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There is an interesting article on Bloomberg about this exact thing. Americans have converted the extra productivity into consumer possessions, while other countries (read Scandinavia/Northern Europe) have converted them into increased leisure time.

Have a look:

http://www.bloomberg.com/news/2011-11-03/americans-work-too-...

I was about to say this. Also, in Scandinavia the salaries _have_ indeed kept pace with increases in productivity. In Norway, you can earn a decent living as a checkout clerk. It seems as if the business owners here have actually passed on most of the savings to their workers. I'm pretty sure this is exclusively a cultural phenomenon - a sense of solidarity and cooperation which the larger part of US culture does not have. (I'm not meaning to bash the United States here, but this view is compounded by the fact that American employee-employer relationships seem a lot more antagonistic and imbalanced).

There are also less super-rich people here since people are overall taxed more. The oil industry also adds to the general income level, but this doesn't explain the entire effect. I'm pretty sure the same can be observed, in Sweden and Finland.

I have a better explanation. Wages have not even remotely kept pace with productivity, so most people do not see the benefits of increased overall productivity.

http://rationalrevolution.net/images/EPI_Productivity_vs_Com...

I'm curious.... if productivity increases rapidly in all sectors then how are wages supposed to increase as well?

The theory is that employees should be paid more for producing more value per head. However if everyone produces more then wages can't go up without a corresponding increase in prices.

The alternative is reduced prices, new improved goods and services, and a steady wage giving the misleading sentiment of "everything is getting better, but I'm still being paid the same".

Why do prices have to go up with productivity? To take a toy example, let's say that the entire economy consists of nothing but producing TVs, and that enough TVs are produced for each person to have one TV per year.

Now some massive productivity increase comes along and doubles output with the same workers. Now you're producing enough TVs for each person to have two TVs per year. Either the price of TVs will drop by 50%, or salaries will double. (Or half of the workforce will be fired....) Approximately. If everyone produces more then everyone has to be able to buy more, otherwise there's no reason to have the additional production in the first place.

If that is the case, then you would expect to be able to make more money by starting your own business, because you start to reap all the rewards (and take on more of the risk).

My theory? Well somebody has to pay for all the useless people (Washington employes a ton of them and so do nearly all large companies in the world).

For the other side, let's say I make $X but only need $X/2 to live. Try finding an employer who will let you work half time for $X/2. It's pretty tough, especially if you make $X at something "professional", rather than, say, digging ditches.

Rather than working ~20 hours a week, work ~40 hours a week, half your life.

...except nobody can tell me accurately when half of my life is over so I can retire at the right time.

Note particularly that statistics only work when applied to large enough populations. I will not be 70% dead at 70, I'll either be 100% dead or 0% dead.

http://jerryjousting.blogspot.com/2011/04/statistical-single...

...except nobody can tell me accurately when half of my life is over so I can retire at the right time.

So work 40 hours/week for until you pile up enough money to buy a lifetime annuity, and let the insurance company do the averaging over large populations.

That's certainly more viable, but requires much more discipline (to avoid spending the extra money too early) and is probably less beneficial as well, due to diminishing returns and such.

Another factor: taxes.

$60k in one year is taxed at a higher rate than $30k/yr for each of two years.

RRSPs in Canada mitigate this... But you're probably still better off with $X/2 income.

Look at it from the employer's perspective: in professional and technical occupations a half time worker isn't much cheaper than a full time worker due to benefits, training, administrative overhead, office space, PCs, etc.