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:
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?