Profit Margins Could Shrink by up to 25% as ‘Productivity-Wage’ Gap Narrows

Between 2004 and 2014, productivity of American workers in the nonfinancial corporate sector averaged 1.2% annually, but real wages grew only by 0.25%. That unprecedented “productivity-wage gap” went straight into the bottom lines of companies, creating historically high profit margins and historically low real wages. This gap has been closing over the past three years and may have just three years left before the pendulum could swing the other way, according to an analysis by Goldman Sachs. In the second quarter of 2014, the 10-year average annualized growth rate of labor productivity fell to 1.09%, its lowest level since World…