
A Productive Mystery
Reading the Washington Post this weekend, Robert Samuelson’s column caught my attention. It was titled, “Solving the productivity mystery,” and it focused on a trend that both concerns and puzzles economists: productivity has stopped growing.
This statement requires some unpacking.
In economics, productivity, roughly defined, measures the ratio of output to inputs. The more valuable output you can produce for the same input costs, the better your productivity.
The Bureau of Labor Statistics expends a lot of effort to carefully measure this metric over many different industries in our country as it tends to be a strong indicator of practical things that people care about, like wage increases.
Back to the Samuelson column…
- From 1995 to 2005, labor productivity increased by an average of 2.5% a year. As Samuelson pointed out, this translates to wage increases of roughly 25% over that period. This is good.
- From 2010 to 2015, however, the average increase has only been 0.3% a year. If this persists through 2020, it will translate to a “puny” 3% wage increase over the decade. This is not good.
The puzzle, as mentioned above, is understanding why productivity is slowing.
There are no shortage of hypotheses. Samuelson reviews several in his column, including Robert Gordon’s claim that serious innovation is fading (c.f., Gordon’s big deal new book), and Samuelson’s own theory concerning the inefficiency of duplicating sales efforts online and in physical stores.
An Intriguing Angle
I’m not an economist, so it’s with trepidation that I throw one more potential contributing factor into the mix: email.
Hear me out.
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