http://www.businessweek.com/magazine/content/02_13/b3776001.htm
The biggest winners from the faster productivity growth of the 1990s were workers, not investors. In the end, workers reaped most of the gains from the added output generated by the New Economy productivity speedup. This revelation helps explain why consumer spending stayed so strong in the recession--and why businesses may struggle in the months ahead.
The key is that wage growth accelerated dramatically for most American workers in the 1990s business cycle. Real wage gains for private-sector workers averaged 1.3% a year, from the beginning of the expansion in March, 1991, to the apparent end of the recession in December, 2001. That's far better than the 0.2% annual wage gain in the 1980s business cycle, from November, 1982, to March, 1991. The gains were also better distributed than in the previous decade. Falling unemployment put many more people to work and swelled salaries across the board: Everyone from top managers to factory workers to hairdressers benefited. Indeed, the past few years have been "the best period of wage growth at the bottom in the last 30 years," says Lawrence F. Katz, a labor economist at Harvard University.
By contrast, the return on the stock market in the 1990s business cycle was actually lower than it was in the business cycle of the '80s. Adjusted for inflation and including dividends, average annual returns on the S&P-500 index from March, 1991, to the end of 2001 were 11.1%, compared with 12.8% in the previous business cycle. Bondholders and small savers saw their returns drop even more in the '90s. The real return on six-month certificates of deposit, for example, was only 3.1% over the past decade, compared with 4.7% in the '80s.
Overall, BusinessWeek calculates that workers received 99% of the gains from faster productivity growth in the 1990s at nonfinancial corporations. Corporate profits did rise sharply, but much of that gain was fueled by lower interest rates rather than increased productivity.
Why did workers fare so well in the 1990s? The education level of many Americans made an impressive leap in the '90s, putting them in a better position to qualify for the sorts of jobs that the New Economy created. Low unemployment rates drove up wages. And a torrent of foreign money coming into the U.S. created new jobs and financed productivity-enhancing equipment investment...
What's more, workers with a wide range of skills and occupations thrived over the past decade. In the '80s business cycle, real wages of blue-collar and service workers fell substantially. Blue-collar wages, for example, declined by 3.5% from 1982 to 1991. But in the '90s, real wages for these less-skilled jobs rose by 12%. Full-time cashiers saw their median weekly earnings jump by 11% (adjusted for inflation), while auto mechanics' pay went up by 14%, after falling sharply in the 1980s. Hairdressers got an almost 18% boost. That's despite Clinton-era welfare reform and a huge influx of immigrants, both of which were expected to hold down wages at the bottom.