The U.S. productivity slowdown: an economy-wide and industry-level analysis

https://www.bls.gov/opub/mlr/2021/article/the-us-productivity-slowdown-the-economy-wide-and-industry-level-analysis.htm

by rsj_hn • 5 years ago

200 179 5 years ago

kf6nux• 5 years ago

Since the title is a little misleading, here's how the article describes itself.

Labor productivity—defined as output per labor hour—has grown at a below-average rate since 2005, representing a dramatic reversal of the above-average growth of the late 1990s and early 2000s. The productivity slowdown during these years has left many economic observers wondering why this situation has occurred and what factors may have contributed. To clarify potential sources of the productivity slowdown, this article presents an analysis of labor productivity and its component series—multifactor productivity, contribution of capital intensity, and contribution of labor composition—at both the economy-wide and industry levels, complemented with a survey of the contemporary productivity literature.

mrfusion2• 5 years ago

My guess would be internet browsing and social media.

VLM• 5 years ago

bureaucratic costs?

If a small company can "handle" your medical insurance problems in one hour, and a "too big to care" megamerger company takes ten hours, and the economy encourages mergers to profit off the financial transaction, the resulting megacompanies will have everyone's productivity drop. That times hundreds of other business operations ranging from getting a toner cartridge from the supply closet to departmental meetings.

GavinMcG• 5 years ago

Odd that it describes a slowdown in growth of labor productivity as a "productivity slowdown." As though we should be able to sustain growth infinitely. Seems like the low-hanging technological fruit has been picked, though.

andrekandre• 5 years ago

  > As though we should be able to sustain growth infinitely.

isnt that the basic assumption that underpins all of our economics though?

maybe im missing something, but minus that (overall expansion/growth), things start to look more like zero-sum?

deltree72• 5 years ago

The problem with 'productivity' measurement is output is based on 'sale price'

* Sell, 1,000,000 lottery tickets (or CDOs or Carcinogenic products) -- Boom, you are productive.

* Cure Cancer (or Linux or Wikipedia or an ad-free Educational YouTube Channel) and open source it for free -- Nah, not productive.

As we digitize, more things will be free and yet valuable and these things won't show up as productivity.

It's time to come up with better measurements of productivity

lumost2• 5 years ago

If the everyone receives the cure for cancer, or benefits from wikipedia or linux, then you would expect to see this show up in productivity numbers elsewhere in the economy.

If instead we invest in US productivity destroying activities such as dismantling factories, price gouging, speculation, mass diss-information and distraction machines, net loss corporations, and indefinite warfare. Then you would expect productivity to fall eventually.

deltree72• 5 years ago

Not necessarily.

Today we produce 1,000,000x more videos/memes/gifs/content 50 years ago and we also consume more of them.

But, those numbers don't show up at all in our productivity measures.

Why would watching "Gone with the Wind" 30 years ago more productive because we paid $10 than watching the same "Gone with the Wind" on a streaming service today (amortized at probably $0.05)

StanislavPetrov2• 5 years ago

"Productivity numbers", much like GDP, are mostly worthless because they don't measure what you are producing. If you pay one person to dig a ditch and another person to fill it in, the productivity numbers will be higher than if no ditch was dug, but have you really produced anything? The metrics we use don't just measure what we are calling "productivity" and "economic growth" but also drive and influence our collective behavior. When these metrics are flawed our behavior in pursuit of changing these metrics also becomes flawed.

missedthecue• 5 years ago

If you were to compare two individual people using that type of metric, I would agree. But if you are measuring multi-decade trends for the 161 million people in the US workforce, the measure they use seems adequate.

nimbius• 5 years ago

We ostensibly have a "better" measure of productivity, called the GDP. Every time a carton of cigarettes gets sold, GDP goes up. every time a person is diagnosed with cancer, GDP goes up. for a capitalist, the GDP is generally a positive litmus.

the concern I think is most evident is that a nearly theatrical number of short-term and long-term issues are becoming insurmountable obstacles to progress at all. having coasted on Quantitative Easing and bond buys since 2008, the market has cheated recession at all turns and subsequently created a corporate credit bubble that has turned the prime interest rate into a third-rail for anyone seeking to raise it to counter now rampant US inflation. many point to 2020 as a recession period, however bond prices and home prices remained high, and it only lasted a month at most as the fed simply injected more cash into the system to "correct" the uncomfortable decline.

the minimum wage hasnt moved in a decade, and most service economy workers (those which make up the backbone of neoliberal capitalist society) faced with the near Sisyphean task of caring for COVID patients at home, educating their kids remotely, and working multiple jobs that offer no healthcare or medical leave reached its absolute breaking point when the government and corporations deputized most of them as mask police to be spit on and assaulted. paying people more isnt working.

finally the fed and the gov arent helping. the looming threat of regular petulant government shutdowns coupled with states that refuse to in many cases even acknowledge their covid numbers, is butting against Federal reserve dogma that laughably insists somehow this is just "transient" inflation and its just going to go away, despite the first decline ever in cyber monday sales on record.

the silver lining analysts all rally around is a trillion dollar stimulus bill just that wasnt even submitted to the house until nine months into the year that will arrive just in time for a 2022 meldown over what are widely anticipated to be poor christmas sales amid a driver shortage, shipping gridlock, and chip shortage.

to see the BLS flog capital intensity platitudes and labor composition functions is just bad comedy. its the same sort of bureaucratic blinders we had right up to 2008.

