Productivity growth is supposed to be the key to boosting wages and living standards in the economy. However, just as housing price growth decoupled from wage growth in recent decades, new research shows that real wages have not kept up with productivity growth.

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So, who is getting the benefit?

Firstly, it's important to understand productivity. Productivity is getting more output from the same number of inputs, or the same output from a reduced number of inputs. For example, if workers are producing thingamajigs a new innovative way and now make more thingamajigs with the same hours of work, then productivity goes up.

This increase in thingamajigs is sold, and then that the extra money made is then supposed to flow to workers in higher living standards. Productivity has been described as "the engine of living standards", and the Productivity Commission says the more productive the economy is, the more workers are supposed to enjoy either higher wages, lower prices, or by working less and having more free time.

The Productivity Commission claims that outside of mining and agriculture, productivity has been flowing to higher real wages. But there is new evidence that the Productivity Commission is wrong.

The Centre for Policy Development (CPD) has released new research showing that for the past 30 years, typical worker's pay has not kept pace with productivity. This is consistent with Australia Institute research, which shows that over the 10 years from 2012 to 2022, productivity grew 11 per cent while real wages remained flat.

The CPD research further shows that not only have wages decoupled from productivity growth, just as housing prices have decoupled from wages in recent decades, but the gaps have been widest where productivity growth has been strongest. For example, the information media and telecommunications industry experienced the highest productivity growth in the last decade, but wages in that industry only increased at a small fraction of that.

So, who is getting the benefits of productivity growth?........

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