US workers have gotten way less productive. No one is sure why.
Employers across the country are worried that workers are getting less done — and there's evidence they're right to be spooked.
In the first half of 2022, productivity — the measure of how much output in goods and services an employee can produce in an hour — plunged by the sharpest rate on record going back to 1947, according to data from the Bureau of Labor Statistics.
The productivity plunge is perplexing, because productivity took off to levels not seen in decades when the coronavirus pandemic forced an overnight switch to remote work, leading some economists to suggest that the pandemic might spark longer-term growth. It also raises new questions about the shift to hybrid schedules and remote work, as employees have made the case that flexibility helped them work more efficiently. And it comes at a time when "quiet quitting" — doing only what's expected and no more — is resonating, especially with younger workers.
Productivity is strong in manufacturing, but it's down elsewhere in the private sector, according to Diego Comin, professor of economics at Dartmouth College. He noted that productivity is particularly tricky to gauge for knowledge workers, whose contributions aren't as easy to measure.
"It is strange," Comin said. "The data is very odd these past couple of quarters in so many different ways. It's hard to even tell a coherent story."
Tech CEOs such as Google's Sundar Pichai and Meta's Mark Zuckerberg have been pledging to boost productivity, calling out low performers and asking their workers to do more. Meanwhile, Microsoft chief executive Satya Nadella said his company coined the term "productivity paranoia" to describe employers' anxieties about whether their employees are working hard enough.
Leaders are under heightened pressure to boost employee performance as firms try to establish a post-pandemic normal, said Kathy Kacher, founder of Career/Life Alliance Services, who advises corporate executives.
"The leaders are not seeing what they want, and they're starting to get anxious," Kacher said.
Many employers have started using software to track employee activity. But Nadella has argued that the technology can have a deleterious effect on trust and employee engagement.
"Ultimately, for the business, these tools are about really helping their employees thrive," Nadella told Bloomberg in September. "The only way a business is successful and productive is if employees feel that sense of empowerment, that sense of energy and connection for the company's mission and are doing meaningful work."
Managers today "might feel especially under the gun" to show that employees are pulling their weight, said Elaine Richards, chief operating officer of software company Basecamp. But they should trust their employees to get work done in ways that fit into their lives.
"I promise you, no CEO has ever said they'd prefer activity over results," Richards said. "The only thing productivity paranoia delivers is a lot of activity."
Critical to a well-oiled economy, productivity is also the ultimate driver of standards of living: Higher productivity eventually translates to more goods and services available at a lower cost, and increased wages for workers, meaning higher productivity also combats inflation.
When productivity slows, economic growth dwindles. The drop-off is particularly concerning to economists and employers as the U.S. economy flirts with recession. It's unfolding as employers struggle to find workers, amid a national tug-of-war over the future of offices. Burnout is high. Engagement is low. People are working more hours, but they're doing less with them.
"No one knows or will know" what is causing the drop-off in productivity for some time, said economist Lawrence H. Summers, president emeritus of Harvard University and former treasury secretary. But it could have something to do with the fact that many employees "were working unsustainably hard" in 2020 and 2021, Summers said.
Some workers are paring back their efforts.
"There's a highly empowered workforce that was engaged in a certain amount of quiet quitting," Summers said. That's creating "a certain amount of absenteeism on and off the job" that is probably leading to lower productivity, he said.
There are many theories as to why productivity has nose-dived. One has to do with the tight labor market.
Employees gained substantial leverage amid the labor shortage, with many exercising their power by participating in the "Great Resignation" or setting more boundaries at work through quiet quitting.
Companies are often losing high performers who are finding jobs with higher wages and more flexibility, said Sinem Buber, lead economist at ZipRecruiter. Replacing them is tough and training new hires is costly and time consuming.