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Worker Productivity Reaches Historic Decline

worker productivity

If you have a hunch that worker productivity isn’t what it used to be, you’re not alone. An analysis of U.S. Bureau of Labor Statistics data shows that the U.S. workforce has experienced the fastest decrease, a historic decline in year-over-year worker productivity since the data first became available in 1948.  

“The data analysis suggests a modest (0.2%) uptick in employee output from the previous quarter, accompanied by a substantial 3% surge in hours worked. This data reveals an alarming trend of diminishing productivity, as employees are working slightly longer without producing proportionally greater results,” writes Allwork.Space’s Dominic Catacora.

EY-Parthenon Chief Economist Gregory Daco first raised the alarm in a series of May 2023 tweets. Daco’s initial observances about the historic decline in worker productivity includes that it’s “exacerbating the compensation pressures & pushing up unit labor costs.” He adds, “A productivity rebound is the key to many of our current issues as it would help lift supply & reduce inflationary pressures.”

We can all agree that reduced worker productivity, in general, is bad for business. But what’s causing it, and how to fix it? That’s up for debate. 

What’s Causing the Historic Decline in Worker Productivity?

Could employee churn—the unprecedented hire and quit rates of recent years—have squashed work productivity as we know it?

“It’s been very difficult for employers to, essentially, train their employees and bring them up to par with the productivity levels that would have been deemed normal pre-pandemic,” Daco tells Fortune. “Because people were job-hopping so regularly, there wasn’t really a chance to bring them up to the speed, or productivity, that a former worker would’ve had.”

For office workers, could remote and hybrid work be a contributing factor? Salesforce CEO Marc Benioff, an outspoken critic of work-from-home (WFH) arrangements, would argue that it is. After acknowledging in 2022 that return-to-office mandates don’t work, he became very vocal about the work productivity drain that seems to be inherent in WFH in the context of the first point: a lack of good onboarding and training.

“We don’t have the same level of performance and productivity that we had in 2020 before the pandemic,” Benioff had said, adding that it became apparent there was a problem when executives discovered that 96% of the company’s annual contract value (ACV) was being delivered by 50% of its sales executives. “Half of our Salesforce is not really productive, and a lot of them are our new folks. So why is that? Are we not managing our remote employees well enough? Do we need new skills? Because that’s never happened before in the history of the company.”

In an interview with the On With Kara Swisher podcast, when explaining Salesforce’s recent mass layoff, Benioff added that “for our new employees who are coming in, we know empirically that they do better if they’re in the office, meeting people, being onboarded, being trained.”  

And the Solution?

If only it were that easy. Alas, as Daco points out, “The difficulty is that there is no magic productivity wand.” He adds that the cost-cutting via layoffs and wage growth compression that has been attempted is “easier” and “faster to execute” than, perhaps, finding a solution that benefits both employers and employees alike.  

Bringing everyone into the office, as you can guess, won’t do it. As Forbes mentions, “A study by Stanford University found that remote workers are actually 13% more productive than their in-office counterparts. The report shows that remote workers are less likely to take sick days and are more likely to be satisfied with their jobs.” Even Benioff admits that forcing workers into the office would push out top-producing talent.

Better training is a critical factor in improving the historic decline for worker productivity across the board. Beyond that, experts agree on the tried-and-true tactics of smart hiring and workforce planning, solid onboarding, high engagement, trust-building, and competitive compensation. The HT Group advisors and recruiters can help you find the combination that works.