American workers increased their productivity over the summer at the fastest pace since 2009, according to new data released by the Labor Department. Higher productivity is generally welcomed by analysts as an indicator of strong economic growth, but may not translate into much benefit for workers.
Though workers produced more per hour over the third quarter of 2013, their hourly wages haven’t quite kept up. Theoretically, increased productivity means businesses can pay workers more without triggering inflation. However, this logic has failed to play out in real life, as wages have stagnated even as worker productivity soared over the past decade. Productivity rose even faster after the 2008 recession due to massive layoffs that allowed businesses to reduce their labor costs while remaining workers increased their output. Workers’ share of the economy, meanwhile, dropped to record lows during this period.
Boosted productivity, then, has largely benefited businesses, not workers. Businesses’ labor costs dropped in the third quarter, suggesting little movement in terms of wages or new hiring. Some companies have touted draconian efficiency schemes to reduce labor costs, paying employees minimum wage while literally counting the seconds it takes a worker to complete a task. As labor expenses drop, corporate profits are sky-high.
Though productivity has risen, the quality of work has declined. Low-wage, part-time jobs in the retail and service sectors have made up the bulk of job growth since the recession. Though these low wages help businesses reduce their labor costs, taxpayers usually pick up the slack; workers are increasingly turning to public benefits like food stamps and Medicaid to make ends meet.
Even with low labor costs, many businesses are fighting a minimum wage increase that could lessen the persistent gap between productivity and compensation. Studies show that the minimum wage, if it had kept pace with productivity gains over the past 30 years, would have been $21.72 last year — a far cry from President Obama’s recent proposal of $10.