The Productivity Blog

Oh, So NOW Productivity is Bad for Us!

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Maybe economist Michael Mandel of BusinessWeek is right and current productivity figures are a sign of bad things to come, but count me both skeptical and amused (in a black humor kind of way). In essence, Mandel argues that U.S. productivity has been rising at a healthy clip over the last two years but that, this time, it may not be such a good thing because now it's professionals getting the ax.

He writes, "Professionals are the people who do the research, the new-product development, the information-gathering, the training, and even the marketing which moves the economy forward… In effect, we could be eating our seed corn to get through the financial crisis - and the official stats would not warn us."

I can almost hear all those veteran blue-collar manufacturing workers - many of whom probably know more about their jobs than 10 MIT engineers - getting a chuckle out of this. Sure, as long as it's only the get-your-hands-dirty crowd getting laid off, rising productivity is a good thing. But as soon as a bunch of the white-shirt (or probably plaid or paisley these days) crowd gets hammered, we're "eating our seed corn."

The truth is, nobody knows how this is going to play out. There's certainly a danger of cutting so far into your talent that you lose muscle rather than fat, thereby killing or maiming the patient on the table (that is, your own organization). Nonetheless, Schumpeter's oft-cited process of capitalistic "creative destruction" shouldn't stop operating just because a growing proportion of the workforce is now working in professional jobs.

Mandel writes, "If the economy is stuck in a slow-growth recovery, companies may not be quick to rehire their professionals - and that would be a disaster." Maybe. But are we necessarily referring to the exact same companies that laid off those professionals? Think about it this way: If a laid-off engineer from a struggling company is hired by a healthier company, it's likely that person will become, over the long haul, more productive in that healthier company. That's how the whole creative destruction process is supposed to work, after all. Now, if a huge percentage of professionals are simply left on the sidelines for years at a time, Mandel could wind up having a point. We'll see.

But there's nothing inherently disastrous about professionals dealing with the same headaches and heartaches that other workers have suffered for years during recessions. They just have to play by the same rules as everyone else in a knowledge economy.

Look on the bright side. Productivity isn't doing too badly right now (though it's not knocking our socks off either, if you really study the numbers). As things progress, that should pay dividends. As Mandel notes, quoting Paul Krugman, "Productivity isn't everything, but in the long run it is almost everything." And it's quite possible that productivity will rise even faster in the future, especially if the woeful manufacturing sector ever bounces back.

So, buck up. Productivity is still a good thing, even if white-collar workers suddenly have to live in the same harsh world as everybody else.

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