In case news of the economy was filling you with good cheer (just kidding), here’s one more thing to consider: Our productivity growth has gone down.
What’s worse, even our former productivity growth turns out to have been less than we thought. “Worker output actually fell in the first two quarters of 2011, the first back-to-back decline since 2008,” Bloomberg Businessweek reported recently, “and Labor Dept. economists have revised the data from 2007 to the present downward.” Among the “probable culprits” cited are “less aggressive spending on new equipment and technology by companies uncertain of the future.”
Peter Drucker liked to remind people that “productivity”—typically defined as output per hour of work—was barely understood as a concept until the 20th century, and even then economists often overlooked it when trying to make sense of things. “We now know that a valid theory of economics will have to be based on productivity as the source of value,” Drucker noted in Managing in Turbulent Times.
“In making and moving things, capital and technology are factors of production, to use the economist’s term,” Drucker wrote in Managing for the Future. “In knowledge and service work, they are the tools of production. Whether they help productivity or harm it depends on what people do with them, on the purpose to which they are being put, for instance, or on the skill of the user.”
The real question, according to Drucker, is how to get smarter about how we work, not just fancier with our machines. “Unless we can learn how to increase the productivity of knowledge workers and service workers, and increase it fast,” Drucker warned in Post-Capitalist Society, “the developed countries will face economic stagnation and severe social tension.”
What’s driving our current loss of productivity—less equipment, the way we manage knowledge workers or something else?