Employment Up, Productivity Down – A Theory

A front page article in the NY Times today proposes three theories as to why productivity seems to be lagging even as employment is increasing.  I have no data to support this, only anecdotal evidence (but isn’t that the prerogative of a blogger), but it certainly supports the theory of what the Times calls the “low productivity worker”.  I’d prefer to frame it in a slightly more positive way. As firms laid off more and more people in 2008 and 2009, the remaining workers were asked to assume many more roles – sometimes doing jobs that had been handled by two or three people earlier. These remaining workers put in longer hours to keep up with their increased workload. In white collar jobs, their pay remained stagnant despite the increase in responsibility and productivity. Many of my friends who kept their jobs over the last seven years have been working harder than ever for virtually the same amount of money and have come, quite frankly, to despise the jobs they have.  But, until recently, there was nowhere else to go, no other jobs out there, so they just hunkered down and survived.  But now, as jobs start opening up and voluntary quits are back to their pre-recession levels, employers have to reduce the workload for the employees they have or they will leave, and so are gradually moving back to more reasonable staffing levels. You would expect some small productivity gains from this rehiring activity, but not much, as the job was already getting done adequately. But I think it is a little harsh to say that these new hires are “low productivity” – it is better to view it as some balance returning to the lives of the super high productivity workers that remained during the recession.

Anyway, just some evidence-free anecdotes in support of a theory…