Greater Productivity Should Give Americans More Money (250)

KNOXVILLE, Tenn. — American workers are not reaping the benefits they should from their increased productivity last year, a University of Tennessee economist said Wednesday.

The Labor Department announced productivity grew 1.1 percent in 1995, the best workplace performance since 1992 and second best in nine years.

Productivity measures efficiency — output per number of hours worked — and when businesses are more efficient they can increase workers’ pay without raising prices for their products.

“With more money in their pockets, workers should be able to spend more,” said Dr. Matt Murray of UT-Knoxville’s Center for Business and Economic Research.

“But what we’ve seen in the last four or five years, despite the fact that productivity has been growing fairly rapidly, we have not seen the same rise in worker wages.”

Politicians, economists and organized labor argue about why workers have not enjoyed a larger share of the gain in productivity. Some say it’s the result of greater efficiency as businesses reduce their work forces and invest in high-tech equipment. Others say it resulted from economic recovery and that productivity gains will be slower as the recovery levels off.

“Consumers clearly are spending more. But, over the longer haul, consumers have been able to increase their spending by sending the spouse into the labor market and by incurring debt, and that obviously has its limits,” Murray said.

“Until the workers see a bigger cut of this productivity gain, it’s going to be hard for them over the longer term to prop up spending.”

Contact: Matt Murray (423-974-5441)

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