I read an article over the weekend, cited below, that showed how the gains in American productivity over the last 20 years compared to compensation.  Ever feel like you are not being compensated for the amount you produce?  According to this article you are absolutely correct.  Over the 20 year period cited, 1989 to 2009, the productivity of the American worker has risen 80%.  While total compensation in the private sector for college grads has risen 17.9% and 20.5% in the public sector. 

 

          These numbers are not too shocking in comparison of the wages and productivity.  There are gains in productivity provided by new tools, new processes and most of all more "man hours" provided by employees who do not want to be unemployed in this market.  This isn't the reason I write these words.  This is just one half of the reason.   Let's bring inflation over that same period into the discussion. 

 

          When I pull the total rate of inflation over the same period, we can see a 73+% increase over that 20 year period.  So, let us take the increase in wages and subtract it from the inflation rate.  We are left with a negatively impacting 53%, working off the most positive numbers for wages.  This would mean that your parents had a great buying power with their money by 53%!!!!!  If they made $60,000 a year in 1989, it had the buying power of $91,800 in todays economy.  If they made $100,000 it had an equivilent buying power of $153,000 today! 

 

          These numbers I put out there are in some ways, the best scenario rates.  Consider what the Median Income rates are currently versus in 1989.  There has not been much of an increase there either.  There has been a gain of about $10,000.  With regards to the buying power lost, that same group should have seen an increase of $15,000 to $20,000 to keep pace with inflation.  Incorporate now the fact that our productivity has seen 80% gains and it is obvious you work more, make less and can buy less. 

 

          Next time you start a salary negotitation ask yourself, "Will this make me better off than my parents were?"  If the answer is "No" then you should ask for 50% more. 

 

Huffington Post Article on Compensation vs. Productivity 

 

Inflation Calculator 

 

John Reagan 

jreagan@boredbrains.net 

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