KingMachiavelli• 5 years ago

They won't show up directly but they should (hopefully) be observable via secondary effects. Linux itself doesn't have price but employees using Linux have salaries, Redhat support has a price. SaaS providers do this for countless open source projects.

Linux and free software are also used for thousands of small commercial websites and projects that show up. If everyone had to use Windows Server and SQL Server for their .NET wordpress-style site there would be fewer sites and fewer businesses.

Educational YouTube channels should lead to more educated and therefore more productive people. It could be argued that for better or worse the higher-ed and post-high school systems (degrees, credentials, etc.) have been very slow or even opposed at allowing this extra learning/knowledge to improve career/productivity outlooks.

e.g. Youtube is free but text books have increased X% in price so the net effect is diminished. Learning is easier and cheaper than ever before but most colleges are not using the more efficient learning systems (online classes, MOACs(?)). The cost of college has increased so much that college itself has decreased in productivity, etc.

Also a lot of the time spent on these free/non-profit projects are not counted as labor hours so if anything they should have zero or positive effect on the measured amount of productivity.

(Personally I think HN is responsible. /jk)

jollybean3• 5 years ago

The 'secondary effects' are bigger houses than ever, more toys than ever, more entertainment than ever, safer, more fuel efficient cars, more vacation (it's not much in the US though), more vacation travel etc..

"Educational YouTube channels should lead to more educated and therefore more productive people."

Possibly, but also less demand for a big source of labour productivity, which is education.

And of course there is home life: if a Mother (or Father) stays home to mind the kids, all of the effort they do doesn't count towards labour input, GDP etc. but if they were paying someone for it, it would.

refurb• 5 years ago

This is economic productivity. Why wouldn’t you measure it in dollars.

JanisL2• 5 years ago

How do you account for differences in the purchasing power of those dollars you are making the measurement in?

An example of why this is relevant: https://www.investing.com/indices/zimbabwe-industrial

csomar• 5 years ago

They do affect productivity and disproportionately one might say. The problem is that these things are very hard to measure. Say you have an article about how to generate Qr-codes and a few hundred people everyday use it to build Qr-code solutions for their businesses. The alternative is that they don't use Qr-codes because they can't afford to buy a solution.

How are you going to measure the productivity gains for that one? Many things were involved along the chain: Internet (and Cable networks), Search Engines, Publishing platform, somebody free time, etc...

zapataband12• 5 years ago

Yep, what about child-rearing. Why isn't it incentivized/uplifted in this society? It's weird so many successes credited to self help, therapy, that petereson dude, elon musks inspiration, etc but why aren't we giving it up for moms??

mikeg85• 5 years ago

The economic gains brought about by labor productivity growth make it possible for an economy to achieve higher growth in labor income,5 profits and capital gains of businesses, and public sector revenue; these economic gains also hold the potential to lead to improved living standards for those participating in an economy, in the form of higher income, greater leisure time, or a mixture of both.

The use of “possible” and “hold the potential to” are telling.

My belief is that as the profits and shareholder compensation have risen disproportionately to wages, the workers who are the key to unlocking the productivity growth have lost their incentives. Why increase productivity when your pay doesn’t increase? This is obvious with the current anti-work movement and labor “shortage”.

If the wealth and growth was shared more evenly, and greed was kept in check, I believe we could easily be at the 2% rate.

ajross2• 5 years ago

I agree with the moral principle of what you're saying.

But, meh. My belief is that this is just measurement error. The linked article is a bunch of yelling about a perceived drop in what amounts to the second derivative of per capita GDP. It's just not a well-characterized "problem" to be solved.

lottospm• 5 years ago

The figure—$10.9 trillion—represents the cumulative loss in output in the U.S. nonfarm business sector due to the labor productivity slowdown since 2005, also corresponding to a loss of $95,000 in output per worker.

Exactly that. This is characterized as a loss but productivity has actually grown every single year except 2011 (which had zero growth, so not a "loss" either).

Maybe 1998-2004 were just exceptional. My guess is that's when computers started to take over larger swaths of the most productive industries.

above-average growth of the late 1990s and early 2000s

On top of that, the article (at least to me) reads like there was about a decade of above-average growth whereas it was really more like 6 years.

Edit: This reads a lot like this: https://xkcd.com/605/

rsj_hn• 5 years ago

The linked article is a bunch of yelling about a perceived drop in what amounts to the second derivative of per capita GDP.

