This Is What the Productivity Crisis Looks Like

Post-WWII America is the story of two economies. In the first 35 years after the war, real hourly compensation went hand-in-hand with rising productivity (or, work per hour). In the next 35 years, productivity accelerated and compensation lagged behind. Here's what that looks like in a picture (via Matt Yglesias):


What's going on here? The simplest explanation is that the U.S. economy seems to be getting really, really great at making more stuff with fewer workers and/or lower wages. But every picture tells a thousand words, and that sentence is barely 20. So here are two more observations:

1) Where Are the Productivity Gains Going? One way to inquire into this productivity "gap" -- the difference between the blue and red lines that opens like a V around 1980 -- is to ask where the gains from productivity went if they didn't go to higher wages. Did they go to cheaper products? Did they go overseas? Are robots and software doing middle-skill jobs more effectively, thereby raising overall productivity, while those same workers are being forced to take lower-wage service jobs that result is a slower moving red line? Or, as economist Michael Mandel has argued, maybe we're measuring productivity incorrectly. In other words, output isn't rising as fast as we think, and that thin blue line is a big fat lie!

2) Where Will the Next Productivity Wave Be? The 1990s were an explosion of productivity and rising real wages, especially in technology industries. In general, productivity rises in industries where wages rise. But in the next decade, the opposite is projected to occur: The area with the largest projected growth in jobs, health care, has one of the lowest productivity growth rates. That's not a recipe for a well-functioning economy -- hundreds of thousands of minds destined for an industry where we know they will be used unproductively.



Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

What LBJ Really Said About Selma

"It's outrageous what's on TV. It looks like that man is in charge of the country."

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

What LBJ Really Said About Selma

"It's going to go from bad to worse."

Video

Does This Child Need Marijuana?

Inside a family's fight to use marijuana oils to treat epilepsy

Video

A Miniature 1950s Utopia

A reclusive artist built this idealized suburb to grapple with his painful childhood memories.

Video

Why Principals Matter

Nadia Lopez didn't think anybody cared about her school. Then the Internet heard her story.

More in Business

Just In