Why Measuring Productivity Differently Will Change the Way We Live

Can you imagine a world without 9-to-5 jobs? Adam Davidson suggests it’s not too far away. In the latest New York Times Magazine, the journalist urges us to change the way we measure productivity. Accountants and Lawyers bill by the hour, encouraging slow work. Paying people by what they produce, rather than by how long it takes them to produce it, would more accurately reflect productivity in the modern economy.

What’s really interesting about Davidson’s argument is his historical narrative. He claims that measuring productivity by hour of work, popularized among accountants in the 1950s, is a leftover of the industrial age. This way of measuring made sense for assembly-line manufacturing, where time units had a fixed correlation to output. But since the 1960s industrial production has become less and less important at the expense of services and the creative economy. Measuring productivity of the latter has little to do with hours worked.

Davidson writes: “Measuring productivity is central to economic policy — it’s especially crucial in the decisions made by the Federal Reserve — but we are increasingly flying blind. It’s relatively easy to figure out if steel companies can make a ton of steel more efficiently than in the past (they can, by a lot), but we have no idea how to measure the financial value of ideas and the people who come up with them. “Compared with the mid-1900s, goods production is not as important a part of our economy, but we continue to devote about 90 percent of our statistical resources to measuring it,” says Barry Bosworth, a Brookings Institution economist who is a leading thinker on productivity in the service sector.”

Davidson doesn’t address the consequences of measuring creative work by its value rather than by time worked, but they would certainly revolutionize our economy. On a microeconomic level, it might mean the end of the 8-hour work day. Measuring the value of ideas would let us work until we have achieved results, not until the clock hits five. How about working 2 hours on Tuesday and 13 on Wednesday? What’s already a reality in some creative professions could become the norm.

The possible macroeconomic effects are just as intriguing. Countries still tend to measure the productivity of their workforce by how many hours people work in a day. For example, business advocates have long lambasted unions for trying to shorten work days. During the Euro Crisis, some have urged Spain to scrap the Siesta, a lengthy lunch break, and stretch out work days to increase productivity. But what if a long break and shorter work days increase productivity in our modern service economy? A one-hour nap might make a good idea more likely than 20 hours of hard work. Perhaps the supposedly lazy Greeks are way ahead of the hard-working Americans.

The entire capitalist system revolves around the notion of productivity. If it turns out we’ve been measuring it incorrectly, sweeping changes are bound to follow.

Here’s a link to the article:

http://www.nytimes.com/2013/08/04/magazine/whats-an-idea-worth.html?pagewanted=all&_r=0

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Filed under Economics, Global

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