The Bureau of Labor Statistics is not in the habit of doing a bunch of yelling. This is a scholarly report, and is commenting on a widely reported phenomena, namely the productivity slowdown. If you don't like this analysis, there are many others that draw similar conclusions. The reason why this analysis is interesting is that it breaks down the productivity decline into component factors and identifies which factors have slowed down (MFP).

maxerickson3• 5 years ago

The labor shortage is plenty real and is going to be for a long time.

We could massively expand immigration, but we won't.

dillondoyle2• 5 years ago

Which would also massively help with our population growth and funding entitlements problem.

We celebrate quickly giving citizenship to pro bball players (Enes Freedom, who btw I think he's awesome and congrats). But it's inaccessible for so many that would be net contributors to our country!

I firmly believe it's rooted in racism & the electoral benefits of Republicans rather than an actual policy/economic debate.

Doesn't help when one political party and their news media empire catastrophize and fear monger dangerous, gun toting, drug muling, cartel infested, caravans of chain migration invasions every October on the dot. But perhaps now I'm the one politicking ;)

roenxi• 5 years ago

The US is going to get to a population of 333,333,333 people in short order. Is that not enough?

While importing cheap labour and working them hard is a road to prosperity - probably quite a good one for all involved - it is hard to see how there can be a pure labour shortage with that many people, that much wealth and that much history of advanced manufacturing.

There is probably an organisational problem here somewhere.

throwaway17773• 5 years ago

Much more likely is we increase automation in jobs that no one wants to do like burger flipper or artichoke picker. And this would be a huge productivity win. It also might be rough for society but for productivity it would be huge.

sg47• 5 years ago

Not sure why you are being downvoted. The immigration policy especially for high-skilled workers is rooted in racism and is ignored because no party benefits from it. The only solution is for workers to form a PAC and raise funds to influence the political agenda.

rgbrenner• 5 years ago

Labor productivity = output per hour worked. Adding people does not change labor productivity.

willcipriano• 5 years ago

Ive reached the same conclusion, with some additional ideas to why. In recent decades the availability of capital has increased dramatically. Low interest rates, spray and pray venture capitalists, creation of new dollars at a rapid rate.

The idea behind capitals returns were that it took great risk as capital is rare and hard to get. If capital becomes easier to get, that alters the risk/reward ratio. I think we are just watching the reward part shift to where it belongs in contrast to the lower risk.

mschuster913• 5 years ago

In recent decades the availability of capital has increased dramatically.

Yeah, if the receiver of the capital is already rich and/or well-connected. If you're not in the top 10%, all you get is 10%+ APR credit cards, payday loans and other usurious crap.

fanzhang• 5 years ago

Is there any evidence of this in the data above (or elsewhere)? Labor productivity is a low degree-of-freedom datapoint and your explanation is indirect and has a lot of degrees of freedom.

mikeg85• 5 years ago

My opinion was anecdotal. But I think it could be argued the entire field of economics has a lot of degrees of freedom - which is why they do not have firm conclusions as to the causes of productivity loss in the article.

Edit: also see: https://www.epi.org/productivity-pay-gap/

oh_sigh2• 5 years ago

Why/how are the workers the key to unlocking the productivity growth? I imagined productivity growth came through mechanization/electrification/computerization, not from the workers themselves being more skilled.

IE if warehouse box-stackers productivity has tripled since 1950, it is because companies have invested in forklifts for the workers to use, not because the box-stackers are just way better at stacking boxes than their 1950s counterparts.

WaxProlix• 5 years ago

Strange that we're talking about a shortage of workers to unlock productivity then, and not a shortage of box-stacking machines or forklifts.

jollybean3• 5 years ago

This is a worthy idea, but not it's not necessarily substantiated.

FYI 'Productivity' is not 'How Hard We Work' - it's a measure of profit/hour.

If profits go down for any reason, including more leverage by consumers due to increased competition, productivity will go down.

'Low Productivity' does not mean the economy is doing poorly.

One other theory, is that consumers have more power then ever, consumer surpluses are greater than ever (through lower prices) and that the money is not going into the companies and therefore not recorded as productivity.

Facebook, Google, Web Browsers, News, email. So much free content.

My favourite Video Game is free to play.

You can buy at Wallmart today what would have cost a lot of money in the 1960s.

Travel is cheaper than ever, more people are travelling, Airlines are always teetering on bankruptcy.

All of that means the productivity numbers are going to be lower than otherwise all things being equal.

oblio• 5 years ago

FYI 'Productivity' is not 'How Hard We Work' - it's a measure of profit/hour.

Productivity is revenue/unit of time (generally hour).

Spooky23• 5 years ago

Productivity is based on labor hours not cost.

In my labor intensive business processes, I’ve used technolgy to control cost. My CFO doesn’t give a rats ass about headcount, just dollars. The people we hire or contract are dumber and cheaper today than they were in 2005.

