The U.S. is experiencing a worker shortage as the economy emerges from pandemic-related upheaval.
But it’s also seeing a boost in worker productivity. And if a productivity boom continues, it could help lead to sustained economic growth.
“We see a significant chance of a productivity acceleration in the next five to 10 years to come,” says Jan Mischke of the McKinsey Global Institute. Sustained acceleration would be a “welcome change” from weak growth over the last decade or so, he says.
For flexible labor markets like the U.S., economists often see upticks in productivity during severe recessions such as the pandemic because companies tend to get rid of their lowest productivity workers, he says. However, once the economy re-stabilizes and workers return to their jobs, efficiency typically levels out again.
Fortunately, Mischke says that’s not necessarily the case this time. He’s encouraged to see that productivity is still rising as people rejoin the workforce. This “promising sign” signals companies are likely making changes that allow employees to be more productive now and in the future, he says.
The most notable change as a result of the pandemic was the massive online shift for retail, banking, telecom companies and so forth, he notes.
McKinsey Global Institute measured productivity in advanced online and offline retailers and found productivity increased two times more for online retail businesses, he says.
“If you have another 10 [or] 20 percentage points of transactions shifting online,” he says, “that has a material impact on productivity.”
The current short-term numbers on productivity are still being impacted by the pandemic. But Mischke says research shows the U.S. has a chance to near the high productivity levels of the 1990s.
“We see an opportunity for a full one percentage point acceleration of productivity growth in the U.S. and Europe over pre-crisis trends,” he says.
A corporate survey by McKinsey Global Institute hints that number could even be a low-ball estimate. CEOs who participated in the survey shared optimism about the upcoming years — suggesting productivity could grow as fast as 3% a year, he says.
For workers, higher productivity reveals a “function of how the overall economy works,” he says. Plus, a real boom generates more profit that can be spread across employees and shareholders, he says.
While a surge should be advantageous to both employers and employees, Mischke says efficiency increases due to automation like robots can have an adverse effect on employment and wages.
Economists with an eye on the U.S. economy are looking at inflation as well as productivity in the long run. The faster productivity rises, the more companies can produce, he says, which lessens inflation assuming demand doesn’t waver.
Julia Corcoran produced and edited this interview for broadcast with Chris Bentley. Serena McMahon adapted it for the web.
This article was originally published on WBUR.org.
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