As technology advances and productivity soars at top firms, are workers getting their fair share? A troubling new OECD study suggests not, revealing that some of the most productive companies are paying wages 40% below their peers.
The analysis, covering 26 countries from the mid-1990s to 2017, reveals a troubling pattern where some of the most productive companies are actually contributing to lower wages and reduced labour share of GDP.
The study identifies a growing class of what economists call “superstar” firms – high-productivity, capital-intensive companies. However, a portion of these superstar firms combine their high productivity with low employment levels and surprisingly low average wages that are 40% below what other superstar firms pay. More concerning still, as these firms grow in importance within the economy, they’re having an outsized negative impact – single-handedly causing half the drop in labour’s share of income in manufacturing and significantly dampening labour share growth in services.
"This evidence shows that focusing solely on productivity growth, without considering how its benefits are shared, is fundamentally misguided. When highly productive companies with advanced technologies concentrate economic power but fail to fairly compensate their workers, it undermines the basic premise that productivity gains lead to broader prosperity."
Until now, the story seemed straightforward: some companies were racing ahead with new technology and high productivity, while others lagged behind. Less productive companies stayed competitive by keeping wages low, while productive ones could afford to pay better. This led policymakers to focus on helping productivity improvements spread throughout the economy.
The new evidence tells a different story. Some of the most technologically advanced, capital-intensive firms are actively pushing down both employment and wages, even as their own productivity and profits soar. This concentrated technological power in the hands of a few firms that don’t share gains with workers challenges core assumptions about how productivity growth in modern, digital economy translates to broader prosperity.
What’s particularly worrying is how these dynamics reinforce themselves. The study finds that as these firms capture more value-added and expand internationally, it creates “winner-takes-all” effects that further increase their profit share at the expense of workers’ share across the whole economy. Even when they do create jobs, it often comes at the cost of greater job losses at competitor firms, potentially reducing total employment.
This evidence demands a fundamental rethinking of economic policy. The traditional focus on boosting productivity without considering distributional impacts appears increasingly misguided in an era where large, digital, cross-border firms can achieve high productivity while systematically reducing labour’s share of income.
TUAC strongly supports several of the study’s policy recommendations, including strengthening profit-sharing mechanisms, collective bargaining, unionisation, and minimum wages. As ILO Research Director Richard Samans emphasised at the 2024 OECD Global Forum on Productivity, macroeconomic policy must be reformulated to include broad distributional considerations.
“The evidence is clear: economic policy focused on boosting productivity, with no consideration of distributional aspects, was wrong in the past and is even more problematic today. The rising technological concentration in the hands of a few large companies that do not reward their workers fairly challenges the assumption that productivity growth in the era of digital, cross-border firms will increase everybody's welfare. OECD governments must respond to this wake-up call.”
Image credit: OECD
