The Washington PostDemocracy Dies in Darkness

The big debate about whether we’re getting more productive

An ironworker holds his helmet and a cell phone in Madison, Wisconsin. (AP/Wisconsin State Journal, M.P. King)

Official data suggest that American workers are getting less done so far this year, which is surprising. As technology advances, you'd think that computers, phones and robots would help workers finish the job sooner.

Indeed, many in Silicon Valley say the official numbers on productivity are skewed.

In The Wall Street Journal, Timothy Aeppel profiles Hal Varian, Google's chief economist and a proponent of this theory. Varian says the problem is in how the government measures productivity. Since so much of what Silicon Valley offers is free, Varian suggests, it is difficult for government statisticians to know how much is really being produced.

For example, it's difficult to know how to account for a new processor that's twice as fast as an older model, but costs the same amount. Does the new technology mean that workers at the chip factory are twice as productive?

Varian contends that technology is making Americans more efficient, but outside the workplace -- when they're trying to figure out where to go for dinner, or when they're looking for a way around a traffic jam on the commute home.

Silicon Valley poses difficult questions when it comes to productivity, and they're all connected to a basic philosophical problem. There's no easy to way to price, value or quantify people's time outside the workplace, away from the formal economy, when they're not producing anything that can be bought and sold on the market, when they're left to themselves.

In the Nordic countries, people are working less than in the United States, as Demos's Matt Bruenig notes. Does that mean they are less prosperous? Or does it mean they are wealthier, because they get more done in the time they spend on the job?

Leisure shouldn't be discounted just because it's hard to put a number on. At the same time, if all Silicon Valley really accomplishes is making it cheaper and more efficient for us to watch videos of frolicking sea otters after work, the claim that the sector is improving productivity is less convincing.


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What's in Wonkbook: 1) Greek debt 2) Opinions, including Gerson on abortion 3) Clinton makes a proposal on profit-sharing, and more

1. Top story: German lawmakers vote on rescue 

Germany agrees to help keep Greece in the euro. "Germany’s parliament on Friday cleared the way for a new Greek bailout, in a contentious vote that exposed deep misgivings in Europe’s powerhouse economy about the rescue package. Amid skepticism in Germany about whether Greece ought to remain inside the shared euro currency at all, German Chancellor Angela Merkel faced a wave of defections among her own party’s ranks. Other lawmakers said that Merkel’s hard-line stance against Greece had fueled the strongest anti-German anger since World War II. Ultimately, the decision was passed through parliament by a wide margin, 439-119 with 40 abstentions." Griff Witte and Michael Birnbaum in The Washington Post.

But Greece's future is still uncertain, partly because of Schäuble's hard line. "Days after Greece appeared to escape crashing out of the euro, hawkish German finance minister Wolfgang Schäuble has put Grexit back on the political agenda, raising tensions in Berlin and across the EU. Speaking before a key Bundestag vote on Friday, Mr Schäuble said voluntary departure from the eurozone 'could perhaps be a better way' for Greece than a proposed €86bn bailout package, which was painfully assembled at a marathon eurozone summit in Brussels over the weekend. Despite his misgivings, the 72-year-old German minister said he would still personally put the package to parliament. His hollow-sounding pledge was eerily familiar to one from Athens this week, where Greek premier Alexis Tsipras presented the same plan to Greece’s parliament while admitting he did not believe in it. ... It is uncertain how much leeway he has been given by chancellor Angela Merkel to advance a historic rupture of the eurozone that he believes would ultimately strengthen both Greece and the single currency." Stefan Wagstyl in The Financial Times.

Happy birthday, Chancellor! Merkel turns 61 today.

Kick Germany out of the euro, not Greece, writes former International Monetary Fund economist Ashoka Mody. "Were Greece to leave, possibly followed by Portugal and Italy in the subsequent years, the countries' new currencies would fall sharply in value. This would leave them unable to pay debts in euros, triggering cascading defaults. Although the currency depreciation would eventually make them more competitive, the economic pain would be prolonged and would inevitably extend beyond their borders. If, however, Germany left the euro area... there really would be no losers. A German return to the deutsche mark would cause the value of the euro to fall immediately, giving countries in Europe's periphery a much-needed boost in competitiveness. ... Because a deutsche mark would buy more goods and services in Europe (and in the rest of the world) than does a euro today, the Germans would become richer in one stroke." Bloomberg View.

O'BRIEN: Even for rich countries, the euro is a disaster. "Finland and the Netherlands have had their fair share of economic problems, but those should have been manageable. Neither country is a basket case, and both have done what they were supposed to do. In other words, they've followed the rules, and the results have still been a catastrophe. That's because the euro itself is. ... It's only a slight exaggeration to say that Apple has kneecapped Finland's economy. Its two biggest exports were Nokia phones and paper products, but, as the country's prime minister Alex Stubb has said, the iPhone killed the former and the iPad killed the latter. Now, the normal way to make up for this would be to cut costs by devaluing your currency, except that Finland doesn't have a currency to devalue anymore. It has the euro. So instead it's had to cut costs by cutting wages, which not only takes longer, but also causes more economic damage since you have to fire people to convince them to take pay cuts. The result has been a recession longer than anything in Finland's living memory." The Washington Post.

