Building shield

Slow productivity growth isn’t just a British concern. As Nicole Gelinas tells us in a piece for City Journal, the figures look pretty bad across the developed world:

“Americans and other Westerners are working harder, not smarter. Last year, in the aggregate, workers in “mature economies,” such as the U.S., Western Europe, and Japan, produced only .06 percent more product per hour worked than the previous year, a slide from the .08 percent increase of 2013…”

“Worse, we’ve fallen far below the 2.4 percent annual productivity increases we regularly saw a decade ago.”

The bottom line is that a less productive future is a poorer one:

“If we don’t figure out how to do more work better, and fast, we’ll continue to suffer slow global growth, with people working more hours for the same money or less.”

The consequences may be obvious, but the causes are harder to get at. Because a number of factors are likely to be involved, it may be that some are being ignored. Gelinas has one particular candidate in mind:

“…the cataclysmic condition of our physical infrastructure and the mounting commute times for millions of workers. In 2013, according to the U.S. Census, nearly 36 percent of Americans had commutes of 30 minutes or more. In 2000, that figure was 34.5 percent; in 1990, it was 30.4 percent, and in 1980, 28 percent. Over three and a half decades, then, 28.6 percent more Americans, as a share of the population—20.9 million more people overall—are enduring longer commutes.”

Even worse than the routine of a long commute, is one subject to added delays:

“In New York, the densest economy in the U.S., commutes are getting less predictable. Overcrowding and lack of investment mean more frequent and longer delays on subways and commuter rails. A person who arrives at work a half-hour late after enduring sweaty, packed conditions and a long wait with no explanation is not, as an economist might say, optimized for productivity.”

Pushing people out into the suburbs and surrounding countryside of our great cities is seen by some as a ‘solution’ to the housing crisis, but inevitably it worsens the commuting crisis. Building extra transport capacity isn’t easy or cheap – and if it doesn’t get built at all then that means traffic jams and jam-packed trains.

Thanks to a captive market and the need for new investment, the financial cost of commuting has also increased – a burden that must be met out of taxed and static incomes:

“On average, Americans haven’t gotten decent raises in years… So we have grumpy workers who can’t stand their commutes; who make less money, by the time they do get to work; and who spend more time worrying and less time sleeping.”

Clearly that can’t be good for productivity. But I wonder if there’s not something else going on. Instead of struggling through the rush-hour every morning, many workers will be choosing not to make the journey at all – instead finding lower paid employment or self-employment closer to home.

As a result they may be happier and perhaps not that poorer (once you take the travel cost savings into account). However, from a statistical point of view they will appear to be less productive. In part this is an illusion, because neither the productivity nor the average wage figures take the unpaid hours of commuting into account. However, part of the cost is all too real: cities like New York or London are engines of productivity, but can’t make the most of their potential if it is too expensive for workers to live or travel within them.

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