If you must know only one fact about the U.S. economy, it should be this chart:

The chart shows that productivity, or output per hour of work, has quadrupled since 1947 in the United States. This is a spectacular achievement by an advanced economy.

The gains in productivity were quite widely shared from 1947 to 1980. Real income for the median U.S. family doubled during this time just as output per hour of work performed doubled. The rising tide was lifting all boats.

However, what we want to focus on today is the remarkable separation in productivity and median real income since 1980. While the United States is producing twice as much per hour of work today compared to 1980, a small part of the gain in real income has gone to the bottom half of the income distribution. The gap between productivity and median real income is at an historic all-time high today.

So where are all of the gains in productivity going? Two places:

First, owners of capital are getting a bigger share of GDP than before. In other words, the share of profits has risen faster than wages. Second, the highest paid workers are getting a bigger share of the wages that go to labor.

The net result is that families at the higher end of the income distribution have received more of the income produced by the economy since the 1980s. The latter fact has been documented meticulously by the brilliant research of Thomas Piketty and Emmanuel Saez.

The widening gap between productivity and median income is a defining issue of our time. It is not just about inequality – important as that issue is. The widening gap between productivity and median income has serious implications for macroeconomic stability and financial crises. Our forthcoming book takes up these issues in more detail.