What's going on?
According to stats released on Wednesday, the overall productivity of the American workforce has shot up recently – not that anyone told Kevin over in Accounts! While that’s pretty good news for the world’s biggest economy, the reported gains don’t appear to be showing up in workers’ wallets…
What does this mean?
Labor productivity (which measures how much economic value the average worker creates in a given span of time) rose by 3% in the third quarter of 2017 compared to last year: the most it’s jumped in three years! While there’s no magic formula for boosting productivity growth, investment in tools and software (which has been growing in the US of late) can simplify tasks and help workers get more done faster.
Why should I care?
For you personally: Dude, where’s my bigger paycheck?
Workers are usually rewarded with higher wages for more productive labor – but that doesn’t seem to be as much the case these days as it used to be. And it’s especially head-scratching right now, with unemployment at a historic low in America: that implies more competition for talent, which should lead to higher wages! However, if productivity growth continues to improve, the dollars might just begin to flow faster.
The bigger picture: Productivity growth has been in a historic slump across developed economies.
Economists routinely consider productivity growth to be one of the best ways to increase general welfare in an economy. But the pace of productivity growth has, on the whole, been declining in major developed economies since the 1970s (it did bump up a bit in the 1990s, which some attribute to the rise of information technology). Low productivity is also a pretty big concern right now in the UK and Europe, and some economists are a bit puzzled about why the widespread digitization of work hasn’t caused collective productivity to spike. Another argument, however, is that productivity growth in the 21st century isn’t necessarily as important as we think.