American workers are becoming less productive. Blame the pandemic.

Justin Ho Aug 8, 2022
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Data on worker productivity in the second quarter is due to come out Tuesday, which could show continued declines as a result of the pandemic. George Frey/Getty Images

American workers are becoming less productive. Blame the pandemic.

Justin Ho Aug 8, 2022
Data on worker productivity in the second quarter is due to come out Tuesday, which could show continued declines as a result of the pandemic. George Frey/Getty Images
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COPY

According to the Labor Department, there was a drop in productivity in the first quarter of the year that saw productivity fall by the most since 1947.

Labor productivity boils down to how much a worker can produce in a given period of time. According to Betsey Stevenson, an economics professor at the University of Michigan, it’s “what’s the amount of output per hour. So if you’re in a coffee shop, thinking about, you know, how many cups of coffee the person can sell.”

She says improving technology can improve that output per hour — a more-efficient coffee maker might churn cups out faster. And when improvements like that spread across the whole economy, it can really improve our living standards.

“I could choose to have a lot more leisure because I could do all my work twice as fast,” she said. “Or, I could choose to work more, and earn more money, so that I could buy more stuff.”

Productivity is also affected by other factors. It might look higher if companies lay a bunch of people off, but it falls if consumers spend less.

“Productivity growth can be really volatile on a quarter-to-quarter basis,” said Michael Pugliese, an economist at Wells Fargo.

Pugliese says that we shouldn’t read too much into one quarter’s productivity. That’s especially true right now, given the cloudy overall economic picture.

“Where you look at employment numbers over the first half of the year, and they’re really robust,” he said. “But you look at other metrics, like the output GDP measures – and those are really poor. And to some extent, that’s in conflict with each other.”

Since economic output fell in the second quarter while employment rose, Harvard economics professor Jason Furman says it’s likely that productivity dropped again.

“What concerns me more is that the overall trend for the last two-and-a-half years has been quite weak,” he said. 

Furman says that could be because COVID has caused more people to take time off work, which drags productivity down, as well as other factors.

“Businesses spent a year and a half focused on how to improve the health of their workplaces, for their workers and for their customers,” said Furman. “Some of that may have come at the expense of product innovation.”

In other words, Furman says there are plenty of reasons to think the pandemic may have done lasting damage to the country’s productivity.

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