Do Workers Work Harder During Economic Downturns?
The productivity rise during the recent recession came mostly because employees worked harder, not because employers kept good workers and got rid of laggards.
During the Great Recession, the aggregate number of hours worked in the United States fell 10.01 percent, but output dropped only 7.16 percent. Thus, output per worker rose. This could be the result of changes in the mix of workers who are employed, with higher-productivity workers retaining their jobs during the downturn, or it could be because the same workers worked harder during this period. To distinguish between these two views, Edward Lazear, Kathryn Shaw, and Christopher Stanton study computer-tracked daily productivity data for more than 23,000 workers at a large technology services company between 2006 and 2010. In Making Do With Less: Working Harder during Recessions (NBER Working Paper No. 19328), they conclude that the productivity rise during the recent recession came mostly because employees worked harder, not because employers kept good workers and got rid of laggards. They find that productivity at the firm they analyze rose 5.4 percent during the recession, with at least 85 percent of that increase attributable to employees boosting their own productivity. They write that "each worker produced more output than would have been the case during normal times."
Some of the most compelling evidence that the nature of the labor market affected the productivity of workers comes from measuring differences at the firm's far-flung facilities. With operations spread across many states, the company had workers doing exactly the same job in high-unemployment states such as Florida, where the unemployment rate rose from 3.3 percent to 11.2 percent between June 2006 and May 2010, and in states that were less affected by the recession, such as Kansas, where the unemployment rate rose from 4.4 percent to 7.1 percent over the same period. The authors find that worker effort increased the most in the firm's operations where unemployment rose the most.
The least productive workers before the recession were the ones who boosted their productivity the most as unemployment climbed. When the local unemployment rate rose 5 percent, workers whose initial productivity was below the firm median boosted their productivity by 5.65 percent, while workers with above-median initial productivity exhibited a minimal change.
The changing composition of the workforce had minimal effects on productivity. The authors find no differences in quality between workers who left the firm and those who stayed. They did find that those newly hired during the recession were 1.5 percent more productive than all the other workers, but their overall impact was small because they made up only 30 percent of the workforce. The changing composition of the workforce accounted for only 0.68 percentage points of the overall 5.4 percent boost in productivity.
--Laurent BelsieThe Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.