Are Manufacturers Less Productive Today Than in the Past?
Performing the same task over and over again should theoretically lead to quicker accomplishment of the task. Unless you believe Parkinson’s Law. For manufacturers, the belief is that familiarity breeds efficiency, which in turn improves productivity. If a new worker can make 10 widgets an hour, it’s only logical to believe an expert worker can make 20 widgets an hour. Their skill and familiarity should automatically increase productivity — right? So, why have U.S. manufacturing productivity numbers dropped over the last decade?
Manufacturing productivity in crisis
In observing a metric called “labor productivity growth,” the Bureau of Labor Statistics (BLS) reported that labor productivity in the United States dropped significantly between 2010 and 2019. Simply put, in the past 10 years, workers have become slower at producing results — not faster. The BLS also found this productivity decline meant a need for more workers, which led to higher prices and lower wage growth. This is the first instance of U.S. manufacturing labor productivity falling since the BLS began measuring it in 1988.
Nearly every manufacturing sector is affected
According to the BLS, manufacturing industries across the board have experienced a productivity decline. Only five out of 19 manufacturing sectors managed to increase production from 2010 to 2019. For the other 14 sectors, productivity decreases ranged from nominal to downright detrimental.
In some of the more staggering examples of productivity decline, the machinery industry’s rate of productivity fell from 132% output in the 2000s to 95% output in the 2010s. Productivity in the plastics and rubber industry dropped from 110% to 88% in the same period. Broad declines indicate the issue — whatever it is — is endemic to the manufacturing sector, or perhaps even the labor market at large.
What’s the cause behind a drop in productivity?
There is no official explanation for the drop in productivity, but many have developed their own theories.
Some analysts blame wage stagnation. There’s been a minimal increase in the minimum wage over the last decade, which may contribute to a lack of worker motivation. Others speculate the drop in productivity is compositional, meaning manufacturers aren’t competing with global producers offering much cheaper prices on specific goods.
Technology is another hypothetical cause for the decline in productivity. While it’s designed to increase productivity, critics have pointed to inefficiencies with new technology as an addition to workload rather than an alleviation. Their main argument is that technology only offers marginal efficiency improvements, which are quickly offset by training, user errors, malfunctions, synergy issues, and more. There’s a case to be made for technology hindering as much — or more — than it helps.
Will productivity ever return?
Manufacturers must make changes to increase labor productivity, but it’s difficult to determine what those changes should look like. Should they start paying higher wages? Invest in new technology? In the absence of a single obvious answer, it’s essential for the industry to observe and recognize the variables contributing to production slumps. The best solution is a case-by-case one, in which individual manufacturers assess efficiency in their facilities and address it accordingly.
