Productivity is slumping in several countries, but for vastly different reasons
Worker productivity is at different levels around the world: In the US, productivity is slumping after witnessing a surge during pandemic lockdowns, although there remains no consensus thus far as to why this is occurring. Meanwhile, in a vastly different economic climate in India, productivity has yet to recover from a dip caused by the pandemic, but relatively lower levels of tech integrations and bad management practices have been identified as two main factors behind the initial plunge.
The jury’s still out on why employees in the US have become less productive: In the first half of the year, productivity — the measure of how much output employees can produce per hour — plummeted by the sharpest rate ever recorded in more than 70 years, the Washington Post reports, citing data from the Bureau of Labor Statistics. The decline in productivity is puzzling as it follows a surge in productivity to levels not witnessed in decades after pandemic-induced lockdowns forced an immediate shift to remote work, prompting some economists to suppose that the pandemic may spur longer-term growth.
While productivity is high in the manufacturing industry, it’s on the decline among white collar occupations, according to an economics professor at Dartmouth College, although knowledge workers’ contributions are harder to quantify, making it more difficult to measure their productivity.
Employees have argued that flexibility aids their efficiency, raising new questions regarding the transition to hybrid models and remote work. This also coincides with a time when quiet quitting has grown increasingly popular, particularly among younger employees, leading to some speculation that it is behind the drop. While the term “quiet quitting” may have recently been added to our lexicon, the practice itself is not new, so it is unlikely to be behind the drop in productivity in the US, Business Insider suggests.
Productivity is also down in India — but on a different trajectory: Data from the Centre for Monitoring Indian Economy (CMIE) indicates that revenue per employee (RPE) — which is used as a proxy for productivity — fell in 2020 during the pandemic. The fall was expected, but what wasn’t anticipated is the decline carrying through in 2021 even though the country’s real GDP grew at an 8% clip, The Print reports. Average RPE fell between 2019-2021 across the wholesale, manufacturing, construction and retail sectors, with the most prominent decline in the manufacturing sector (28%), in stark contrast to the trend in the US.
What’s behind India’s drop in productivity? Poor management practices could be a factor, suggests a report published in Harvard University’s Quarterly Journal of Economics, which looks into whether differences in management practices across firms can explain differences in productivity. The study, which compared management practices at large Indian textile firms, found that adopting better management practices raised productivity by 17% in the first year compared with control group firms that did not change their practices.
Relative lack of technology is another factor: A 2018 report, published in the American Economic Journal, demonstrates that low-income nations had lower productivity compared to high-income countries not because they did not adopt key technologies, but because they utilize these technologies at a lower intensity, relative to countries with high incomes. An Organization for Economic Co-operation and Development (OECD) report explains that digital technologies fall short in counteracting a decline in productivity due to the fact that they go hand-in-hand intangible assets, such as ICT-related competencies, organizational capital and data and software, which are sometimes difficult and expensive to obtain.