Whole industries run like this. Hotels, government, manufacturing, etc. You might have a company with 3,000 people where key decisions are made by 5. Smartphones and services replaced supervisors and dispatchers with text messages. Many of those labor hours are inefficient as a result, but very cheap.

Terry_Roll3• 5 years ago

Productivity is based on labor hours not cost.

Exactly, a distribution warehouse is a fixed size, it has a maximum capacity (floor space & racking), so despite being able to bring in more boxes and also hire more (agency) staff Hours to process the Units in and out, at some point that warehouse will grind to a halt and become like a traffic jam caused by too many people and too many Units much like we see with too many vehicles on the road at peak times.

Automated distribution warehouses (computer controlled conveyor belt systems) also have this problem, as do theme park rides, rail networks and airlines as other common examples. In the 90's automated warehouses in one company I was familiar with would also crash at peak times, namely Xmas because it couldnt handle the increased volume. When it crashed work was distributed to other warehouses in the network to balance the workload amongst the remaining operational warehouses. However with automated warehouses, management/board know its maximum handling capacity and just accept it, unlike human manned warehouses where management keep pushing for more until workers revolt!

This is why the Reddit AntiWork subreddit is interesting right now, we are seeing a country wide revolt which could spread to neighbouring Western countries. The spooks will be watching this like hawks. During a UK fuel protest in the UK, a protestor who was also a small business in the run up to his attendance at a second protest had a visit from 4 big burly guys in a new expensive Black Range Rover, one of the guys got out and told this small businessman, if you go to the next fuel protest, you wont have a business to come back to. Thats how the security services and others operate here in the UK! Its the security services job to protect the country which includes the economy and other things, thats also why the illusion of privacy and tech security is just an illusion!

So other factors that can affect productivity in a country is poor transport networks, if people are spending more time travelling to and from work, then that country will be facing problems in years to come unless changes are made.

Look at commute times dropping during covid lockdowns. It was like getting to work 20 or 30 years ago, less traffic on the road yada yada yada.

Now changes in legislation can offset some of this which is in the hands of a Govt, like sunday trading (being open on Sundays) and also 24hr trading (being open 24hrs a day), internet shopping can also offset some or redistribute the demand on infrastructure but even the internet retailers have their problems and inefficiencies but these are now offloaded to the consumer, so legislation has created a cost saving for internet retailers in some countries.

I do agree that management are largely detached from the situation on the ground and you can see this in many ways with the problems that exist, but either they dont care or they dont know, some really are detached from the reality on the ground. Its also cheaper to address these on an ad hoc basis when intelligent consumers complain, management rely on stupidity and laziness to get away with poor goods or services. Remember inflation only measures the cheapest price of a good or service, it does not take into account the decline in quality or life span of a good or service.

ectopod• 5 years ago

This has been my impression for the last quarter of a century. Better communications ultimately give lower efficiency. Why plan when you can micromanage?

wpietri4• 5 years ago

Definitely. Another factor I think about a lot is what I call "managerial diversion". As a simple example, imagine one of those meetings where a boss calls it to feel important. E.g., a "progress report" meeting where each person tells the boss what is going on while everybody else just tries to look alert.

To me this is a diversion of resources from productive use. Managers get to feel powerful, important, smart. But neither investors nor customers benefit. At the team level, it's often just wasted hours here and there. But as you scale up, it gets worse. I've plenty of expensive corporate projects that were really just resume-builders for some executive.

How much more productive would each of us be if the management chain was reasonably effective and reasonably selfless?

rp1• 5 years ago

This opinion feels to much like a cliche. Management needs to know what’s going on, even in well run companies. You might not like giving progress reports, because you feel like it takes time away from your job, but it’s possible that management is using the progress reports to better the company as a whole. For instance, if you’re behind schedule they can allocate more resources to your project, etc. I’m sure you have many anecdotes where management wasted peoples time. That happens often too.

aeternum2• 5 years ago

Wouldn't the companies that allow this "managerial diversion" quickly fall behind competitors that did not allow it?

Companies also have different ratios of managers to employees. If managers drag down productivity wouldn't you expect to see much flatter orgs in successful companies.

Tempest1981• 5 years ago

I'll sometimes just give a 10-second status update: "Working on feature X, it's coming along nicely", or "Fixed a dozen pesky bugs".

Eventually, others start to do the same. Granted, there will still be a couple of "long talkers".

qwertyuiop_• 5 years ago

The MBA hacks need to slither in and “create value” from things that they have no real expertise in. Look at the debris field they created value GM, GE, Intel

dkdk8283• 5 years ago

You should try working in management before coming to conclusions

wyager3• 5 years ago

the workers who are the key to unlocking the productivity growth

What makes you say that?

Why increase productivity when your pay doesn’t increase?

