Productivity continues to drop

Mitchell Hartman Aug 10, 2011

Productivity continues to drop

Mitchell Hartman Aug 10, 2011

STEVE CHIOTAKIS: The latest economic report out this week shows that for every employee, fewer things are being made.

Worker productivity was down three-tenths of a percent in the last quarter. But what does lower productivity really mean?

Here’s Marketplace’s Mitchell Hartman.

Mitchell Hartman: Remember the I Love Lucy episode where Lucy and Ethel get jobs in a candy factory?

Foreman: Now your job is to take each piece of candy and wrap it in one of these papers, and then put it back on the belt. You understand?

Lucy: Yes, sir — yes, ma’am.

Foreman: Let ‘er roll.

They’re doing fine, until:

Foreman: Speed it up a little!

Candies whiz past, and Lucy and Ethel aren’t so productive anymore.

That’s kind of what’s happened in the recession. First, companies downsized and got everyone who was left to work faster, do more. They bought new labor-saving machines. Productivity went way up.

Patrick Newport: Most workers out there are pretty much occupied full-time and are working overtime in a lot of cases.

Economist Patrick Newport at IHS Global Insight says workers and machines have gotten about as efficient as they can. Productivity’s now slipping back.

Newport: Companies will have to hire more employees in order to get that productivity up, to give their existing workforce a breather.

Unless they opt for lower productivity instead. That’s what aerospace engineer Don Chambers sees happening at his company, a big Southern California defense contractor. Last year, he was doing 24 hours of overtime a week. Then:

Don Chambers: Management decided that we should not be paid the overtime. Productivity has dropped off, and they’re not hiring anyone to pick up the slack.

And with the economy slowing down, the next step might be another round of downsizing.

I’m Mitchell Hartman for Marketplace.

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