Transcript What has been the pattern of productivity of U.S. workers over time

What has been the pattern of
productivity of U.S. workers over time
and how does this compare with their
major international competitors and
what factors have
contributed to gains?
EVT 7066, Unit#3: The Economy and Labor Market Presentation
Larry Rosen 10/20/08
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Definition and Patterns of
Productivity in the U.S.
• Productivity = the amount of output given a unit of labor
input. Can also be defined as GDP per hour worked.
• After two decades of steady growth, productivity came to
a standstill in the early ’70’s
• In the mid-1990’s, productivity growth in the U.S.
showed signs of resurgence.
• Those manufacturing sectors that invested most in
information technology in the late ’80’s and early ’90’s,
enjoyed productivity gains in the late 1990’s.
• A positive relationship between information technology
investment and productivity growth was established.
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Labor Productivity Growth
Non-farm business, Annual % Rates of Change
3.5
3
2.5
2
1.5
1
0.5
0
1960 - 73
1973 - 95
1995 - 00
2000 - 05
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GDP per hour worked in 2005,
U.S. and selected countries
50
45
40
35
30
25
20
15
10
5
0
U.S.
Can.
EZ
FR
Germ.
IT
SP
U.K.
Aust.
Japan
S. Kor.
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GDP per hour worked in 2005,
U.S and selected countries
•
•
•
•
•
•
•
•
•
•
•
France
U.S.
Germany
Eurozone
U.K.
Australia
Canada
Italy
Spain
Japan
S. Korea
=
=
=
=
=
=
=
=
=
=
=
$49.00
$48.30
$44.00
$41.90
$40.10
$40.10
$38.50
$38.10
$36.90
$34.40
$19.70
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GDP per hour worked in 2005, U.S.
and selected countries
• Among Organization for Cooperation and Development (OECD)
member countries, the U.S. @ $48.30 per hour ranked near the top
in terms of GDP per hour worked. Among large major economies,
only France posted higher productivity levels at $49.00 per hour in
2005.
• Workers in a handful of smaller European countries – Luxembourg
($64.70), Norway ($63.50), Belgium ($52.90), Ireland ($50.50), and
the Netherlands ($50.10) produced more per hour than the U.S.
• Output per labor hour in the U.S. was 20% higher than in Australia,
25 % higher than in Canada, and 40% higher than Japan.
• Among Eurozone countries, GDP per hour averaged $41.90.
Productivity levels did vary from $36.90 in Spain to $49.00 in
France.
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Annualized growth (%) in GDP per hour
worked, 2000 to 2005
U.S and selected other OCED countries
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
U.S.
Can.
EZ
FR
Germ.
IT
SP
U.K.
Aust.
Japan
S. Kor.
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Comparing Work Effort for the U.S.,
Eurozone countries, and S. Korea
• In addition to greater efficiency or productivity,
the U.S. is a leader in work effort, which is hours
on the job.
• On average, U.S. workers put in 1713 hours in
2005. For Eurozone countries, the average was
1594 hours. This was almost three weeks less of
full-time work.
• However, the average worker in South Korea
worked 2354 hours in 2005, over 45 hours per
week.
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Gap between workers’ real wages and
productivity
• From the late 1940’s to the mid – 1970’s , the
living standards of middle income families kept
pace with productivity gains.
• Since that time, the relationship between
productivity and family income growth has fallen
by the wayside.
• Between 2000 – 2003, productivity expanded by
12% while median family income fell by 3%.
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Gap between workers’ real wages and
productivity (continued)
• Since the first quarter of 2001, real wages have grown at
an annual rate of .7%, while productivity has expanded
4% per year. This represents a unprecedented gap
between paychecks and productivity.
• The benefits of productivity growth have not gone into
compensation for workers but instead have primarily
gone towards company profits.
• In previous business cycles, profits have accounted for
23% of growth in corporate sector income, and total
compensation accounted for 77%.
• The current business cycle has reversed this pattern. In
this cycle, 70% of the growth has gone towards company
profits, and 30% has gone towards worker
compensation.
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Real After – Tax Household
Income Growth,
1979 - 2002
•
•
•
•
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Low 20% = 4.5%
Middle 20% = 15.0%
High 20% = 48.2%
Top 1% = 111.3%
Low 20% Middle High 20% Top 1%
20%
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How have families fared during the
2000 – 2005 period?
• Productivity rose 4.5% in the 2000’s but income
growth was negative, particularly affecting less
advantaged families.
• Real median income for African – Americans
families fell by 4.8%; for Hispanic families, it was
6.3%.
• The number of poor people grew by 17.1% (5.4
million).
• The number of people without health coverage
grew by 15.1% (6million)
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Different views on the benefits of
productivity growth
Some say that growth
is beneficial for all.
The quote that typifies
this is:
“ A rising tide lifts all
boats”
Others who question
whether the benefits
of growth are fairly
and evenly distributed
offer this sentiment:
“A rising tide fails to
lift those with leaky
boats or those
stranded on the
shore.”
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“When it comes to an economy that is working for working
families, growth in and of itself is a necessary but not a
sufficient condition. The growth has to reach the people:
the bakers need to benefit from bread they create each
day of their lives.”
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Recommendations
• Policies should be designed that begin to close the gap
between productivity, wages, and income.
• Efforts should be made to enhance the economic
security of families and individuals.
• Access to higher education should be ensured for all
those who qualify and want to attend college by requiring
that they re-pay their financial support over time from
their increased wages.
• Expand Trade Adjustment Assistance to workers in all
sectors
• More attention needs to be paid to work / life balance
issues. Provide more relief in terms of childcare, flexible
schedules, leave, etc.
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Recommendations (continued)
• Workers need to rewarded for their hard work not only with
commensurate compensation but with reasonable amounts of paid
time off /vacation time. The “European model” of increased
mandated levels of vacation time should be considered and perhaps
adapted to American use.
• Universal health coverage needs to be seriously considered. The
U.S. spends more on health care than any other developed country
but has more uninsured and less beneficial health outcomes and life
expectancy.
• Efforts need to be made to address the issue of growing income
inequality. Failure to address this issue tears at the fabric of our
democracy, and bodes ill for the future. The gap is largest in the U.S.
as compared to the other OECD countries.
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References
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Allegretto, S., Bernstein, J., and Mishel, L., 2006. The State of Working America: 2006 / 2007.
Economic Policy Institute
Bernstein, J. 2005 The 21st Workplace: preparing for tomorrow’s employment trends today.
Testimony, Committee on Health, Education, Labor and Pensions., U.S. Senate
http://www.epi.org content.cfm/webfeatures_viewpoints_21st_century_workplace_testimony
Educational Testing Service, 2006. High School Reform and Work: Facing Labor Market Realities.
Princeton, New Jersey: Educational Testing Service
Grubb, W. and Lazerson, M. 2007. The Education Gospel: The Economic Power of Schooling.
Cambridge, MA: Harvard University Press
The American Enterprise Institute and The U.S. Dept. of Labor. Productivity in the Twenty – First
Century. October 23, 2002. Washington, D.C
U.S. Department of Labor, 2007. America’s Dynamic Workforce. Washington, D.C. : U.S. Dept. of
Labor
U.S. Department of Labor, Sept., 2008. International Comparisons of Manufacturing Productivity
and Unit Labor Cost Trends, 2007. Washington, D.C: Bureau of Labor Statistics
U.S. Department of Labor. Productivity and Costs. Washington, D.C.: Bureau of Labor Statistics
Wilson, G. and Cobet, A. Comparing 50 Years of Labor Productivity in U.S. and Foreign
Manufacturing. Monthly Labor Review, June, 2002
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