You're conflating two things - industry-wide pay changes (which any individual worker's productivity-related decisions have ~zero influence on) and individual pay changes, which are in fact determined (partially) by individual productivity.

mikeg85• 5 years ago

The title of the article omits the word "labor" but the article is obviously focused on labor productivity so lets starts with a simple definition from Investopedia: Labor productivity, also known as workforce productivity, is defined as real economic output per labor hour. Growth in labor productivity is measured by the change in economic output per labor hour over a defined period.

I believe (through observation/experience) that workers are the key because without their buy-in and support, none of the business strategies or technological innovations management can introduce will matter. Individual workers have a lot of control over the economic output they choose to contribute. This is, IMO, very much about motivation.

RE your second point, I'm not sure if I'm conflating the two vs using a micro example to extrapolate a macro trend.

arcbyte• 5 years ago

Wild thought here: how does changing demographics influence this? Retiring people in many cases literally can't be productive anymore, but demand capital returns. But because they, in aggregate, didn't have enough kids, there isn't enough productivity to service that demand.

irrational• 5 years ago

I’ve wondered this myself. Boomers are 25+% of the population. That large of a percentage dropping out of the workforce is going to leave huge areas for younger people to move up and fill in, leaving tons of the bottommost jobs (most service jobs) unfilled. At some point the Republicans will have to come to grips with their xenophobia, since immigration seems like the only solution.

JanisL2• 5 years ago

There's definitely some very big problems with people demanding fixed interest returns when demographics aren't good: https://realinvestmentadvice.com/the-unavoidable-pension-cri...

dsugarman• 5 years ago

I'm having trouble following your logic, if productivity is defined as revenue per labor hour, and you're saying this is due to the anti-work movement and labor shortage, that's decreasing the denominator.

Or are you saying workers have become less engaged and less productive at work but maintain they're jobs? That might be plausible

bopbeepboop• 5 years ago

I took it to mean that workers did what was asked and no more — so productivity stayed constant.

Which was contrasted with engaged employees, who sharing in more of the profits, have an incentive to increase productivity — eg, by inventing a tooling improvement for the assembly line.

I think the overall point was employers are “penny wise, pound foolish” in that small productivity “gains” caused employees to disengage which is causing long-term slowdowns in improvements — improvements typically driven by employees stepping up and doing more.

mikeg85• 5 years ago

Absolutely the latter. A huge part of the movement is sticking it to the man, do the bare minimum, do not go above-and-beyond etc etc.

wolverine876• 5 years ago

This isn't economics, but I will say that, in much of the past, Americans had a belief in being productive, contributing members of society, in anyone achieving anything ('you could be President some day!'), and in an obligation to maximize your potential.

As wealth has become concentrated and the wealthy have openly and arrogantly adopted a philosophy of taking as much as they can - that it's what capitalism is about - rather than producing and contributing and thereby earning, it's no surprise that workers might not feel they should do more than the minimum.

neilparikh• 5 years ago

My belief is that as the profits and shareholder compensation have risen disproportionately to wages

It's not that simple: https://www.brookings.edu/wp-content/uploads/2015/03/finalin...

(From https://www.brookings.edu/bpea-articles/deciphering-the-fall...)

The takeaway is that these additional gains in productivity are being captured by land (as expected based on the law of rent). The problem is that this is popular when the majority of voters (or at least, the ones active in politics and making their opinion heard) are homeowners.

gremloni3• 5 years ago

I believe it’s a mix of an explosion of recreation and entertainment options that people can’t wait to get back to and it getting increasingly hard to maintain the paradigm of work being a virtue.

ddingus2• 5 years ago

The promise was it was going to get much cheaper to live. That didn't happen, and here we are.

le-mark2• 5 years ago

Some make the case that cheap goods from China via Walmart was precisely that.

yobbo• 5 years ago

The metric in question might be "labour share of income" and it has indeed been decreasing for a long time.

But it's not obvious that incentives in individual jobs are affecting overall productivity (can one factory worker really make the conveyor belt move faster?). A plausible explanation could be that it's becoming easier (and profitable) to hire more low-wage workers than systematically increasing productivity.

le-mark2• 5 years ago

My understanding is that cheap labor (China) is why there was nearly a complete stop of factory automation. Instead of increasing automation, low cost labor was utilized instead. Now that wages are rising around the globe, there should be increased innovation around automation. Explicitly that would be factory robots.

neilwilson• 5 years ago

"Why increase productivity when your pay doesn’t increase?"

Because the neoliberal belief is that pay should remain largely fixed and the productivity bonus comes through as reduction in prices or increase in function.

So this season's iPhone does more than last at roughly the same price.

