Americans' productivity rising faster than paychecks

MIAMI — All that hard work probably isn't paying off — for you.

In the past 10 years, U.S. productivity, a measure of worker output, has increased 33 percent, something economists have hailed as a victory for America's "new economy," because productivity is often seen as the key to raising living standards.

In a speech last week, Federal Reserve Chairman Ben Bernanke called the gain one of the past decade's most significant economic developments.

But the problem, according to a new book-length study, is that workers are no longer seeing those increases where it matters most to them: in their paychecks.

Wages stopped rising and actually began losing ground starting in 2001, despite continued growth in productivity and corporate profits, according to an analysis of government data in "The State of Working America: 2006/2007" by the Economic Policy Institute, an independent Washington think tank.

"We've had stellar productivity growth over this recovery, but the economists' mantra — such growth automatically translates into improved living standards — no longer holds," said Jared Bernstein, an EPI economist and one of the authors.

Case in point: UPS driver Mike Cortez. Last month, he got a 4 percent raise on his hourly pay, which is around $27 an hour. But with south Florida's inflation rate running at 5.8 percent, his costs are increasing much faster. A Weston, Fla., homeowner, his insurance premium alone is up 66 percent this year.

"I really feel like corporate America forgets about the working guy," said Cortez, who feels jobs like his are a key contributor of the company's strong profitability of late. UPS, the world's largest shipping carrier, earned more than $1 billion in its most recent quarter, a 7.6 percent increase over the year before.

He thinks he gets some share of that, but only because he's with the Teamsters. "We're better off than some," he said.

Between 1995 and 2000, U.S. productivity — the amount that an average worker produces in an hour — grew about 2.5 percent annually. And real median family income grew right along with it, at about a 2.2 percent annual clip.

Productivity grew even faster between 2000 and 2005, an average of 3.1 percent annually, helped by improvements in technology. But real median family income dropped 0.5 percent each year during that same time, according to the study's data.