Squeezed Dry: Why Americans Work So Hard but Feel So Poor

How is it possible that we're both working harder and finding it more difficult to make a living? Maybe the same thing is making work cheap and life expensive. It's the productivity paradox.

marvin l stressed worker.pngFlickr/Marvin L

Sped up, slimmed down, squeezed dry, or simply shut out, the American worker faces an unprecedented slump. The numbers say we're getting better at our jobs, but paychecks suggest we're worse off.

Since the recovery began, corporate profits have captured nearly 90 percent of the growth in real income. Wages and salaries have accounted for 1 percent. That's "unprecedented," say Northeastern University economists, but it ain't new. Productivity (that's work/time) has increased seven times faster than wages in the last 30 years.

There's a lot of online ink about the productivity paradox, memorably deemed our "Speed-up Crisis" in a provocative article by Monika Bauerlein and Clara Jeffery, coeditors of Mother Jones. It boils down to one question. Why does it seem like people have to work harder and harder to make the same amount of money?

HOW WE GOT HERE
(or: HOW CONSUMERS FOUGHT WORKERS, AND WON)


I want to try to tell this story without using the word corporation. Yes, corporate profits are up 22 percent since 2007 while employment is down. Yes, companies have swapped unionized workforces for universal workforces by letting jobs expire at home while hiring overseas. These are important pieces to the puzzle. But I want to tell the story starting with another piece. Productivity.

Productivity means work divided by time. It tells you how much stuff our economy makes, and how efficiently we make it. Over time, higher productivity leads to wealth. But in the last 30 years, the average worker hasn't felt very enriched by all his or her extra work. Take a look.


Mother Jones

Productivity is not evil. For a consumer, it's bliss. It means iPods and cheap toasters. "What people forget about productivity is that it's not just about becoming more efficient by using fewer workers," says James Manyika, Director of the McKinsey Global Institute. "It also means creating more valuable things. For example, Apple has driven productivity by expanding our basket of products." Workers have a less rosy view. If you're in manufacturing or IT services, for example, you've seen millions of jobs turned over to robots and Rajasthan.

This conflict between consumers and workers is an important piece of the productivity puzzle. Workers have lost power since the heyday of organized labor in the mid-20th century. Meanwhile, consumers are in their heyday right now. Family spending dominates the U.S. economy more than any other big economy.

But wait, you're thinking, how can the middle class support a consumer-dominated economy if the middle class isn't making more money? Four reasons. First, in the 1960s, women joined the workforce, and dual-income households grew. Second, in the 1970s and 1980s, white collar workers started putting in longer hours. Third, in the 2000s, the housing boom made families feel richer than their paychecks. Fourth, consumers discovered it was more affordable to buy clothes, food, electronics -- you know, stuff -- despite poor salaries. Why?

Stuff got cheap.

IF WORK IS CHEAP, WHY IS LIFE SO EXPENSIVE?
(or: PRODUCTIVITY IN ALL THE WRONG PLACES)

Here's a theory. In the last 30 years, productivity grew, but it didn't make you rich because all the benefits went to make stuff cheaper. You can see this in Walmart and on your computer screen. Food and clothes have never been more affordable. Information has never been so easily accessible. Electronics have never been so advanced. Consumer products have never been so diverse, effective, and cheap.

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

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