Which then leads to the paradox of productivity - since profits cannot then grow either unless there is ever greater leverage from banks.

ajross2• 5 years ago

This is a bit oversold. Here's the FRED graph of nonfarm labor productivity over the last 80 years or so: https://fred.stlouisfed.org/series/OPHNFB

In fact productivity has been going up at very roughly constant rate ever since it's been measured. And it's been growing since 2008 too. It's true there's an inflection around then, and that the growth rate has been lower than it was during the peak years of the late 90's. But (1) it's not that much lower and (2) it's not remotely outside historical norms. There were flat spots in the 70's and late 50's too.

Basically: the free lunch from the heyday of VLSI scaling, that enabled the enormous automation economy, is probably over. Now we're waiting for another breakthrough.

miltondts• 5 years ago

Exactly. I'm very surprised by this article and all the comments that apparently didn't bother to go check historical data and immediately started looking for causes (they are lazy! It's management! It's inequality etc). But it seems the article is really about the fear of losing no. 1 place to China as can be seen in the conclusion: "the productivity slowdown of the past decade and a half has left the U.S. economy in a weaker position"

bluedino• 5 years ago

I was kind of expecting this to be blamed on three things:

1. Supply chain issues

2. Businesses that are still closed/reduced in size

3. People working from home

But instead it's a long-term analysis from far before covid

sailfast• 5 years ago

Huge productivity boom after the 2008 recession when everbody had to do the same thing with a ton fewer people, I would expect to see smaller growth as things normalized again over the following few years. That said, not a data scientist - just an armchair economist.

Can't wait to see the numbers "per hour" when they normalize a full time job into 40 hours a week and try to figure out how remote workers perform and also have childcare duties (or work all the time) for two years from your house. It will be quite the challenge for them to normalize!

assbuttbuttass• 5 years ago

This looks like the falling rate of profit (https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...) by a different name.

scottcodie• 5 years ago

Many economic models assume economic profit is zero, meaning the owners could not use their time or money better in any other business.

andrewmutz• 5 years ago

These statistics are scary. I believe that instead of worrying that "the robots will take all of our jobs" we should worry that the robots aren't taking our jobs quickly enough.

literallyaduck4• 5 years ago

Should robots appear tomorrow and replace 99.95% of the workforce do you really believe the robot owners will be altruistic enough to provide charity to the displaced workforce?

The attractive people who are out of work will end up in the sex industry. The rest will go to protection zones, ghettos, and will be sterilized to prevent reproduction, and possibly starved depending on how things go.

Society is not shock resistant and needs time to grow into things. Look at oligarchies and tell me socialism, capitalism, and communism are really any different beyond the rhetoric.

How many dev shops said they are agile when they were clearly waterfall?

No matter what you call it the ruling class will always call the tune and the poor and middle class will dance.

pharmakom• 5 years ago

And who are the 0.1% going to sell the output of their robot labour to if everyone else is in ghettos?

Anyway, I’d hope in such a scenario some smart underdogs would illegally repurpose some robotics to create their own abundance. Might make a good TV show.

zapataband12• 5 years ago

Communism/socialism are sorta different. Look at cuba look at the values that people died for throughout the last century. Humans are imperfect but ideals are ideals, and show me the ideals that capitalism has gotten us but mass exploitation. We have to be more creative than the past and see better alternatives. Mass movements/protests are the only thing that have ever moved the needle https://en.wikipedia.org/wiki/Neozapatismo

tonyedgecombe2• 5 years ago

Should robots appear tomorrow and replace 99.95% of the workforce

In what world is that going to happen?

crocal2• 5 years ago

No matter what you call it the ruling class will always call the tune and the poor and middle class will dance.

Ever heard about the French revolution? Ruling class had to take dance lessons.

mrfusion2• 5 years ago

Would robots always show up in productivity numbers or are there certain ways robots could be employed that don’t show up?

istjohn• 5 years ago

Surprise, surprise, increasing concentration of market power in tech and other industries seems to explain much of the productivity slowdown:

Computer and electronic products incurred a massive slowdown, with a contribution to MFP growth of 0.45 ppt. from 1997 to 2005 dwindling to 0.10 ppt. from 2005 to 2018....The MFP slowdown in computer and electronic products represents 66 percent of the slowdown in durable manufacturing and 31 percent of the slowdown in the private nonfarm business sector.

...

Mordecai Kurz [...] finds growing market power in the IT sector, which may be stifling the entry and growth of young firms. Kurz reports that “declining or slow growing firms with broadly distributed ownership have been replaced by IT based firms with highly concentrated ownership,” and that “IT innovations enable and accelerate the erection of barriers to entry and once erected, IT facilitates maintenance of restraints on competition.”

Foster, Grim, Haltiwanger, and Wolf also reference the concentration within high-tech industries, noting that, in contrast to the late 1990s, when “the productivity surge in the high-tech sectors [had] a high contribution of increased within-industry covariance between market share and productivity . . . the productivity slowdown in the post-2000 period in high tech is due to both a decrease in within-firm productivity growth but also a decrease in this covariance.”

