Productivity-Pay Wedge

A quarter earlier, in Q1 2026, the wedge was 108.6. The latest reading is the highest in the current, revised data, which start in 1947.

The wedge divides two Bureau of Labor Statistics indexes for the nonfarm business sector: output per hour worked, and hourly compensation adjusted for consumer prices. Both are set to 100 in 2017. Above 100, the productivity index stands above the real-pay index; below 100, the real-pay index is the one on top. It is a ratio of growth since 2017, not a gap in dollars or a percent of pay withheld. BLS publishes the two indexes; American Default Research computes the ratio.

Nonfarm business leaves out government, nonprofits, households and farms, about a quarter of the economy. It counts everyone working in the sector, including managers and the self-employed, so it is not the pay of a typical worker. Compensation includes benefits and employer payroll taxes as well as wages. Output is measured with the sector's own prices while pay is adjusted with consumer prices, so any gap between those two price measures shows up in the ratio as well. It does not by itself show a shrinking share of income going to workers.

BLS revises each quarter twice in the months after its first estimate, and revises years of history when output and payroll benchmarks are updated. Revisions have changed a single quarter of this ratio by more than a point within weeks, so quarter-to-quarter moves of about a point are described here as little changed. Long comparisons also mix deflators: BLS uses a research consumer price index (CPI-U-RS) for 1978 onward and the CPI-U for the latest quarters.

A separate page tracks the labor share, the part of nonfarm business output paid to workers as compensation. It is a separate BLS series and need not move with the wedge. The Economic Policy Institute's productivity-pay gap uses different inputs, total-economy productivity and production-worker pay, so its figures are not this series.