Overtime and Productivity

Inefficient Overtime

As our nation’s economy continues to recover from the recession, our GDP continues to rise—as do the number of hours worked per week by employees. It can be misleading, however, to interpret those figures as proof that productivity is rising as well. Recently released, official data from the Bureau of Labor Statistics (BLS) tracks hours paid, which does not account for the reality that many salaried Americans—especially those fearful of losing employment in a labor market with depressed hiring rates—are willing to put in hours beyond 40 per week.

Because firms are instructed to report their standard workweek as 40 per week, regardless of actual totals, we’re left with an inaccurate image of productivity growth. When taking this underreporting into account with data from the BLS establishment survey, we see that productivity levels have actually diminished since the recession, with actual productivity growth based on hours worked shrinking from 1.78% per year to 1.49% per year.

What does this mean for employers in the future? While the labor market continues to improve, workers will feel less obligated to work extra hours or may even leave jobs after feeling overworked and undervalued. This high turnover could stifle any expected improvements to the unemployment rate, and in turn, cause further headwinds for measured growth productivity.

 

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