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 worker
2013. , p. 38