Increased productivity: worker productivity increases, but wages hardly increase

Americans are working harder these days, but they are not reporting as before.

In the first three months of 2019, employees worked so hard that productivity expectations were reduced to nothing.

Labor productivity in the non-farm business sector (most of the US economy) grew 2.4% over the same period last year, according to new estimates from the US Department of Labor. United States.

This is the highest jump in almost a decade and is slightly higher than the average quarterly growth rate for most of the post-Second World War period. According to another measure, which compares annual growth with the previous quarter, productivity increased by 3.6%, the highest level in at least four years.

Business investment in technology certainly makes workers more efficient, but that does not explain such an increase in productivity as capital expenditure growth is declining.

What these numbers tell us: engineers, bartenders, supermarket cashiers and other private sector employees are working harder than in recent years. Although productivity fluctuates every quarter, no matter how you measure it, it has increased steadily since 2016.

It's great for businesses (they make more money) and for the economy (GDP is growing faster). The problem is that companies do not reward their employees for their hard work.

Just look at the table below. Business and plant employees were more productive, worked longer and produced more goods and services than last year. But their real hourly wages, corrected for inflation, have hardly increased. And the actual hourly wage of factory workers actually dropped during this period.

United States Department of Labor / Bureau of Labor Statistics

It is not so that the economy is supposed to work. Paychecks are expected to increase more quickly when productivity increases so rapidly and unemployment drops as low. This is the basis of the market economy. The theory is that companies will pay more for their employees when they produce more, and they will be willing to pay higher wages if it is harder to find employees.

But that does not happen. And few economists seem to be interested in the underlying reason for families' hardships: US companies are simply smaller than ever before. The latest productivity data is further proof.

The recovery of the Great Recession has changed everything

Economists worry about the so-called "wage puzzle" during the current economic expansion. They had trouble explaining why wages did not rise as fast as they did in the 1990s, while unemployment was also extremely low.

There are many theories. A reasonable point of view is that productivity does not increase much either.

According to Jason Furman, former economic advisor to President Barack Obama, wages have risen almost in line with productivity. But after 2000, productivity has slowed, he said in a test last year. It is therefore not surprising that employers pay workers a lot more.

"Increased productivity growth could be the most powerful source of sustainable wage growth across all incomes," he said.

Now that productivity has increased, we still do not see the magic wage hike, based on these new estimates. The peak may be temporary and not part of a larger trend. It is a reasonable view.

But there is another sign that businesses are very tight these days. Latest data show that the rising cost of labor is slowing while employee productivity accelerates. Usually, it's the opposite. When productivity increases, the cost of labor also increases, as employers generally increase wages to reward employees.

But for working-class Americans, economic theories about the impossibility of moving forward are irrelevant. What matters is that today's economy forces workers to go on strike to get a decent increase.

Record number of workers are on strike

Frustration over stagnant wages is also the main factor underlying the generalized strikes by workers across the country in places like California, Illinois and Missouri. Last month, 31,000 supermarket workers went on strike in the Northeast to cancel proposed wage cuts and higher insurance premiums. the Stop & Shop on strike By mid-April, it was the largest private sector work stoppage in years. After eight days in empty supermarkets, the company agreed to give up its plan.

Last year, a record number of US workers went on strike, according to The data published in February by the US Bureau of Labor Statistics. A total of 485,000 employees were involved in major work stoppages in 2018 – the highest number since 1986, when flight attendants, garbage menand the steelworkers left work.

Angry teachers from West Virginia launched the first big strike in January 2018. About 35,000 educators and staff members left work to protest a 1% wage increase, which they deemed inappropriate. The shutdown eventually resulted in the closure of all state public schools for a week, the time that state lawmakers agree to grant them a 5% increase and temporarily freeze them. health insurance premiums.

Teachers from six other states soon followed and, by the end of the year, Marriott workers were picketing in four states.

Working-class Americans are no longer fed up with their employers since the 1980s, as this chart shows:

United States Department of Labor

Some economists are convinced that wages will start to rise if employees continue to revolt. "[T]The sharp increase in the number of workdays lost due to pay and benefits strikes over the last year suggests that employees are increasingly recognizing that the balance of power has changed in their favor, "Ian Shepherdson , Chief Economist, Pantheon Macroeconomics Research Firm wrote on Friday in an analysis.

It should not be so difficult to get an increase.