The business news is often filled with statements about productivity going up or down. But what do economists mean when they talk about productivity?
A good example of the word “productivity” in the popular press came from The Washington Post and was republished here:
[The 2000-2010 decline in the] manufacturing workforce — it shrunk by a third over the decade — actually represented good news, [experts] said. It meant that U.S. workers and factories had become more efficient and, as a result, manufacturing companies needed fewer people.
“What happened to manufacturing? In two words, higher productivity,” Robert Reich, former labor secretary in the Clinton administration, wrote in 2009.
This is the definition of productivity that economists tend to use. It’s the value of stuff that goes into compared to the value of what comes out. If a manufacturing plant becomes more automated, they may need less people—even though they can sell their goods at roughly the same price. Therefore, the business (and in turn the larger economy) is said to have increased productivity.
It’s easy to see how this number could be deceptive. That article notes that the figure may actually be inflated:
Between 2000 and 2010, computer and electronic products manufacturing output rose at a remarkable rate of 18 percent per year.
Over the same period, output in the rest of U.S. manufacturing remained roughly flat, according to [Council of Economic Advisers] figures. That’s a dismal showing for a decade.
It is only when computer and electronic products are included that overall manufacturing output registers impressive increases. Though it represents 15 percent of manufacturing output, the sector’s strong growth makes the rest of U.S. manufacturing seem more robust than it really is.
But the term productivity really ought to have a deeper meaning. Instead of just referring to economic efficiency employee productivity at work is about engagement. It doesn’t refer just to how much workers get done, but also how likely they are to innovate, how willing they are to speak up with new ideas or concerns, and the degree to which they feel they have autonomy and mastery.
The best indicator of employee productivity is not results alone, but results combined with satisfaction. If people have a genuinely positive view toward their workplace and are getting things done, then they are productive. And if you want to increase employee productivity, build an environment where they have the freedom to work and the confidence that their work truly matters.
That’s not to say that the economic definition of productivity it not important. But it can seem a little cold. Work is not just about producing results: it’s also about the people who do the work. Increase productivity by embracing the individual. Get more done by giving people more room. Help the economy grow through the satisfaction of one employee at a time!