Economic production fell less than the employment dropped in the recession, implying that worker productivity increased. Traditionally thinking holds that this was because businesses kept their hardest-working individuals and let go of their least productive ones. N.C. State University economist Mike Walden discusses with host Mary Walden whether this is true.
“That’s a very interesting question, Mary, and what you said has always consistently been the explanation that economists have given for why we think worker productivity goes up during a recession. Actually now, … a new study … would conclude no, that’s not the reason. Actually what the study found is that businesses do not necessarily get rid of their lowest-performing workers and keep their highest performing workers and that’s why productivity goes up.
“In fact, the answer to why productivity goes up seems much simpler: People just work harder during recessions. They’re worried about their jobs — they are worried about keeping their job — and it doesn’t matter if you’re a very highly productive worker or you’re one that’s not as productive. Everyone increases their level of productivity. They all work harder.
“In fact, the study found that those folks who seem to be at the lower end of the productivity scale actually are the ones that stepped up their game most during recessions. So this is very, very new information for economists.
“I think it’s going to change the way we look at how the workforce responds during recessions. And I think it does give you one conclusion: Sometimes the simple answer is the best answer.”