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The Productivity Puzzle

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The Productivity Puzzle

It&146;s no surprise that stagnant infrastructure mirrors a stagnant economy. July 17, 2015
Photo by Mike Watson Images/Thinkstock

A recent study on lagging productivity in the global economy has economists puzzled, because they miss the obvious: Western workers have an increasingly hard time just getting to work. They’re also so distracted by money worries that they can’t work as effectively as they should. Economists’ confusion about these issues demonstrates how removed they are from the real world and why they haven’t helped us recover from the 2008 financial crisis.

Americans and other Westerners are working harder, not smarter. Last year, in the aggregate, workers in &147;mature economies,&148; such as the U.S., Western Europe, and Japan, produced only .06 percent more product per hour worked than the previous year, a slide from the .08 percent increase of 2013, according to the Conference Board, a business-research group. American workers’ productivity rose by 0.7 percent, down from 1.2 percent the year before. Europe boosted its productivity slightly but continues to lag the United States overall. And Japanese workers became lessproductive.

Worse, we’ve fallen far below the 2.4 percent annual productivity increases we regularly saw a decade ago. &147;Labor productivity growth in the United States started its decline around 2005, when the first-round . . . effects from the boom in information technology&148; from the 1990s started to fade, the researchers note. The rest of the world is slowing down, too. &147;This is a global phenomenon and . . . we have to take it very seriously,&148; the Conference Board’s chief economist Bart van Ark told the Financial Times. If we don’t figure out how to do more work better, and fast, we’ll continue to suffer slow global growth, with people working more hours for the same money or less.

Why the slowdown? Economists can only point to the usual suspects. We haven’t yet figured out how to use our fancy new telephones and robot helpers, they say. Regulations are too burdensome. The Financial Times offered five other guesses from economists, ranging from the idea that some of today’s jobs are inherently inefficient to the contention that we just aren’t measuring our productivity properly.

All of the economists overlooked a central factor: the cataclysmic condition of our physical infrastructure and the mounting commute times for millions of workers. In 2013, according to the U.S. Census, nearly 36 percent of Americans had commutes of 30 minutes or more. In 2000, that figure was 34.5 percent; in 1990, it was 30.4 percent, and in 1980, 28 percent. Over three and a half decades, then, 28.6 percent more Americans, as a share of the population—20.9 million more people overall—are enduring longer commutes. In 2013, nearly 3.4 million Americans traveled more than 90 minutes to work each way; the Census Bureau calls them “extreme commuters.”

The problem goes beyond long commuting times. Economists fail to acknowledge that people like predictability. They counsel travelers not to show up at airports early, figuring that they waste too much time waiting. But the average person would rather sit and look out the window at airplanes for a half an hour than go through a stress-filled sprint to make (or miss) a flight. In New York, the densest economy in the U.S., commutes are getting less predictable. Overcrowding and lack of investment mean more frequent and longer delays on subways and commuter rails. A person who arrives at work a half-hour late after enduring sweaty, packed conditions and a long wait with no explanation is not, as an economist might say, optimized for productivity.

Judging from the lifestyles of my friends and colleagues, the people with the longest commutes tend to be people with families. Thanks to our global failure to admit the fact that high house prices are not a good thing, younger people can’t afford space anywhere near where they work. The result is that people in their most productive years are wasting the most time commuting.

Long commutes shape other factors that, in turn, influence productivity. Another new study tells us that workers who don’t get at least seven hours of sleep each night are pretty much useless—worse than smokers and drinkers. The same study found that physical inactivity and poor mental health were also costly. But if you have to get up at six to drop your kids off before starting your daily trek to work, you’re not getting the sleep you need—and forget about finding time to go to the gym.

The Conference Board study also found (unsurprisingly) that people don’t make great workers when they’re worried about money. On average, Americans haven’t gotten decent raises in years. Even as the economy recovers, employers are giving out one-time bonuses instead of steady raises. People understand that they can’t count on getting the $1,000 bonus next year that they got this year in lieu of a raise. So we have grumpy workers who can’t stand their commutes; who make less money, by the time they do get to work; and who spend more time worrying and less time sleeping.

Could economists have helped solve these problems after the financial crisis? Sure. More economists could have called for smart investment in infrastructure, especially much better mass transit in parts of the country with the most productive, creative, and highly paid workers—including New York, Boston, Los Angeles, and other big hubs. They could have pointed out that we need to change the way we build infrastructure, too—getting rid of wage mandates that push construction work into the six figures while leaving non-construction workers stuck in traffic. And the politicians could have responded by building the right kinds of infrastructure—a new tunnel under the Hudson River to ease commuting to Manhattan for New Jersey residents, for example—rather than structures like the $3.9 billion PATH train station in Lower Manhattan, which won’t increase the number of trains or speed up commute times.

We could, in other words, be making ourselves more productive by improving our well-being—meaning better pay and less worry over money. Instead, we’re sitting in traffic or on crowded trains, fretful that we’re not getting enough done and that we’re going to lose our jobs. Work dumb, play less doesn’t make for healthy people—or a healthy economy.

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