Just to show what a nerd I am, one of the things I look forward to every year at this time is the annual report of the Federal Reserve Bank of Dallas. The latest is just out and, once again, was worth the wait.
For those unfamiliar with the Dallas Fed report, it is much more than just a financial statement with the usual tables of debits and credits, assets and liabilities. Some years ago, it started making the first half of the report an essay on some interesting topic. Among those of recent years are essays on the dynamics of income distribution, the declining cost of living, free trade and mass customization, among other things.
These essays are always chock full of statistics, creatively presented, that usually challenge the conventional wisdom. One feature that is always a hallmark is longtime series of data. These are important because we are all myopic to some extent and tend to focus our attention primarily on the very recent past, often extrapolating into the future on the basis of what is really a very small amount of information. Therefore, it is helpful to see trends in historical perspective.
This year's report looks at the issue of productivity. It's an important topic because productivity has gotten a bit of a bad rap lately as a cause of slow employment growth. It seems that many businesses have been able to increase output without adding new workers by getting more productivity out of their existing labor force. Also, many of the things that economists favor to raise productivity, such as free trade, are controversial. Thus it is important for people to be reminded of why productivity is good and why it's worth making efforts to increase it.
At the simplest level, productivity is about doing more with less -- less labor, less energy, less capital. It is because each worker today produces far more than those in the past that we have a higher standard of living. According to the report, output per person is about 25 times higher today that it was in 1776. And unless productivity increases, businesses will not have the resources to increase real wages and raise future living standards.
Some workers incorrectly view productivity as a kind of dirty word. They imagine bosses prodding them to work longer and harder, with fewer breaks and vacations. In fact, productivity is all about getting workers to work less and more easily, not longer and harder. As the report notes, a key benefit of higher productivity is that we work far less today than in the past. In 1830, the average worker put in a 76-hour workweek. This fell to 60 hours in 1890, 39 hours in 1950 and just 34 hours today.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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