As recoveries go, this one brings rich pickings for politicians. The rest of us may be baffled that the slowest trudge out of recession in history has been followed by the fastest growth of any advanced economy. You may be asking why unemployment has tumbled, yet wages have not risen. And why all that austerity, only for George Osborne to have drifted further from his deficit goals?

But for MPs gearing up for an election, it is a take-your-pick kind of recovery. One man’s Britain mired in a “cost-of-living crisis” (Ed Balls) is another’s “employment powerhouse” (Danny Alexander).

It is this discrepancy in the jobs market that is most widely felt and keenly pondered. Employment is rising fast and yet wages are falling once inflation is taken into account.

What this means for pay has been totted up by various politicians and economists. Labour says average wages after inflation are down £1,600 a year since 2010. Another estimate, from Professor Paul Gregg at the University of Bath, is £5,000 a year. Real wages are some 20% below where they would be had trend wage growth continued over the past six years, he says.

Plenty of reasons have been put forward for this. There has been a surge in self-employment, where pay is often low. There is a bigger supply of labour. Companies have resorted to cheap labour to make money rather than investing in machinery or innovations. So employment has stayed high but the money available to pay each employee is tight.

This last factor is crucial. So long as Britain fails to do something about its stagnant productivity – output per hour worked – the money to share out will remain tight. Productivity is no higher than it was six years ago. This “productivity puzzle” puts the UK way behind other advanced economies.

The sunniest optimists tell us productivity will soon take off and then so, too, will wage growth. The more cautious optimists tell us that if, and only if, productivity rises, can wages rise too. But the pessimists paint another picture: productivity eventually picks up and real wages rise only for the top earners. That’s the productivity puzzle solved to be replaced by the pay puzzle.

Their pessimism is rooted in recent history, which appears to show what Gregg has called a decoupling of wages from productivity. Gregg noted that “ordinary British workers are no longer benefiting from improvements in economic efficiency in the economy,” in a policy brief for his university’s Institute of Policy Research (IPR).

Median wages per hour – the hourly pay received by the typical British worker – have been growing below productivity since the early 1990s, and markedly so since the early 2000s, he notes. It is a phenomenon the UK shares with the US, and when you think about what those two have in common you begin to explain where the gains are going. Against a backdrop of rising inequality, the benefits from any efficiency improvement have disproportionately flowed to funding pensions and rewarding executives.

The Resolution Foundation has also looked at ordinary workers experiencing growth without gain. Its Commission on Living Standards highlighted distribution changes. In 1977, of every £100 of value generated in the UK economy, workers in the bottom half of the earnings distribution received £16 as wages; by 2010 this share had fallen to £12. Workers in the top 10% increased their share of value from £12 to £14 over the same period.

One solution to this problem of low and falling pay that is not talked about enough is simply to pay more at the bottom. How do you that before productivity rises? You do it so that productivity will rise. This sounds too easy to be true, but the living wage movement is providing a growing number of examples of where higher pay has bred higher productivity, rather than vice versa.

One good illustration comes from a sector not usually renowned for productivity growth nor decent pay. London-based home care provider Penrose Care was one of the first in its sector to sign up to the living wage, set at £8.80 an hour in London and £7.65 elsewhere, compared with the national minimum wage at £6.50. Penrose’s staff turnover is close to zero, as is the number of sick days, says co-founder Robert Stephenson-Padron. Higher morale among carers means clients are happier and reviews are positive. The company has won contracts despite charging more than some rivals.

Consultancy KPMG says it cut the cost of running its buildings by introducing the living wage along with more flexible shifts and more holiday for cleaners and other staff. Turnover dropped and workers were happy to take on more responsibility.

These are just two of many examples. Research has found that there can indeed be a virtuous circle from higher pay to higher productivity. The Living Wage Commission said raising coverage of the living wage alongside improved training could even plug the UK’s productivity gap with the other G7 countries.

That is wishful thinking. But it is better than shaky promises that a return to productivity growth will herald the long-awaited wage recovery. On recent trends there is every chance it will merely make the rich richer.

Employers would do well to try another way. Raise pay and watch productivity follow.