The perils of productivity
The report last week of the 7.2 percent growth rate for the third quarter's gross domestic product was greeted with almost mission-accomplished optimism by the Bush administration and "but what about the jobs?" pessimism from the Democrats. Whichever view you'd like to take of an obvious strengthening in the economic recovery, you would do well to question how the productivity gains, the hallmark of this rebound, are being achieved and how our broader economic policies are affecting our standard of living.
There is mounting evidence that despite higher consumer spending and business investment, fewer jobs will be created in this recovery than is the historical norm, and unemployed workers will have to continue their long, hard slog back into the workforce.
Some economists are predicting that demand will shortly catch up with productivity, spurring an enormous boom in job growth. Other economists, like Barry Bluestone, political economy professor at Northeastern University, disagree. "We'll be very lucky if we break even or have a little bit of job growth over the next year," Bluestone told me. "With productivity continuing to grow at 4 to 5 percent per year, and the economy growing at best at 3.5 percent [annually], that would mean that employment would basically hold steady without much growth at all."
While our increasing productivity is due, in large part, to the use of technology, there is no denying that the people who are lucky enough to have jobs are simply working more. According to the Economic Policy Institute, the average American worker has added 199 hours to a year's work since 1973. Since companies began shedding jobs during the recent economic downturn, employees who remained behind are working more in order to avoid being the next victims of a cutback.
Unlike previous economic downturns, workers who are let go in this economy are often not called back when business improves. A recent study by the New York Federal Reserve Bank found that companies are now relying on rising productivity to pull them through economic recession rather than simply laying off workers and bringing them back when they are needed again. In most previous recessions, temporary layoffs accounted for 30 percent to 40 percent of the increase in unemployment as opposed to just 7 percent in the most recent recession.
The United States does have the highest productivity growth per worker of any nation. But the productivity per hour--a more accurate measure of efficiency--of some European countries is far superior to that of the United States. American workers have an output per hour of $32, well below the $38 per hour in Norway and the $34 per hour in Belgium. So we may be working longer, but we are not necessarily working better or smarter.
Workaholics. We not only work more hours than nearly any other developed country, but we also have less vacation time. Only 87 percent of U.S. companies are now providing paid vacations, down from 95 percent in 1999. The American worker takes an average of just 10.2 vacation days per year, while our counterparts in France and Germany enjoy more than 30. In too many cases, corporate America is using higher productivity and greater efficiency as code words for cheaper labor. Big business is either using cheaper labor in this country or seeking out the cheapest labor in the world in countries like India, China, and the Philippines.
And this trend is only beginning. Donald Straszheim, president of the independent research firm Straszheim Global Advisors, told me: "The job loss to China, in particular, is just in its infancy. In the manufacturing sector, there is going to be enormous further erosion of jobs to China." Straszheim's view is supported by a new study released last week by the University of California-Berkeley, which found that as many as 14 million U.S. service jobs are in danger of being shipped overseas.
As our economy continues to grow, corporations will shed their reluctance to hire additional staff. But will they resist reasonable wages with reasonable hours? It's time to begin questioning the current demands on our workforce and to talk straight about what higher productivity really means to our standard of living and what outsourcing really means for the job security and well-being of hard-working Americans.
This story appears in the November 10, 2003 print edition of U.S. News & World Report.