Productivity is down—and it is confusing economists as to why.
Key Details
- Experts expected the post-pandemic normal to settle but productivity is continuing to decline—as buzzwords like “burnout,” “quiet quitting,” and “the great resignation” continue to cause concern.
- “In the first half of 2022, productivity—the measure of how much output in goods and services an employee can produce in an hour—plunged by the sharpest rate on record going back to 1947,” says The Washington Post.
- Economists aren’t sure what is causing the drop in productivity but it may have to do with stress and exhaustion from the pandemic economy—that employees were “working unsustainably hard,” according to Harvard economist Larry Summers.
- “There’s a highly empowered workforce that was engaged in a certain amount of quiet quitting. [That’s creating] a certain amount of absenteeism on and off the job,” says Summers.
- The productivity drop isn’t universal as manufacturing is still strong but elsewhere companies are trying to find ways to crack down on low productivity through increased employee surveillance, mandatory return-to-office mandates, or simply asking remaining employees to pick up the slack.
Why it’s Important
With recession fears looming, low productivity is a negative indicator of the overall direction of the economy. Low productivity can harm economic growth and large portions of the workforce are clearly starting to check out and contribute less. Raising productivity could also contribute to inflation improvements and offer some needed economic relief.
“Critical to a well-oiled economy, productivity is also the ultimate driver of standards of living: Higher productivity eventually translates to more goods and services available at a lower cost, and increased wages for workers, meaning higher productivity also combats inflation,” says The Washington Post.
The economy in 2021 saw massive post-COVID gains as large segments of the economy returned to normalcy, sparking one of the largest economic booms in history as the economy reset itself and pre-pandemic jobs returned. Productivity increased by 4.3%. It has slowed down since.
“There are many theories as to why productivity has nosedived. One has to do with the tight labor market … Companies are often losing high performers who are finding jobs with higher wages and more flexibility. Replacing them is tough and training new hires is costly and time-consuming. Another theory is that all workers are just in a productivity funk,” says WP.