Titan Alon, David Berger, Robert Dent, and Benjamin Pugsley offer further evidence to support this finding, noting that “over the last three decades, the U.S. business sector has experienced a collapse in the rate of new startups alongside an enormous reallocation of economic activity from entrants and young firms to older incumbents.” Alon et al. clarify that this finding is not just particular to high-tech industries but is “widespread across industries and geographic markets,” so that while this could be relevant in high-tech industries, it could also help explain the productivity slowdowns in other industries. And, more generally, Grullon et al. observe that “more than 75% of U.S. industries have experienced an increase in concentration levels over the last two decades.”

beezle2• 5 years ago

The recent trend the capital component was a little light, labor was a bit more than usual. Its the 'mfp' that is really lagging.

My speculation is business investment in r&d has vanished, in part because of stock buybacks and in part executive level compensation. Think about what the r&d spending was like back in the 50s-mid 80s and then the initial flipping of the online switch in the late 90s early 00s. The easy gains seem to have been made?

mschuster913• 5 years ago

My speculation is business investment in r&d has vanished, in part because of stock buybacks and in part executive level compensation.

No, it only has shifted. In ye olde days, companies took the risks of R&D spending upon themselves. These days, R&D spending has been shifted towards the capital market (especially venture capital) and in some areas universities, and companies buy startups that have shown results, and the VC investors/taxpayers/university endowments bear the risk.

beezle2• 5 years ago

Not sure most people would consider venture capital funded startups as even close to the same as the large corporate basic R&D of the past. A better 'name' might be: niche short term applied r&d.

Likewise, university "research" is not the wide open expanse that it once was either.

kelseyfrog• 5 years ago

Namely, though low productivity growth may be leading to rising inequality, it may also be that rising inequality is reducing productivity growth, by stifling “the ability to harness the talents of potential innovators across the income spectrum.

"The ability to harness talents" is a weird way of saying people don't want spend their time working to benefit someone else. When the value extraction knob turns up, the incentive to work goes down. When you're getting cucumbers and the other guy keeps getting grapes[1] it makes sense to stop playing the game.

1. https://www.youtube.com/watch?v=n_9RjDqJ7Zs

subsubzero• 5 years ago

Maybe its just people are working too much, leading to lower output due to not being fresh. I just wish we could try different things, a 4 day workweek, or a day off every other week and measure productivity. Where I have a hard time is we have a problem but we are changing nothing. Microsoft Japan has showed that a 4 day workweek improved productivity by 40%, so maybe less is more - https://www.npr.org/2019/11/04/776163853/microsoft-japan-say...

Also given that tech has almost fastfood levels of turnover cannot be great, people constantly leaving and knowledge being lost and the intense time sink of training new hires and interviewing not to mention recruiting and scouting out new people is not helping any productivity. Pay people decently, don't work them into the ground and watch your productivity jump. Very simple.

gremloni3• 5 years ago

Even four days a week is too much to be honest though I don’t know if our current societal paradigm could handle anything less than that. With how productive and involved work is now, working white collar jobs are hard. It isn’t like 30-40 years ago when everyone worked at a relaxed pace at relatively low mentally intensive tasks.

mschuster913• 5 years ago

Pay people decently, don't work them into the ground and watch your productivity jump.

That's a question of accounting. Paying people better so that they don't churn is a long-term obligation (opex), whereas recruiting costs are capex - and especially for "cannon fodder" aka junior developers you don't have much in that area anyway. Constant churn keeps wages as low as the market will bear, prevents organizing of employees and guarantees a constant supply of "fresh blood" aka new ideas.

Personally I believe that paying people better is the way to go, the problem is that stock markets reward low-opex operations more than low-capex/long-term sustainable ones.

nootropicat• 5 years ago

At the most basic, production is defined as resources_in x efficiency.

American energy consumption stopped growing so all growth has to come from efficiency increases, which has a physical maximum of 1. Energy efficiency of computation has been increasing exponentially - and orders of magnitude increases are still possible before the Landauer's bound is hit. Cooling and heating is close to physical efficiency limits. Transport in theory could be near lossless, but required infrastructure makes that impractical any time soon, and open-air transport is close to efficiency limits.

Therefore, in the absence of an increase in energy consumption significant productivity gains can only happen in sectors where compute/storage/bandwidth expense is a significant factor. This very lopsided growth profile is likely to lead to an increase in social tensions.

The only other sector I can think of where exponential efficiency increases are also possible is biotechnology, and, by extension, medicine.

https://en.m.wikipedia.org/wiki/Energy_in_the_United_States#...

ay• 5 years ago

https://en.m.wikipedia.org/wiki/History_of_Facebook

The timing may be totally coincidental, of course…

MisterBastahrd• 5 years ago

I wonder how much of this is due to boomers being suckered by their parents to eradicate their own corporate safety net. These people are in their 70s and can't afford to retire. Many of them enjoy seniority for just existing for so long and they would cost a fortune to lay off under most VSO programs. The term "shoot yourself in the foot" referred to someone with a rifle making an error. That generation decided to use the semiautomatic variety.

blunte• 5 years ago

Like profit (measured only as money left after expenses), productivity is not the only important measure. What is traded for productivity? Who gains from productivity increases?

