This Is What the Productivity Crisis Looks Like

More

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.



Jump to comments
Presented by

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

Get Today's Top Stories in Your Inbox (preview)

'Stop Telling Women to Smile'

An artist's campaign to end sexual harassment on the streets of NYC.


Elsewhere on the web

Join the Discussion

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

Video

Where Time Comes From

The clocks that coordinate your cellphone, GPS, and more

Video

Computer Vision Syndrome and You

Save your eyes. Take breaks.

Video

What Happens in 60 Seconds

Quantifying human activity around the world

Writers

Up
Down

More in Business

Just In