A Tenative Hypothesis For the Productivity Slowdown: You Can’t Get Blood From a Stone

So outgoing Federal Reserve Chairman had this to say about productivity declines (boldface mine):

“Disappointing productivity growth,” Bernanke said, “must be added to the list of reasons that economic growth has been slower than hoped.” Unlike the other reasons—the faltering Euro, for instance, or ill-timed state and federal spending cuts—weak productivity growth was an unknown factor until this past November, when earlier data were recalculated—“an illustration,” Bernanke said, “of the frustrations of real-time policymaking.”

Because of weak productivity growth—that is, weak growth in output per worker per hour—Gross Domestic Product is about 7% below where it should be, according to Fed economists.

Until the recent data revision, productivity growth was one of the long-term bright spots in the economy….

Why has productivity growth slowed down? The reasons, Bernanke said, “aren’t entirely clear.” One possibility, he said, is that tight credit is inhibiting innovation. Another is that weak sales have inhibited hiring and investment. Bernanke also raised the possibility that the slowdown is caused by unspecified “longer-term trends unrelated to the recession.” Long-term unemployment may be contributing to it. Since your likelihood of staying in the workforce recedes the longer you’re out of work, Fed economists have suggested, your likelihood of adding to the nation’s output recedes, too. In this sense, “productivity” is just another word for “employability.”

I would add one other explanation:

blog-real-income

Incomes, in real dollars, have declined to where they were at the end of the Reagan era.

Maybe some of the slowdown in productivity is because workers are finding ways to not work as hard? Think of it as subconscious sabotage. While I doubt most people are looking at income distributions in the FRED database (that would be really freaky), most people realize they’re not working to get ahead, but simply to not fall behind. They think (often correctly) that gains to their company won’t be reflected in either paychecks or job security.

Perhaps this is ‘working to rule’ on a person-by-person basis?

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5 Responses to A Tenative Hypothesis For the Productivity Slowdown: You Can’t Get Blood From a Stone

  1. Robert L Bell says:

    If Bernanke is truly interested in understanding why productivity growth is down, he can ask me.

    I will tell him that thirty years ago we as a nation stopped investing in the people and institutions who ask the hard questions that lead to insight about the world as it is, with consequent mastery over the world as we would like it to be. Instead we over-invested in big houses and cheap toys for cool kidz. An entire generation of scientists and engineers has been deflated; not so much crushed as drained of the vital animal spirits that a generation ago sent us to the Moon. Rebuilding a new innovation culture from the rubble of the old will be at best a long hard slog, and I am pessimistic that we have the sand to see it through.

  2. drouse says:

    The wisdom of Homer Simpson: You don’t go on strike or call in sick. You go in every day and do the job half-assed. That’s the American Way.

  3. Kaleberg says:

    It’s the new American way: They pretend to pay us, and we pretend to work.
    I’ve heard that before, except it was in the context of the Soviet Union before its collapse.

  4. coloncancercommunity says:

    Why are people productive in the first place? They expect a reward for all that hard work. Instead they are now getting a lump of coal! If they find a way to do something more efficiently they may find themselves pink-slipped for their trouble because they showed management how they could get by with less people. Why on earth should anyone stick their neck out in that type of atmosphere? Take what happened to the Boeing machinists as an example. They helped Boeing reap their highest profits ever – and then they were rewarded with benefit cuts and a virtual pay freeze. Its nothing short of disgusting, but the response by employees (whether workers or scientists) is entirely predictable.

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