America’s Productivity is Near All-Time Highs. Are AI and Automation to Thank? – The Average Joe

    America’s Productivity is Near All-Time Highs. Are AI and Automation to Thank?

    Noah Weidner

    February 1, 2024

    February 1, 2024

    Is America working hard or hardly working? Execs spend millions every year to answer that question. Uncle Sam also measures time in dollars — and according to the Bureau of Labor Statistics (BLS), America is on the verge of its highest level of productivity ever. That’s a sharp turn from the recent decade, which saw productivity grow just 1.5% per year on average between 2007 and 2019 — down from its long-run average of 2.1% since 1947.

    Putting in hours: Productivity accelerated last year after a surprising decline in 2022. Yesterday, the BLS reported that US labor productivity (economic outputs divided by total hours worked) climbed 2.7% year-over-year (YoY), its third-highest reading ever. This has left analysts wondering if advances in AI and automation have kickstarted a new growth supercycle.

    • According to S&P Global, modern productivity gains have mostly come with an increase in working hours, but outputs have significantly outpaced work hours for the last three quarters — a sign workers are being more efficient with their time.
    • According to McKinsey, maintaining this productivity growth could add $10T to the US GDP by 2030, which is expected to translate to $3-5K in American wage growth.

    What does this mean for workers?

    Productivity is a hot topic for profit-hungry employers, which are investing trillions in automation and efficiency tools, or axing employees to achieve their own idea of “productivity.” EY’s Chief Economist, Gregory Daco, says, “If companies can generate strong productivity growth, they will be able to control costs and protect margins without sacrificing talent” (BBG). But over the years, economic strength hasn’t always trickled down to workers.

    • Since 1973, productivity growth outpaced real wages by nearly 2x, meaning that workers have only “partially benefitted” from productivity gains, per the St. Louis Fed.
    • The pursuit of productivity also costs people their jobs, especially in tech, where more than 450K employees have been displaced since 2022, reducing employee engagement and confidence.

    Don’t regret your action: Rather than too many employees, some industries may face massive talent shortages as a wave of Baby Boomers retire in the coming years. According to Korn Ferry, there could be an 85M worker shortage by 2030, which could cost the economy $8.5T — nearly enough to offset the gains from productivity gains.

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