16 ms·

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

200 points by rsj_hn 5y ago

blunte 5y 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.
anovikov 5y 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.
- jart 5y 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.
  - gremloni 5y 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.
  - anovikov 5y 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?
    - jart 5y ago
      It depends how you define work. I have built systems that are used in large production services. But even if you're just going to dinners and meetings then that's still work in a way. Possibly a more important kind. We all need to have some reason to exist. Tech is weird historically speaking since once the work is done the code runs itself which leaves builders as the architects of their own demise, since few folks are interested in disrupting cash cows with a better mousetrap.
  - crocal 5y 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 5y 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.
deleted 5y ago
[deleted]
Nevermark 5y 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 5y 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.
pietrovismara 5y ago
Why should we be more productive if all the additional value we create goes up? Why should we do charity for the rich?
kf6nux 5y 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.
- mrfusion 5y ago
  My guess would be internet browsing and social media.
- VLM 5y 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 5y 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 5y 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?
deltree7 5y 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
- lumost 5y 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.
  - StanislavPetrov 5y 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.
  - deltree7 5y 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)
    - 5y ago
mikeg8 5y 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.
- fanzhang 5y 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.
  - mikeg8 5y 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/ https://www.epi.org/productivity-pay-gap/
    - webmaven 5y ago
      It is possible that the drop in productivity growth, if it goes on long enough, will have the effect of closing the gap.
- neilparikh 5y 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/finalincomeviz.png https://www.brookings.edu/wp-content/uploads/2015/03/finalin... (From https://www.brookings.edu/bpea-articles/deciphering-the-fall-and-rise-in-the-net-capital-share/ 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.
ajross 5y 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 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 5y 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 5y 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 5y 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 5y ago
This looks like the falling rate of profit (https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...) by a different name.
- scottcodie 5y 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 5y 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.
- literallyaduck 5y 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.
  - tonyedgecombe 5y ago
    >Should robots appear tomorrow and replace 99.95% of the workforce In what world is that going to happen?
  - crocal 5y 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.
    - pietrovismara 5y ago
      Maybe that's the problem. We stopped giving dance lessons to the ruling class a long time ago, but those lessons have always been the only reason why, as working class, we have the few good things we have.
    - literallyaduck 5y ago
istjohn 5y 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.”
beezle 5y 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?
- mschuster91 5y 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.
  - beezle 5y 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 5y 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 https://www.youtube.com/watch?v=n_9RjDqJ7Zs
subsubzero 5y 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-says-4-day-workweek-boosted-workers-productivity-by-40 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.
- gremloni 5y 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.
- mschuster91 5y 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 5y 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#/media/File%3AUS_energy_consumption.svg https://en.m.wikipedia.org/wiki/Energy_in_the_United_States#...
ay 5y ago
https://en.m.wikipedia.org/wiki/History_of_Facebook https://en.m.wikipedia.org/wiki/History_of_Facebook The timing may be totally coincidental, of course…
MisterBastahrd 5y 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.
steve76 5y ago
[dead]

200 points by rsj_hn 5y 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.

anovikov 5y 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.

jart 5y 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.
- gremloni 5y 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.
- anovikov 5y 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?
  - jart 5y ago
    It depends how you define work. I have built systems that are used in large production services. But even if you're just going to dinners and meetings then that's still work in a way. Possibly a more important kind. We all need to have some reason to exist. Tech is weird historically speaking since once the work is done the code runs itself which leaves builders as the architects of their own demise, since few folks are interested in disrupting cash cows with a better mousetrap.
- crocal 5y 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 5y 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.

deleted 5y ago

[deleted]

Nevermark 5y 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 5y 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.

pietrovismara 5y ago

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

kf6nux 5y 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.

mrfusion 5y ago
My guess would be internet browsing and social media.
VLM 5y 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 5y 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 5y 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?

deltree7 5y 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

lumost 5y 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.
- StanislavPetrov 5y 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.
- deltree7 5y 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)
  - 5y ago

mikeg8 5y 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.

fanzhang 5y 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.
- mikeg8 5y 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/ https://www.epi.org/productivity-pay-gap/
  - webmaven 5y ago
    It is possible that the drop in productivity growth, if it goes on long enough, will have the effect of closing the gap.
neilparikh 5y 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/finalincomeviz.png https://www.brookings.edu/wp-content/uploads/2015/03/finalin... (From https://www.brookings.edu/bpea-articles/deciphering-the-fall-and-rise-in-the-net-capital-share/ 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.

ajross 5y 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 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 5y 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 5y 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 5y 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 5y ago

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

scottcodie 5y 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 5y 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.

literallyaduck 5y 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.
- tonyedgecombe 5y ago
  >Should robots appear tomorrow and replace 99.95% of the workforce In what world is that going to happen?
- crocal 5y 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.
  - pietrovismara 5y ago
    Maybe that's the problem. We stopped giving dance lessons to the ruling class a long time ago, but those lessons have always been the only reason why, as working class, we have the few good things we have.
  - literallyaduck 5y ago

istjohn 5y 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.”

beezle 5y 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?

mschuster91 5y 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.
- beezle 5y 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 5y 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 https://www.youtube.com/watch?v=n_9RjDqJ7Zs

subsubzero 5y 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-says-4-day-workweek-boosted-workers-productivity-by-40 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.

gremloni 5y 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.
mschuster91 5y 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 5y 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#/media/File%3AUS_energy_consumption.svg https://en.m.wikipedia.org/wiki/Energy_in_the_United_States#...

ay 5y ago

https://en.m.wikipedia.org/wiki/History_of_Facebook https://en.m.wikipedia.org/wiki/History_of_Facebook The timing may be totally coincidental, of course…

MisterBastahrd 5y 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.

steve76 5y ago

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