2023-06-17 04:01:14
Labor productivity, or the “average value of goods and services produced in an hour’s work,” in many US states declined from 2021 to 2022, even major states. What does it mean for the US economy?
Image source: US Department of Agriculture (Public domain)
According to a special report by US local media outlet Stateline under The Pew Charitable Trusts, it reported that the ‘Labour Productivity’* of working people in the United States has dropped dramatically. This includes in major states of importance. Some economists are alarmed by this situation. This might mean trillions of dollars. in a declining economy as well
| ‘Labor Productivity’ (Labour Productivity) Refers to the ratio of output to the number of workers in the economy. In theory, labor productivity is both average labor productivity and marginal labor productivity. 2 types, namely the average labor productivity per person (Labour Productivity per Employed Person) and the average labor productivity per hour worked (Labour Productivity per Hour Worked). However, calculating the average labor productivity per person can be easier than the average per hour, but there Many countries calculate labor productivity in both ways. According to ILO data, 51 out of 123 countries can provide average labor productivity per hour worked, including the European Union, the United States, Canada, Australia, Hong Kong and Singapore. |
Labor productivity — the average value of goods and services produced per hour worked — ranged from $58.80 in Mississippi to $120.67 in New York in 2022, according to a Stateline analysis using data from the Federal Bureau of Labor Statistics. BLS) published in May 2023
In 37 states, worker productivity has declined from 2021 to 2022 following adjusting for inflation. decreased throughout Q1/2023
Decreased productivity increases product costs. The economy has slowed and it has threatened wages paid to workers. This negatively affects the quality of life of the people and the collection of state taxes.
Even the state that has led the way in production in recent years. Labor productivity also declined between 2021 and 2022, such as California, New York, Texas and Washington. From 2007 to 2019, those states contributed to US productivity growth. is more than half
Some economists see the unprecedented decline in the country’s output as a warning sign. Although some viewed it as an expected outcome of the COVID-19 pandemic. With the tech industry in California and Washington soaring along with the financial industry in New York, only nine states experienced a decline in productivity compared to 2019 and 2022.
Gregory Daco, chief economist at Ernst & Young, calls the drop “a slump.” “Signs of recession” in a tweet on May 4, 2023, noting that the five consecutive quarterly declines through early 2023 hadn’t happened since the BLS had been keeping records since 1948.
“Manufacturing is in decline,” Dago wrote in a client briefing. The reason for this phenomenon is labor market turbulence causing businesses to lose skilled workers Including unequal access to technology for working people.
economist Given that there are many possible factors. labor shortage This makes the business sector need to recruit more new untrained employees to work. And the recovery of service jobs following the COVID-19 pandemic has ended has added more low-wage jobs back into the labor market.
Experts are also debating whether the increase in remote work has caused a drop in productivity. And some critics have argued for a decline in labor productivity. This may be because workers are stressed and exhausted from years of the pandemic.
Oil Pipeline in Alaska | Image Source: Malcolm Manners (CC BY 2.0)
states that produce energy and states whose economies depend on the tourism sector Biggest drop in labor productivity: Alaska, down 7.1% (at $99.80); Louisiana, down 6.1% (at $72.90); Nevada, down 5.9% (at $71.06); Hawaii, down 5.3% (at $75.39) and North Dakota were down 5.1% ($90.28).
That might be another sign of another hardship in power-producing states. which just went through a difficult time due to high oil prices in 2022. In Hawaii and Nevada due to labor shortages The recovery in the tourism sector might be affected as well.
Idaho is a state with a significant increase in labor productivity, contrary to most states. This is due to the influx of tech workers moving from California and Washington State. Idaho’s 4% increase brought labor productivity to $65.51, although previously in 2021 Idaho had the lowest labor productivity following Mississippi. Tana and South Carolina
The McKinsey Global Institute released a report in February 2023 showing that the United States might add $10 trillion to its economy over the next decade. By returning to the same pattern of high labor productivity growth as in the past.
Construction worker in Texas | Image Source: Bill Jacobus (CC BY 2.0)
The report, which analyzed pre-pandemic trends through 2019, showed that states like California, Colorado, Massachusetts, New York, North Dakota, Texas and Washington were more productive and productivity growing faster than the national average. United States With updated figures for 2022, only Texas has dropped off the list.
“The 2022 state numbers do not fundamentally change trends,” McKinsey spokeswoman Rebeca Robboy said in a statement. “Some of the high-growth states in our analysis, such as California, saw a sharp drop in labor productivity in 2022. But if we look at the long-term outlook since 2007, only Texas has really changed. that fell below the average.”
The McKinsey report does not see the decline between 2021 and 2022 as a sign of a recession. It is not yet clear whether remote work is responsible for the decline in labor productivity.
Daniel Hamermesh, an emeritus professor of economics at the University of Texas at Austin, said the state’s productivity figures show weakness relative to the state’s economic size and rapid growth.
“Texas leads the way in GDP growth. But that’s because of its size. But they contribute less per capita than the other big states: Florida, California and New York,” Hamermesh said. It looks pretty bad. Not a joy for Texas.”
working remotely It is seen as one of the reasons for the decline in labor productivity in the United States. Image Source: Oregon Department of Transportation (CC BY 2.0)
While business leaders point to remote working as a possible cause of lower productivity. a phenomenon that some researchers call ‘Fear of not being able to work effectively’ (productivity paranoia)
‘Productivity paranoia’ is a state in which people feel anxious or fearful of not being able to produce or do their job effectively or adequately to meet defined needs or expectations. This can happen when there is pressure or urgency to produce results. Anxiety regarding productivity can cause people to feel psychologically depressed and worried regarding their own performance. As a result, the work is not effective or unable to meet the expectations or standards set.
But Jose Maria Barrero, an economist and co-founder of the WFH research project that analyzes the work-from-home phenomenon, says it’s difficult to measure differences between remote and in-person productivity. normal office
“I’m very curious regarding how remote working can decrease productivity. There are more simple reasons why productivity fluctuates,” Barrero said. “For the average worker, remote work at home is 30%, and this figure hasn’t changed much over the years. come”
“The profitability of companies hiring highly skilled workers has increased. Due to reasons related to the COVID-19 pandemic,” Barrero said, “2020-2021 was a very profitable year for the financial sector. There is also a growth in the technology industry as well.”
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