The Myth of American Productivity: Politicians say we have the most productive workers in the world. They Are Wrong
In 1939, when John Steinbeck completed The Grapes of Wrath—a heart-wrenching tale of a family of sharecroppers forced out of their home during the Depression— roughly one-quarter of the U.S. population still lived on farms. Today, family farms are increasingly rare, and less than 2 percent of employed Americans work in agriculture.
But rather than viewing the decline of farming jobs as a tragedy, economists almost invariably count agriculture as a shining American success—the triumph of productivity. And why not? A handful of farmers using GPS-equipped combines and sophisticated moisture sensors can grow far more food than the population of an entire rural county in 1939. Food has become so plentiful and cheap in the United States that it has been blamed for the increase in obesity. And agricultural products have become one of the country’s chief exports, totaling more than $115 billion in 2010.
As the story of the American economy is usually told, the shrinkage of agricultural employment was a tough but essential part of the march toward higher incomes and a better standard of living. What’s more, this example has been cited time and again to explain subsequent upheavals in employment. In 2003, N. Greg Mankiw, a Harvard economist who then headed President George W. Bush’s Council of Economic Advisers (CEA), told a Washington audience that the more recent fall in manufacturing jobs was an “inescapable” consequence of rapid productivity growth: “The long-term trends that we have recently seen in manufacturing mirror what we saw in agriculture a couple of generations ago.”
In a 2006 speech, University of Chicago professor Austan Goolsbee made the same point, explaining why the long-term decline in manufacturing jobs didn’t worry him. “Employment in the [manufacturing] sector and the share of spending in the sector get smaller and smaller almost as proof of how productive it has become,” said Goolsbee, then a top economic advisor to Senator Barack Obama and more recently CEA head under President Obama. “It is exactly the same process that agriculture went through.”
Numerous statistics would appear to confirm Mankiw and Goolsbee’s analogy. Manufacturing employment in the U.S. is on a long downward trend, with no sign of a rebound. Despite the supposed recovery, companies are still announcing factory shutdowns and consolidations. One example: in Fort Smith, Arkansas, a Whirlpool refrigerator plant currently employing about 1,000 workers will close its doors by the middle of 2012.
Nevertheless, these ever-fewer workers seem to be producing ever-larger quantities of manufactured goods, such as electronics, aircraft, medical equipment, and chemicals. According to the Bureau of Economic Analysis, American manufacturing output was 16 percent higher in 2010 than it was a decade earlier, despite the devastating impact of the Great Recession and the virtual disappearance of some manufacturing industries. Combined with the sharp plunge in employment, the BEA statistics imply that manufacturing productivity rose by a stunning 74 percent from 2000 to 2010. Companies that distribute and sell these goods, like Walmart and Best Buy, also seem to be enjoying sizable efficiency gains. According to government data, wholesale and retail trade companies have seen a 20 percent increase in productivity since 2000, as information technology and the Internet enables them to deliver more goods with fewer people.