Dallas Fed: U.S. productivity transforming economy and workplace
For immediate release: May 13, 2004
DALLAS—Advancing U.S. productivity—fueled by technology and trade—is transforming the economy, enriching the nation and altering skills Americans need to succeed in the workplace, according to the Federal Reserve Bank of Dallas’ 2003 annual report essay.
In “A Better Way: Productivity and Reorganization in the American Economy,” Senior Vice President and Chief Economist W. Michael Cox and economics writer Richard Alm find that “as companies and workers achieve greater efficiency at the microeconomic level, they unleash a power that reorganizes the whole economy, spurring further productivity gains at the macroeconomic level.”
The long-term result: bigger paychecks for workers and lower prices for consumers.
Although macroeconomic productivity spurs economic growth, it’s often overlooked or characterized as a threat to jobs.
“But taken together, micro- and macroproductivity are a potent brew for economic progress,” the authors state, taking America through a succession of technology revolutions—from horse and buggy to the Internet.
The essay points out that trade is proving as effective at driving up productivity as it is at holding down prices. Foreign competition is forcing U.S. producers to shift resources to their best uses, creating a more productive deployment of labor. This reorganization results in outsourcing of jobs, including those in manufacturing and—in the current recovery—service sectors.
The essay’s “hierarchy of human talents” shows how American jobs are changing as a result of greater productivity.
Those who earn their living with muscle power, manual dexterity or formulaic intelligence are increasingly finding themselves replaced by automation or cheaper overseas labor, requiring them to adjust by utilizing higher-order skills that machinery or outsourcing can’t do as well.
“Americans who want to prepare for the better jobs of the future will concentrate on developing their creativity, imagination, people skills and emotional intelligence,” the authors write.
Additionally, in his annual report letter, Dallas Fed President and CEO Robert D. McTeer, Jr. says that while productivity has temporarily slowed job growth, “We should do what we can to promote the dynamic growth that will eventually create new jobs.”
He cautions against actions that seek to protect jobs at the expense of productivity growth.
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