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Who shares the growing productivity pie?

Scott Tong Nov 6, 2014
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Productivity in the latest quarter came in 2 percent higher. That’s an increase from an average of about 1 percent the last three years. Rising productivity means workers are cranking out more goods and services every day, or every hour.

Productivity, by quarter

Productivity, by quarter

The latest numbers are not the surge of 5 to 10 percent in the late 1990s and early 2000s, but a hopeful sign. And gains do not appear to be simply bosses cracking whips on the backs of a couple workers.

Productivity in the postwar era

Productivity in the postwar era

“Sometimes employers raise productivity simply by squeezing more output out of fewer workers, and that very much was the story in the earlier part of the recession,” says labor economist Harry Holzer of the Georgetown University Public Policy Institute. “It doesn’t look like that’s happening now, because we know the employment numbers are growing.

Employment is up, and so are wages. So part of the pie is going to workers, and part going to company profits and investors.

Zooming back, workers’ share of the fruits has been relatively low for decades. Many say the fates of companies and employees have “decoupled.”

Productivity and Employment: Decoupling?

Productivity and Employment: Decoupling?

So, are they re-coupling?

Brookings Institution senior fellow and economist Gary Burtless doesn’t think so.

“Just like a snowflake doesn’t bring Christmas,” Burtless says, “seeing one quarter of pretty good wage gains is not a signal that those wage gains are going to continue forever.”

And any gains are not shared evenly across workers. To some degree, productivity is about machines. Are you the worker getting replaced by a more efficient machine? Or designing the next one?

Labor economists see a complex shakeout underway.

“There are more high-skilled workers versus less-skilled workers,” says MIT Sloan School business professor Erik Brynjolfsson, author of “The Second Machine Age.” “There are capital owners and employers versus labor. And there are superstars versus everyone else. In each case, the first group recently has been doing quite well.”

The second group, he says, has fared far less well.

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