It would certainly appear that over the last 30 years in the US, most of the productivity gains have gone to a relative few people - certainly not uniformly distributed amongst the people who created most of that productivity.

anovikov2• 5 years ago

My cynical explanation:

In every workplace, it's usually the few productive people who do all the work and others just dragging their asses around, mostly being a nuisance - they exist only because HR is doing a bad job on one hand, people learned how to pass interviews and then kiss asses to stay on the job very well, on the other hand, and managers want to stroke their egos by having as many people "under them" as possible.

Trick is, in the last 10-15 years those few productive people, thanks to the infinite scalability of success in the digital world, and the good stock market performance, have saved up enough money to kiss the job goodbye forever, and only those losers remain. Almost all good developers i know, quit actual development - they either sit on multimillion savings, or went into well, hardly productive sectors like crypto. No one works for hire as developers or even runs development companies (startups are too hard, many tried but no one pulled it off). And these people are barely 40. 20 years ago people like that would be those primary workhorses, now they are lost for the labor market forever.

On paper things look well, but productivity obviously suffers.

jart2• 5 years ago

You make retiring in your 30's sound like it's a victory. No one does that unless they feel unwelcome and have enough money to scrape by after saying goodbye rather than being forced to tolerate an unwelcoming environment.

anovikov2• 5 years ago

I don't agree, many people just don't like work. Smarter people may be less influenced by social pressures/morals so they can see it in a more unbiased way (society forces on us perception of work as a virtue), so they like it even less.

After all, i for example, have never participated in a single project that would ever go live, and only a few times, built small pieces of code that were for some time used in live products. How can i probably fool myself into believing that work is a virtue?

gremloni3• 5 years ago

Why would it not be a victory? Who likes working for someone else when you don’t have to. I can think of an infinite number of things to do with free time if I didn’t have to work for money.

crocal2• 5 years ago

Smart and productive people are happiest when they are free to do whatever they feel is worthy of their time and attention. One of the key to their productivity is that they don’t need to be told what to do every step of the way. Retire at 30 does not mean being unproductive, it means working on what you want, when you want. I have even met execs in large orgs that were essentially doing the job because they liked it. They did not need the salary anymore.

novok• 5 years ago

And in 20 more years, they would retire, die or become managers. And new engineers enter the field, without millions in the bank, establish themselves as workhorses and so it continues.

Nevermark• 5 years ago

The average worker is not getting more productive, because they are being homogenized to great corporate benefit.

Workers are homogenized when software and hardware automation replace some of their skills, even though the job still exists.

1. Reduced utilization of worker skills, reduces worker's on the job value.

2. Reduced utilization of worker skills, reduces worker replacement costs.

3. Reduced need for training, also reduces worker replacement costs.

4. Reduced need for training, decreases on-the-job value gains for workers.

5. Homogenized jobs are easier to offshore to areas with lower wage expectations.

6. Homogenized workers allow for greater manager-to-worker ratios, either reducing the number of management jobs or increasing the number of homogenized jobs.

More of these jobs are being created very quickly since:

1. They save companies in wages.

2. They save companies in time.

3. They save companies in management complexity.

4. They save on resources for dignity and comfort.

5. They allow for faster scaling.

6. Entering new markets that require many workers is easier and more profitable where job homogenization is possible.

Think of automation from the employer's view:

1. Automation by software.

2. Automation by hardware.

3. Automation by worker homogenization.

Workers (for many types of low-level high-count jobs) and capital goods are "better" when they are standardized in quantity.

The point isn't to make them more productive, but to save money, which may go to profits, but it might also just go to reducing product and service prices since homogenization is not a difficult differentiator to copy.

So no "net gain" in GDP dollar terms, just reduced prices in line with reduced wages. But with dollars shifting away from companies not doing this yet, to companies that are.

lkrubner• 5 years ago

The starting point of this article is misleading. It would be more accurate to say that most Western nations saw historic and extraordinary productivity gains for much of the early 20th Century, building up to the astonishing economic activity of the post war boom, 1945-1973, what the French call "les Trente Glorieuses." Since that time, every Western nation has suffered the Great Stagnation, but the Great Stagnation has been punctuated with several short revivals. France saw productivity boom in the early 1980s, but that boom died out. The USA saw productivity return to the boom levels from 1995 to 2005, but then die out.

This article starts its analysis with 2005, but lacks the broader historical context that might offer deeper explanations for the malaise that it is about.

pietrovismara2• 5 years ago

Why should we be more productive if all the additional value we create goes up? Why should we do charity for the rich?

The U.S. productivity slowdown: an economy-wide and industry-level analysis

Related Stories