December 16, 2021

About Productivity, Pay and Buying Power

Working in a job, are you ever wondering how your salary develops?

Working in a job, are you ever wondering how your salary develops relative to the profits of the business you work for? And if you are continuously pushing to do and make things faster and better, what is your share? And in addition, why not have a look at the development of your buying power comparing the average development of salary increases to inflation rates.

From 1979 a 35% Gap Between Profits and Salaries Opened

There is a relaionship between job/business risk and the profit/salary level. At least it should be. It is no secret that after WWII there was a period of about 30 years, between 1950 and 1979, when productivity and conpensations were pretty much in line and developed with the same annual growth rate.

Both businesses and employees benefited in a similar way from the joint efforts to become ever more productive and competitive.

For a number of reasons this changed after 1980, opening a growing gap between productivity and compensations, i.e. business profits and salaries. Profits started to grow much faster than salaries, opening up a sigificant gap of 44%(!) in 2020.

Profit improvements from productivity gain only partially trickle down to the work force.

Only the Top 1% Salaries Keep up with Productivity

In addition, itm is stunning that the real annual wages, i.e. the employee buying power, developed significantly different for high and low salaries. The group of the highest 1% wages saw growth in parallel with productivity, whereas for the "bottom 90%" a gap of about 35% opened up.

"The bottom 90%" is pretty much everyone, most likely including yourself. And not to forget: the top 0.1%, i.e. the top of the top earners, raked in an incredible  343.2%, more than twice the productivity improvement.

Not to forget: the top 0.1%, i.e. top of the top earners, raked in an incredible  343.2%, more than twice of the productivity improvement.

Result: Annual Salary Increases are Below Inflation Rate.

We can´t beat science: with a 22% increase from 1979 to 2017, i.e. 38 years, we achieve an average of approx. 0.5% per year, far below the inflation rate of 2.2%. Bottom line: employees lose buying power year after year.

Two key questions for job owners ...

1. Can and do you want to live with the situation?
2. If not - what are you going to do about it?

If "Changing the System" is no Option, What´s Next?

Basically there are three ways to react to the pay gap: 

1. Accept the situation.
2. Climb the ladder and become a top earner.
3.Work overtime or get a second job.
4. Become a business owner.

Becoming a top earner is possible with hard work plus a little luck to be at the right place at the right time knowing the right people who make decisions in favor of you. So, there are a number of unknowns and you are dependent from people.

Your boss and maybe your boss´s boss must be in your fanclub to promote you up the ladder and sign a number of pay rises. This process takes years, you need to work your butt up (sorry for my French) and be nice all the time.

The annual numbers - +0.5% pay and 2.2% inflation - need to be seen in perspective. With a 1.7% gap per year the loss of buying power becomes a serious threat to yor family budget within a few years: after 10 years there is a 19% gap and after 20 years the problem becomes massive with 44%.

Looking into the mirror most of us have to admit: how much of my monthly incom is really "free", i.e. not assiged to any recurring payments or a saving plan. I suspect it´s certainly not at 10% or 20%. It´s rather a couple of 100 bucks if ends meet at all.

If that was not enough, the business option seems to be out of reach with high requirements for skills, investments and a high risk to lose money instead of developing the desired high income.

Looks like number two and three of our option list are pretty hopeless and you are left alone crying with number one: give in and start loving it.

Or pull number three, get a second job like so many of us and work your butt up until you die.

And What if "Sit Back and Cry" is not Your Cup of Tea?

Wait a minute ...

You certainly don´t have to admire Bill Gates to acknowledge he knows how to build a business.

What if there was a solution to the problem - building a business with no specific skills, literally no investment aparrt from your own time and a proven way to gradually build a passive business income.

And especially a business which works with a Customer and Team Network and a stunningly simple system of referrals - with no involvement in sales, product inventory, fulfilment and the payment side of the business.

Job owners are continuously losing buying power as the general annual increase of wages (0.5%) amounts to less than 25% of the inflation rate (2.2%). Developing a Passive Income from a Referral Home Business is a risk free way of escaping the inflation gap.

Generate additional income to counteract a continuous loss of buying power and retain your standard of living.

There are numerous concepts and ideas to make sure your income development is not turing into a financial nightmare. One option is generating additional passive income by building a Home Business.

We found a way to do so with our referral business. It's set up as a no risk, no investment and ready-to-go concept. We can most likely help you to benefit from it and close your income gap.

Watched the video on top of this article already? Do yourself a favor and invest 2 minutes prior to clicking the button to contact me.

A detailed article about "The Productivity Pay Gap" was published by The Ecoomic Policy Institute in Ausgust 2021.


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They are home.

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