In the first quarter of this year, worker productivity increased at the fastest pace in almost a decade, according to the Labor Department. This unforeseen hike in efficiency will likely lead to an increase in wages and an overall upswing in the economy.
Worker efficiency increased by 3.6 percent quarter-over-quarter and 2.4 percent year-over-year. This represents the highest annual growth rate since the third quarter of 2010, when the U.S. economy was climbing out of a cavernous recession.
It is no coincidence that the first quarter of this year also experienced its fastest growth rate in GDP in four years. The 3.2 percent growth rate is largely attributed to an increase in exports and a decrease in imports, but the improvement in worker efficiency was also instrumental in the first quarter boom.
As the unemployment rate declines and the labor market becomes more competitive, an improvement in worker efficiency is crucial. With more productive workers, companies can operate optimally and improve their profit margins; as a result, companies can increase workers’ wages and/or reduce prices for consumers if applicable. Either way, the American worker benefits.
Local economist Alan Maguire explains that the improvement can partially be attributed to the continued development and utilization of technology in the workplace.
“One of the things that makes people more productive is forced multipliers,” Maguire said. “For example, a machine; think about trying to pound nails in a house without a hammer. Think about the difference between having a computer on your desk with Microsoft Excel versus having a Ten Key Machine. Computerization, automation in factories. You used to have factories that employ thousands of people, but now they employ 75 productive people.”
In fact, multifactor productivity – the measure of technological innovation – also grew at its fastest rate since 2010 last year. Worker productivity and machine productivity go hand-in-hand in helping businesses run efficiently, which, in turn, helps the economy perform optimally.
“I think all sorts of technologies are being used to streamline making things more productive than they historically could have been,” Arizona Tech Council CEO Steven Zylstra said. “I think that’s just going to increase significantly as we move into an era of AI and machine learning because so much will be able to be done with so little.”
Technology and workers help the economy as they become more efficient, and with the right policies, these time and money savings can be re-invested in technology investments, research, and development.
“The purpose of the economy is to provide disposable income for people to take care of themselves, so when productivity grows, it does exactly that,” Maguire said.