MinnEcon: August 25, 2009 Archive

Productivity is up, but what's the cost?

Posted at 2:48 PM on August 25, 2009 by Paul Tosto (0 Comments)
Filed under: Jobs & unemployment

From my colleague Mike Caputo:

Numbers this month show that the U.S. economy is more productive. But what's the toll of that productivity?

Stephanie Massey of Mound has some idea. Her husband, who works for a large financial institution, came back from vacation earlier this year to find about half of the employees in his unit had been let go. For those who remain, the mounting stress has triggered a certain survival instinct.

"He says they are all working scared," says Massey. "They are hyper-focused but there are still mistakes being made. No one is watching anyone else's back."

A nurse in our Public Insight Network tells a similar story. She works at a large county hospital where all of the LPNs in her unit, several social workers and other ancillary hospital staffers have been laid off. The higher nurse-to-patient ratios combined with the overnight hours is taking such a toll on her personal and family life that she's looking for other work.

"Even though this is a difficult time to be looking for a job and there's every reason for those with a job to stay put, I just don't believe I can tolerate my current work schedule for much longer," she says.

Such burnout is becoming common. A recent study of 4,400 U.S. workers found nearly half of them are absorbing more responsibility and stress after a company layoff. Thirty-seven percent said they are handling the work of two people. Thirty percent feel burned out.

Now for the upside: the cost-cutting that is causing workers so much anxiety has made economists more optimistic about a recovery.

This month a measure of worker productivity by the federal Bureau of Labor Statistics - one that looks at worker output versus cost - rose at a larger-than-expected rate. The reason: Companies moved fast to cut jobs and their expenses. Essentially they are getting more with less.

There are no state-by-state breakdowns of the productivity measurement. But using indirect measures, such a rising per capita income, points to Minnesota making similar productivity gains, says Toby Madden, economist with the Minneapolis Federal Reserve.

Madden explains that economists view productivity as a key to economic performance. He says that during this downturn, companies are learning to work smarter, incorporating technology. And when businesses must cut back on jobs, they are improving productivity through subtraction.

"If you lose the more marginally productive people in a workforce, that alone can improve productivity," Madden says. That, of course, assumes that companies cut on the basis of productivity, which is not always the case.

While the news might be good on a macro level, Madden says that labor cuts create upheaval for some in the short term. And for people caught in the middle of that, like Stephanie's husband, they can be stuck having to do more without getting more income in return.

"There's lots of turmoil out there," Madden said. "On the average you will see a little bit of growth, but that doesn't mean everybody is better off."

Check that. Massey says her husband's Minnesota office will close soon and his job will be moved to Chicago at the end of the year. He could go, but there are no company benefits to absorb the probable loss of selling their home in Mound.

He job hunts online after midnight, after working 12 to 16 hours a day in an increasingly difficult work environment.

"It's the workload. It's the hostility of the workers who are scared," Massey says. "I just hope (the economy) starts cooking before we are cooked."

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