Dazzling U.S. Productivity Trends
Tired of rotten U.S. economic news? Then try dwelling on the terrific productivity trends that have emerged over the last five years. But beware euphoria. The big question is, Will these trends continue over the next five years?
In 2000, the U.S. enjoyed the best productivity gains since 1983, resulting in a five-year expanse of solid growth. Worker productivity – the amount of goods and services produced for each hour worked – jumped by 4.3% in 2000. Over the last five years, productivity growth averaged 2.8%, double the growth in the previous two decades. Manufacturing productivity has been particularly strong, growing by 7.1% in 2000. The dazzling 2000 increase in manufacturing output per hour was the largest recorded over the 51-year history of the measure.
Many economists give the credit to business investments in computers and other high-tech equipment. Used in conjunction with new work processes, such equipment may be creating lasting structural changes in the economy. Last January, Federal Reserve Chairman Alan Greenspan told the U.S. Congress that solid productivity increases occurred even as the economy slowed and that this has "added to the accumulating evidence that the apparent increase in the growth of output per hour [is] more than transitory."
Both employers and employees should hope so. Productivity enables employers to pay workers more without having to raise their prices. Rising productivity helps keep unit labor costs in check. In 1998, unit labor costs grew by 2.5% but dropped to 1.8% in 1999 and then to just 0.7% in 2000. Many economists say that low unemployment, low inflation and the rising real wages of recent years are mostly attributable to rising productivity.
In fact, some complain that wages have not risen as fast as worker productivity, implying that the workers responsible for the economic boom haven't fully shared its fruits. The Los Angeles Times reports, "Such critics note that a variety of measures show that over the last 10 years, pay and overall compensation have risen more slowly than productivity. Conservative measures put that gap between compensation and productivity growth at 2.5%. That suggests average wages for U.S. production workers, currently $14.01 an hour, could have grown about 35 cents more, to $14.36, without risking harmful inflation." Using different measures, some economists believe that the production wages could have grown by a full 70 cents more. Given such findings, they argue that moderately higher wage increases could boost the economy by giving average workers more money to spend.
An economic slowdown may reduce productivity growth in the near future. Conventional economic wisdom states that when economic output slows, productivity also tends to fall because employers generally don't reduce their workforce as fast as they cut production. On the other hand, so far U.S. productivity has been remarkably resilient. "It is truly extraordinary to get this kind of productivity growth this late in the expansion or just ahead of a recession," said David Resler, chief economist at Nomura Securities International, in February.
U.S. workers deserve a great deal of credit for productivity increases. There's a danger, however, that the increases are partly based on unsustainable work efforts. A new poll sponsored by the National Sleep Foundation has found that more than one third of Americans say they get less sleep than they did five years ago and that many of the hours that could be spent sleeping are spent on the job. In fact, some 40% of respondents said they work longer hours than they did five years ago. If many of these extra work hours somehow go uncounted (as may happen in some white-collar jobs), then it may turn out that some employees are working harder rather than smarter, and this can't go on indefinitely. Such research suggests that employers should do more to ensure that work habits and processes are sustainable as well as productive. Only in this way will employees be able to balance the need for productivity with their own long-term psychological and physical needs.
====================================================
To look at recent government data on U.S. productivity, see
http://www.bls.gov/news.release/prod2.toc.htm
To read more about how Americans are working more and sleeping less, go to
http://www.sleepfoundation.org/
To see how the U.S. compares with other nations in terms of productivity, see
http://www.bls.gov/news.release/prod4.toc.htm
For information on a Gallup survey of worker attitudes, please see
http://www.themarlinco.com/test/Asp/Gallup.asp
In 2000, the U.S. enjoyed the best productivity gains since 1983, resulting in a five-year expanse of solid growth. Worker productivity – the amount of goods and services produced for each hour worked – jumped by 4.3% in 2000. Over the last five years, productivity growth averaged 2.8%, double the growth in the previous two decades. Manufacturing productivity has been particularly strong, growing by 7.1% in 2000. The dazzling 2000 increase in manufacturing output per hour was the largest recorded over the 51-year history of the measure.
Many economists give the credit to business investments in computers and other high-tech equipment. Used in conjunction with new work processes, such equipment may be creating lasting structural changes in the economy. Last January, Federal Reserve Chairman Alan Greenspan told the U.S. Congress that solid productivity increases occurred even as the economy slowed and that this has "added to the accumulating evidence that the apparent increase in the growth of output per hour [is] more than transitory."
Both employers and employees should hope so. Productivity enables employers to pay workers more without having to raise their prices. Rising productivity helps keep unit labor costs in check. In 1998, unit labor costs grew by 2.5% but dropped to 1.8% in 1999 and then to just 0.7% in 2000. Many economists say that low unemployment, low inflation and the rising real wages of recent years are mostly attributable to rising productivity.
In fact, some complain that wages have not risen as fast as worker productivity, implying that the workers responsible for the economic boom haven't fully shared its fruits. The Los Angeles Times reports, "Such critics note that a variety of measures show that over the last 10 years, pay and overall compensation have risen more slowly than productivity. Conservative measures put that gap between compensation and productivity growth at 2.5%. That suggests average wages for U.S. production workers, currently $14.01 an hour, could have grown about 35 cents more, to $14.36, without risking harmful inflation." Using different measures, some economists believe that the production wages could have grown by a full 70 cents more. Given such findings, they argue that moderately higher wage increases could boost the economy by giving average workers more money to spend.
An economic slowdown may reduce productivity growth in the near future. Conventional economic wisdom states that when economic output slows, productivity also tends to fall because employers generally don't reduce their workforce as fast as they cut production. On the other hand, so far U.S. productivity has been remarkably resilient. "It is truly extraordinary to get this kind of productivity growth this late in the expansion or just ahead of a recession," said David Resler, chief economist at Nomura Securities International, in February.
U.S. workers deserve a great deal of credit for productivity increases. There's a danger, however, that the increases are partly based on unsustainable work efforts. A new poll sponsored by the National Sleep Foundation has found that more than one third of Americans say they get less sleep than they did five years ago and that many of the hours that could be spent sleeping are spent on the job. In fact, some 40% of respondents said they work longer hours than they did five years ago. If many of these extra work hours somehow go uncounted (as may happen in some white-collar jobs), then it may turn out that some employees are working harder rather than smarter, and this can't go on indefinitely. Such research suggests that employers should do more to ensure that work habits and processes are sustainable as well as productive. Only in this way will employees be able to balance the need for productivity with their own long-term psychological and physical needs.
====================================================
To look at recent government data on U.S. productivity, see
http://www.bls.gov/news.release/prod2.toc.htm
To read more about how Americans are working more and sleeping less, go to
http://www.sleepfoundation.org/
To see how the U.S. compares with other nations in terms of productivity, see
http://www.bls.gov/news.release/prod4.toc.htm
For information on a Gallup survey of worker attitudes, please see
http://www.themarlinco.com/test/Asp/Gallup.asp