Productivity

Bruce Bartlett gives us a lesson on "why productivity is good and why it is worth making efforts to increase it":

At the simplest level, productivity is about doing more with less — less labor, less energy, less capital. It is because each worker today produces far more than those in the past that we have a higher standard of living. According to the [Dallas Fed] report, output per person is about 25 times higher today that it was in 1776. And unless productivity increases, businesses will not have the resources to increase real wages and raise future living standards.

Some workers incorrectly view productivity as a kind of dirty word. They imagine bosses prodding them to work longer and harder, with fewer breaks and vacations. In fact, productivity is all about getting workers to work less and more easily, not longer and harder. As the report notes, a key benefit of higher productivity is that we work far less today than in the past. In 1830, the average worker put in a 76-hour workweek. This fell to 60 hours in 1890, 39 hours in 1950, and just 34 hours today.

Workers are able to work less because capital, technology, education and training, and managerial innovation have combined to raise output per hour. . . .

Historically, labor productivity in the U.S. has grown 2.3 percent per year. At this rate, living standards will double every 31 years — about a generation. Thus, at this rate, every generation will live about twice as well as the previous one. But after 1973, this historical trend took a nosedive for reasons economists are still unclear about. From 1973 to 1995, productivity increased only 1.5 percent per year. At this rate, it would take 48 years for living standards to double.

Since 1995, productivity has rebounded and even accelerated to 3.2 percent per year — enough to double living standards in just 22 years if sustained.