What your local coffee shop can tell you about U.S. productivity
What can your local coffee shop tell you about the state of U.S. productivity?
UPDATE (1:15 pm EST): Productivity fell at the end of last year at the fastest pace in two years -- about 2 percent. Analysts say companies are hiring more and therefore don't have to lean so hard on their current workers.
Economists had expected a drop in productivity of anywhere from 1 percent to 2 percent to cap off a year in which productivity increased -- but at a mediocre pace.
Patrick Newport, U.S. economist at IHS Global Insight, predicted productivity to rise by 1 percent for all of 2012. That compares to 0.7 percent in 2011. Productivity rose more strongly immediately after the recession, in 2009 and 2010. The 50-year average of productivity rise since World War II is approximately 2 percent per year.
These days, you can see improved productivity everywhere -- including at this reporter’s local latte bar, Jola Café, in Portland, Oregon.
As the barista calls out for "a hemp latte and a chai" to his co-worker at the espresso machine, he touches out the order on an iPad mounted on the counter. Then he swipes the customer’s credit card. Tia Ribary, a business consultant here for a morning meeting, signs with her finger. There’s no need print, tear, sign, or store the receipt.
“They email it to me,” says Ribary. “It makes it easier to send the receipt to my bookkeeper. I don’t have to scan it, I just forward the email.”
Using smart machines to do more work with less human labor -- that productivity engine keeps humming along at a steady pace in the U.S.
But economist Patrick Newport says overall productivity gains have slowed in the past two years. And here’s why: Companies massively downsized during the recession, then made the workers who were left on the job do more. Productivity initially rose as the recovery took hold, but only temporarily.
“Companies were working their existing workforce to the bone and getting more work out of them,” says Newport. “But that strategy no longer works, because workers are tired. And on top of that, we’re seeing an increase in hiring.”
Companies are finally adding new workers to spell their overworked legacy employees. But economic growth has all but stalled: we’re not making a lot more widgets, or lattes. So productivity is falling right now. What's more, new employees require training from more experienced workers. Newport says the time spent on training and ramp-up also supresses productivity gains, at least in the short term.