America’s economy has a problem: Workers just aren’t producing as much as they once did.
Some blame social media. Employees might feel like they’re toiling away at the office, but if they are tweeting and Facebook messaging their friends, that’s not doing much to boost the economy.
“What do we produce? We just go around and text each other,” Carl Icahn, a prominent hedge fund manager and supporter of Donald Trump, told CNN.
Whatever the reason, Americans aren’t working harder, and it’s holding the U.S. economy back.
Output per American worker (know as “worker productivity”) is at its lowest level since the 1970s, according to government data.
Throughout the 1990s, worker productivity shot up by 2.2% a year, on average. In the early 2000s, it went up a brisk 2.6% a year. Since the Great Recession, it’s been crawling along at barely more than 1% a year, on average.
Now it’s getting worse. The latest reading came in at negative 0.5% for the period between April and June. (Yes, that means American workers were less productive this spring than a year ago).
Economists agree: The U.S. is in an alarming productivity slump, and it’s not clear how to fix it.
The two most popular solutions are: Get businesses to invest in better equipment or revise the productivity statistics to take into account the benefits of the smartphone economy.
Businesses aren’t investing
“The most important issue is a lack of investment spending,” says David Kelly, chief global strategist at JPMorgan.
Companies are sitting on near record levels of cash. In a healthy economy, businesses typically spend money on new factories, tools and research. That’s not happening. Businesses are either hording cash in their bank accounts or using it to buy back stock. Those activities do little to help the economy.
“You have to give each more worker tools” to be productive, says Kelly. Productivity boomed in the 1990s and early 2000s because businesses were investing in technology to improve factories and processes. The same worker could suddenly make a lot more gadgets or serve more people.