The pandemic has devastated the economies of rich countries, but there are signs that a productivity boom may be emerging from the Páramo.
Economists Conference Board, an American think-tank, points out that this is the case. Ataman Ozildirim And Class de Vries Predict that after a recession in 2020, the US economy will experience total factor productivity (TFP) growth of more than 2 percent in 2021. GDP is measured by output growth thereafter, and this can only be attributed to increased employment and capital money at work. recovery.
The 2 percent rate, if achieved, would more than offset the slight loss in PFTs in 2020 — a natural consequence of idle capital like machinery — and would be a significant improvement over the nearly zero annual growth rate in PFTs in the US in the decade prior to the pandemic.
The United States is not alone in showing signs of healthy production performance. According to forecast Organization for Economic Co-operation and Development (OECD)The pandemic has accelerated labor productivity growth in most high-income countries.
In the United States, that metric — gross domestic product per hour worked — will grow 6.7 percent in the three years covered by the pandemic, from the fourth quarter of 2019 to the fourth quarter of 2022, according to figures from Organization for Economic Cooperation and Development. This is more than double the 3.3 percent cumulative rate in the previous three-year period.
The same acceleration is expected in all G7 countries. Japan expects labor productivity to increase by 2 percent in the three years ending in 2022, after recording a decline in the previous three years. Germany is heading towards a growth rate in the same period from 1.1 to 2.6 percent; France, 1.8 to 2.5 percent; UK from 0.6 to 3.7 per cent and Italy from zero to 1.4 per cent. Of the nine richest economies, only South Korea recorded a slowdown in productivity growth in that period, and that rate remains a respectable 4 percent.
These predictions may be wrong, but given the strength of the recovery, it seems possible. This will be a pleasant surprise. Remember that in 2019, economists were concerned that the post-financial crisis expansion was rapidly losing momentum, exacerbating already modest productivity growth.
Why is this apparent boom in productivity happening? It cannot be interpreted as an arithmetic tool. Measured productivity may increase if production falls more than hours worked and if workers with low productivity disproportionately lose their jobs. While this boosted measured productivity in the United States, cutting employment in the spring of 2020, other wealthy countries saw production per hour decline before recovering when economies reopened.
In any case, by the end of 2022, employment should have returned so close to pre-pandemic levels that a mere arithmetic cannot explain the increase in productivity. Part of the improvement must reflect a real change in labor productivity.
If so, there are two questions. Why is productivity accelerating? And what should be done to stabilize it at a higher rate?
Higher productivity is about doing more with fewer resources, and there are two obvious ways high-income economies have been doing this since last year. as they say Ozildirim Based on prey: “Increasing adoption of digital technologies could lead to a resurgence of productivity…slow labor supply growth and labor shortages could lead companies to focus more on innovation by accelerating automation and digital transformation.”
It’s easy to see how technology increases productivity, from time saved in commuting and commuting through remote work to increased online sales and digital payments in retail. Governments can encourage companies to keep pace, without pressuring them to revert to the previous status quo regarding office occupancy, for example.
Even more paradoxically, a labor shortage can be a good thing for the economy. Hardly a day goes by without headlines about managers complaining that they can’t find more staff and have to replace lost waiters or cleaners. In other words, having to do more with fewer resources or be more productive.
Economic history and common sense suggest that when demand exceeds supply, firms improve their game by increasing productivity. If wages rise, they will have no choice, or they will lose their workers to more productive competitors.
Productivity growth is likely to benefit from a combination of three things: demand that is expected to remain strong, capital and technology that are affordable, and training that continually improves workers’ skills. Achieving this mix consistently means keeping employers poised to compete for workers.
The word scarcity hides this fact behind employer complaints. But an economy in which there is more than enough demand for everyone’s contribution is a thriving one: one in which workers enjoy opportunities, where markets reward productivity improvements, and where prospects justify investment in expansion.
Maintaining a permanent degree of strong demand pressure, such that labor is always difficult to obtain, should not be seen as a risk, but as a sign of economic success. As we hope to defeat the virus, we must learn to live with a labor shortage.
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