Wednesday, October 13, 2010

Employment, Productivity, and Economic Growth

The economy can grow one of two ways... an increase in the number of people working (i.e. employment) or getting more out of these workers (i.e. productivity). Over the last few years the employment side has been horrendous, but has been (partially) offset by a jump in productivity (i.e. getting more out of the existing workforce).

The issue (as I see it) is the longer trend that can be seen above. Employment has been on a 30 year slowdown in terms of growth, while productivity has just recently slowed following a 20+ year period from a consistent rise from the early 80's through early 00's (lack of investment?).

Source: BLS / BEA


  1. It would be nice if there was a way to separate productivity resulting from capital expenditures from productivity resulting from shipping jobs overseas. A job lost to a machine may not seem different from a job sent overseas, but job losses due to automation (may) lift the salaries of the remaining works and maintain domestic production. Productivity resulting from jobs sent overseas may depress salaries and reduce domestic production.

  2. It could be argued that a job pushed overseas increases the salaries of the remaining workers left in the U.S. (increased profits from cheaper labor) in the same manner. The difference being that some of the revenue is paid abroad for the overseas labor.

    My thinking is that it depends who makes the machine that is replacing the workers. If the machine that replaces jobs is made overseas, then the "salary" is paid abroad in the form of the cost of the machine, whereas if the machine is made in the U.S. it "stays".