Labor productivity was up 3.2% in the final quarter of 2023. That's nice.
But for some reason I was curious about long-term averages over the past few decades. Here they are:
The last five years have seen the highest productivity growth of the past 50 years with the exception of the dotcom boom. But why? Here is quarterly productivity growth:
It's all because of a single quarter of stupendous growth. During the first few months of the pandemic, we produced less stuff but with a lot fewer workers—which produced a net increase in stuff per hour of work. Normally this would be a transitory artifact, made up in the next quarter or two by large declines as the labor market returned to normal. But that didn't happen. Productivity went up and then stayed at a permanently higher level.
Why? The productivity increase at the start of the pandemic is nothing special. The least productive workers were laid off or furloughed and the remainder probably worked a little harder. But why didn't that turn around as the unproductive folks were rehired? Maybe they never were?
It turns out that's the case. Since the start of 2020, the number of workers without a college degree has gone down 2%. The number with a college degree or higher has increased 7%. The distribution of the workforce changed during the pandemic and has stayed changed since then.
Said it before, but I'm always suspicious of ANY YoY figures around the pandemic. Things were distorted in a major way for a short period, and the whole gemisch of big changes and big reversals, time lags between causes and effects, and differences in reporting methods and periods, makes those data highly suspect as bases from which to draw conclusions.
Give it another year or two just for reporting and time lags to catch up, and maybe a little longer than that to see what effects might be lasting -- eg changes from in-office to "mixed" and at-home work -- and then we can opine about What The Pandemic Hath Wrought.
May I suggest in the meantime, say, a careful exegesis of recent extemporaneous remarks by the presumptive Republican nominee for President? You want to dive into some confusing stuff that requires thoughtful decoding, it's a mother lode!
in spite of disgruntled ceo's whining about losing the ability to force people into 3 hour daily commutes, maybe work from home is actually good for productivity
even if it is, no one will be paid to publish any research in support of the notion
In the decade prior, coming out of the Great Recession we had a weaker-than-needed fiscal response. It was a decade of relative austerity, relative low growth, weak productivity, and despite low interest rates (inc QE1, QE2, etc.) a long recovery.
What was different about the pandemic was a massive fiscal response, the largest federal spending boost since WWII.
Yes, the pandemic was disruptive and productivity growth is now better than we've seen in ages. What happened? It's more than just a happy accident that happened in the labor market. It's the government response.
If we had no government stimulus, we'd be in a depression. If the stimulus was too weak, we may be destined for another decade like the previous one. But with the large fiscal spending packages we got, we may have stimulated growth in the economy for a long time to come.
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Labor productivity is subject to time lags and other disruptions of various sorts. At the start of a downturn sales may fall but employers don't want to lay people off in case there is a recovery. Then after a long period of low sales they are reluctant to hire again. There may be bottlenecks and surpluses in supply lines. So it is a mistake to make a lot out of quarterly variations. Again, just because somebody puts out data on a monthly or quarterly basis doesn't mean that the variations over these periods are significant.
Of course the main mistake that is made with respect to productivity is relating it to how hard people work, or how efficient they are personally. In the long term the relationship is with capital investment in machinery, including electronics. Productivity goes up, and everybody gets more stuff, when machines replace people. This is a relationship which has existed through civilization, and there is no sign of it breaking down because of "robots".
It's not likely that presumably more efficient people with degrees have replaced those without in ordinary production jobs. If the correlation is really meaningful it may mean that production has shifted at least temporarily to things with a higher monetary value. There are lots of things that cost a lot of money - and make money for some people - but don't really improve lives.
This is hard to figure out if we assume (as Kevin did) that it is the people who are either productive or unproductive. This is an inherent quality that is hard (impossible?) to change.
If instead we assume that it is the job/position/role that is productive or unproductive, suddenly things make a lot more sense.