Productivity slowdown costs US economy $10.9 trillion

Productivity slowdown costs US economy $10.9 trillion
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The US has lost a whopping $10.9 trillion to low workforce productivity since 2005. According to the US’ Bureau of Labor Statistics (BLS) this translates to a corresponding loss of $95,000 in output per worker. 

“Many economic observers were yet again surprised, in this case at just how drastically growth rates slowed, given the recently observed high rates of growth and the continued technological innovations that were proliferating throughout the economy.” the report from BLS read. 

Some economists even say that low productivity is at the core of every economic problem in the US. 

In a recent article by The New York Times, Nela Richardson, chief economist at American human resources management and services provider ADP was said, “Many economic observers were yet again surprised, in this case at just how drastically growth rates slowed, given the recently observed high rates of growth and the continued technological innovations that were proliferating throughout the economy.”

Productivity is what allows the economic pie to grow: If workers can produce more in the same amount of time, then their employers can afford to pay them more per hour without either raising prices or cutting into profits.

Pay becomes a zero-sum game

When productivity stagnates, however, pay becomes a zero-sum game: If workers want to make more money, then the money has to come from somewhere else.

Even before the pandemic hit, many economic observers and economists have been trying to figure out this phenomenon. And with the rise of new labor woes including The Great Resignation, Quiet Quitting and Job-Switching, some economists point to these as the major factors for productivity’s weak growth. 

In November 2021, the U.S. has seen 4.5 million workers leave their jobs. This is contributing to low productivity levels, economists say. The hiring process and the turnover is costing the US  large sums of money. 

In the article published by The New York Times, robotics company W.H Bagshaw has been seeing a rapid increase in employee turnover. 

“Anytime we bring in a new hire, they’re not productive on Day 1 — usually they’re shadowing someone for a few weeks or months,” the company’s president Adria Bagshaw said. 

“You’re investing in someone for the future. Whoever is doing the training, they’re slowed down from their normal productivity.” she continued. 

Complicated impact of the Great Resignation

But the impact of the Great Resignation is complicated: Too much turnover all at once can create its own problems.

Dominic Benvenuti, an owner of Boston Pie, which owns more than two dozen Domino’s locations in New England said that “The solution is to focus on training and to recognize that new hires won’t be as productive as 10-year veterans right away.”

Many economists say it is still possible that the pandemic-era increase in turnover will be beneficial for productivity. There is some hope that people who thrive working from home will gravitate toward companies that embrace remote work; people who do better in person will be snapped up by companies that require employees to come into the office. 

Read more here. 

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