Effort at work: The motivational benefits of nasty job markets

Posted: December 17, 2013 in economy
Tags: , ,

AMERICA was in recession from the fourth quarter of 2007 to the third of 2009. Working hours fell by 10%. But output fell by 7%. In other words, worker productivity rose.A new NBER paper* tries to explain why. The authors have access to a big database—over 23,000 service-sector workers between 2006 and 2010. The workers were spread across the country, but had one common defining feature: a computer tracked their productivity. (The workers’ jobs include test-grading and insurance-claims-processing, where measuring productivity is quite straightforward). For these workers, overall productivity rose about 5% during the recession. Some suggest that labour productivity rises during downturns because bosses get rid of the weakest workers. After cutting away dead wood, average labour productivity rises. The authors, however, show that the exit of workers from firms during the recession was not related to their quality. Workforce cutbacks did not leave the most skilled workers behind. As a result, productivity improvements during the recession were not driven by “compositional effects”.  Productivity might also improve during a recession if investment in capital goods picks up. The authors do not spend much time testing this—but given the dearth of business investment during the recession, that explanation seems unlikely.  So what caused higher work …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/12/effort-work?fsrc=rss

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