Business News : Job Cuts: The secret behind U.S.’s gain in productivity
Over the past couple of years, the productivity rate of U.S. businesses, with the notable exception of those related to farms, have been on the rise. Recent research points to a significant factor behind this recent rise in productivity, which surprisingly enough, are job cuts.
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How the businesses produce more with fewer workers, one may ask. The main reason behind this is that while there are indeed fewer workers working due to the cuts, those that do remain are producing more per hour, as in work more diligently, which contributes to the 6% rise in productivity in U.S. non-farm businesses since 2007. Despite the numbers of total hours worked having fallen by nearly 9%, total output is only 3.4% lower than what it was on December 2007, which meant that the workers that are working made more in the same timespan compared to their brethren back in 2007.
The construction and manufacturing industry have cut the most jobs, having 25% and 16% less employees respectively, followed by the information, wholesale trade, mining, logging, retail trade, and financial industries, whereas the utility, education, and health department have actually increased its number of workers.
Because of these however, companies might have to ramp up on capital spending to keep up the current level of productivity. Indeed, the current capital spending is generally on par with the profits, whereas in the past the capital spending has generally exceeded profits, with the companies borrowing money to full the gaps between the spending and the profits. Whether this trend will remain as it is, or whether it will change again in the near future, is still everyone’s guess, what with the recent instability in the financial climate. Whether these job cuts will hold for the long run, is also another question still left unanswered.
Great post – and solid domain by the way!