured the productivity of all workers — including people who were self-employed. But when it came to measuring hourly wages, those workers were not counted, causing skewed numbers. When the Mercatus Center took all those factors into account, it found compensation is rising alongside Americans’ productivity. This doesn’t fit the Left’s narrative, and so the Obama administration will continue to act, hurt hardworking Americans, and still claim that it — the bull in the China shop — is helping.

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