The relationship between labor compensation and productivity: an empirical study of 30 industries in the U.S.

Positive relationship between labor productivity and worker compensation has been puzzled by economists for a long time. On the one hand, some senior economists reckon that compensation stagnates or does not rise properly while productivity grows swiftly in many industries of the U.S. This may be due to the fall in bargaining power of workers as supply for labor exceeds demand. On the other hand, other economists argue that if fundamental factors like appropriate price deflator is taken into account when exploring trends for productivity enhancements and compensation rises, the line of growth for both should be identical, specifically, increases in compensation need to follow growth in productivity at the national level as theories predict it. This implies that workers benefit from productivity growth at the aggregate level. This paper analyzes the dynamics of productivity gains and compensation rises by discussing various theoretical relationships. Applying the data from the U.S government agency, the Bureau of Labor Statistics, an empirical approach will be conducted in order to investigate the effects of productivity growth and other influential factors on annual compensation per worke