--- canonical_url: "https://csls.ca/ipm-archive/ipm-issue-41/have-productivity-and-pay-decoupled-in-the-uk/" title: "Have Productivity and Pay Decoupled in the UK?" author: name: "CSLS" url: "https://csls.ca/author/cslc/" date_published: "2026-07-13T08:01:55+00:00" date_modified: "2026-07-13T08:01:55+00:00" post_type: "ipm" summary: "" ipm_issue_period: - "Fall 2021" ipm_keyword: - "1981-2019" - "decoupling" - "inequality" - "LSE" - "median wages" - "non-wage compensation" - "pay" - "productivity" - "self-employed" - "UK" - "Van Reenen" - "wages" ipm_research_theme: - "Labour" ipm_country_focus: - "United Kingdom" featured_image: "https://csls.ca/wp-content/uploads/2026/06/IPM_50_banner.webp" status: "publish" --- # Have Productivity and Pay Decoupled in the UK? Canonical URL: https://csls.ca/ipm-archive/ipm-issue-41/have-productivity-and-pay-decoupled-in-the-uk/ # Have Productivity and Pay Decoupled in the UK? [Download full PDF article](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-41-2-Teichgraber-Van-Reenen.pdf) Cite this article × Cite this article as: Teichgräber, Andreas, and John Van Reenen. 2021. “Have Productivity and Pay Decoupled in the UK?” International Productivity Monitor, No. 41 (Fall 2021): 31–60. https://www.csls.ca/ipm-archive/ipm-issue-41/have-productivity-and-pay-decoupled-in-the-uk/ ## Authors: - Andreas Teichgräber London School of Economics - John Van Reenen MIT ## IPM Issue 41 Fall 2021 pp. 31–60 ## Related IPM articles [The Relationship between Efficiencies Defenses for Mergers and TFP Growth Robin Shaban Fall 2025 | IPM Issue 49 | pp. 82–102](https://csls.ca/ipm-archive/ipm-issue-49/the-relationship-between-efficiencies-defenses-for-mergers-and-tfp-growth/) [Adult Skills and Productivity: New Evidence from PIAAC 2023 Dan Andrews, Balázs Égert, Christine de La Maisonneuve Fall 2025 | IPM Issue 49 | pp. 41–63](https://csls.ca/ipm-archive/ipm-issue-49/adult-skills-and-productivity-new-evidence-from-piaac-2023/) [The Potential Impact of Pro-competitive Regulatory Reforms on Productivity and Growth in Canada Gilbert Cette, Jimmy Lopez, Giuseppe Nicoletti, Océane Vernerey Fall 2025 | IPM Issue 49 | pp. 3–40](https://csls.ca/ipm-archive/ipm-issue-49/the-potential-impact-of-pro-competitive-regulatory-reforms-on-productivity-and-growth-in-canada/) [ONS Response to ‘Are UK Regional Productivity Disparities Really Narrowing?’ Richard Prothero Spring 2025 | IPM Issue 48 | pp. 85–89](https://csls.ca/ipm-archive/ipm-issue-48/ons-response-to-are-uk-regional-productivity-disparities-really-narrowing/) [New Measures of Public Service Productivity: Lessons and Results from the United Kingdom Richard Heys Spring 2025 | IPM Issue 48 | pp. 90–114](https://csls.ca/ipm-archive/ipm-issue-48/new-measures-of-public-service-productivity-lessons-and-results-from-the-united-kingdom/) [De-industrialization and the Great Productivity Slowdown: What Comes Next? 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An Investigation into Recent Productivity Data Revisions Fokke Reitze Gouma, Philip McCann, Raquel Ortega-Argilés Spring 2025 | IPM Issue 48 | pp. 63–84](https://csls.ca/ipm-archive/ipm-issue-48/are-uk-regional-productivity-disparities-really-narrowing-an-investigation-into-recent-productivity-data-revisions/) [Online Supplementary Material: UK Regional Productivity Data Fokke Reitze Gouma, Philip McCann, Raquel Ortega-Argilés Spring 2025 | IPM Issue 48 | pp. 15–19](https://csls.ca/ipm-archive/ipm-issue-48/online-supplementary-material-uk-regional-productivity-data/) [The UK Productivity Slowdown: A Review of Timing, Magnitude, and Drivers Josh Martin Spring 2025 | IPM Issue 48 | pp. 1–34](https://csls.ca/ipm-archive/ipm-issue-48/the-uk-productivity-slowdown-a-review-of-timing-magnitude-and-drivers/) [Appendix: UK Productivity Growth Rates Across Data Vintages and Studies Josh Martin Spring 2025 | IPM Issue 48 | pp. 65–73](https://csls.ca/ipm-archive/ipm-issue-48/appendix-uk-productivity-growth-rates-across-data-vintages-and-studies/) ## Abstract ## Résumé EN FR Copy link Email LinkedIn In the long-run at the macro level, the growth in real pay of workers tends to follow that of labour productivity. In recent years, however, there have been concerns that this relationship has broken down and that pay has become “decoupled” from productivity, growing much more slowly, and leading to a fall in the labour share. This has been a welldocumented phenomenon in the United States (US) since the early 1980s. By contrast, we show that in the United Kingdom (UK), employee mean hourly compensation has grown at the same rate as labour productivity between 1981 and 2019. However, there has been a divergence between median employee hourly wage growth and productivity growth of about 25 percentage points. About three-fifths of this “overall decoupling” is due to increasing inequality (mean wages growing faster than median wages) and one-third is due to the increased non-wage compensation costs, in particular employer pension contributions. However, this analysis relates to employee compensation. The average self-employed worker has seen their income grow by only 50 per cent, compared to 80 per cent for the average employee. Using micro-data, we show that this gap can essentially be explained by (i) the growth in the numbers of “solo self- employed” (who have relatively low incomes), and (ii) a much greater fall in hours worked by the self-employed than for the employed. Finally, if we “correct” the labour share for self- employment and non-wage labour costs, the UK labour share has fallen by about 3.5 percentage points over the last four decades. À long terme au niveau macro, la croissance des rémunérations réelles des travailleurs tend à suivre celle de la productivité du travail. Cependant, ces dernières années, des préoccupations ont été soulevées quant au fait que cette relation s’est rompue et que la rémunération est devenue « découplée » de la productivité, augmentant beaucoup plus lentement. Ce phénomène a été bien documenté aux États-Unis depuis le début des années 1980. En revanche, nous montrons qu’au Royaume-Uni, la rémunération horaire moyenne des salariés a augmenté au même rythme que la productivité du travail entre 1981 et 2019. Cependant, il y a eu une divergence d’environ 25 points de pourcentage entre la croissance du salaire horaire médian des salariés et la croissance de la productivité, dont environ trois cinquièmes sont attribuables à la hausse de l’inégalité. [Download full PDF](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-41-2-Teichgraber-Van-Reenen.pdf)