2. Top opinions

GERSON: The Planned Parenthood tape shows disrespect of human life. "At first, it seemed like an Internet hoax. A doctor, over a glass of wine and a salad, coldly describes the extraction and monetization of fetal body parts. Surely this is some kind of sick parody. But it is not a hoax. ... It shows the appalling trivialization of life at the heart of extreme pro-choice ideology. If a developing life is really the moral and medical equivalent of a cyst or tumor, there is no limit on how it may be exploited. But most people — even those who support Roe v. Wade — intuitively recognize that the boy or girl in the sonogram is not a cyst. ... All our best instincts push toward expanding the circle of inclusion and protection. Even opponents of same-sex marriage must admit that the rapid shift of public opinion on this issue has resulted from an impulse of generosity. But how does abortion — particularly late-term abortion — square with this trend in liberal societies?" The Washington Post.

WILKINSON: Utah is balancing religious freedom with the civil rights of gays and lesbians. "In March the state passed a law that banned workplace and housing discrimination against gays and lesbians while protecting the expression of religious conscience. The legislation was the result of patient cooperation between gay-rights activists and the Mormon church, without whose support the law would have been doomed. It is now illegal in Utah fire someone for being gay, but also illegal to fire someone for expressing religious opposition to gay marriage. ... It remains legal for Utah businesses to deny service on the basis of sexual orientation. That may seem objectionable, but robust legal protection against discrimination in housing and employment for tens of thousands of LGBT Utahns is a great deal better than nothing." The Economist.

KRUGMAN: Raising the minimum wage won't put people out of work. "Mrs. Clinton’s speech reflected major changes, deeply grounded in evidence, in our understanding of what determines wages. And a key implication of that new understanding is that public policy can do a lot to help workers without bringing down the wrath of the invisible hand. ... More than two decades ago the economists David Card and Alan Krueger realized that when an individual state raises its minimum wage rate, it in effect performs an experiment on the labor market. ... Until the Card-Krueger study, most economists, myself included, assumed that raising the minimum wage would have a clear negative effect on employment. But they found, if anything, a positive effect. Their result has since been confirmed using data from many episodes. There’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America." The New York Times.

3. In case you missed it

Hillary Clinton proposes a tax credit to encourage employee profit-sharing. "The 'rising incomes, sharing profits' tax credit Mrs. Clinton is proposing would give companies a two-year tax credit equivalent to 15 percent of profits distributed to employees, to be capped at 10 percent of wages. The credits would cost an estimated $10 billion to $20 billion over 10 years and would be paid for by closing corporate tax loopholes. If a company provided an employee earning $50,000 annually with a $5,000 profit-sharing payment, for example, that company would receive a $750 tax credit in return. ... Her profit-sharing plan echoes the kind of business-friendly economic approach of turning to public and private investment that Mrs. Clinton and her husband, former President Bill Clinton, are known for. But it also highlights how Mrs. Clinton is different, and vastly more centrist, than Senator Bernie Sanders, the independent from Vermont who is also seeking the Democratic presidential nomination." Amy Chozick in The New York Times.

Bush is winning over the GOP elite. "The wealthy Republicans who rounded up donations on behalf of Mitt Romney's 2012 bid for the White House are making their preference clear: Jeb Bush for president. Since April, at least 146 Romney bundlers have given to the former Florida governor -- more than twice the number that helped the next most popular candidate, Senator Marco Rubio. That's according to a Bloomberg review of bundlers' donations, a potential signal of who they'll back in the coming months. ... The majority of the fundraisers -- at least 1,002 - didn't make any donations between April and June, so there may be plenty of room for other candidates to contest Bush's dominance. And now more than ever, candidates have other routes to raising big money." Zachary Mider and Noah Buhayar for Bloomberg.

Janet Yellen tells a Senate committee that fewer banks could be declared too big to fail. "The 2010 Dodd-Frank financial reform law says that all U.S. banks with more than $50 billion in assets are labeled systemically important financial institutions (SIFIs), making them subject to tougher supervision by the central bank. A bill drafted by Republican Richard Shelby, the committee chairman, and passed by the panel in May proposes allowing banks with assets between $50 billion and $500 billion to lose the SIFI designation if the Fed believes they are not systemically risky. Republican Senator Mike Crapo reminded Yellen on Thursday that Fed governor and top banking regulator Daniel Tarullo has told the committee he supports raising the threshold above $50 billion. 'So, like Governor Tarullo, I would be open to a modest increase in the threshold,' Yellen said. She added that it is critical for the Fed to maintain its discretion over systemically important banks should the SIFI threshold change." Michael Flaherty and Megan Cassella for Reuters.

What is productivity, anyway? "Google Inc. chief economist Hal Varian is an evangelist for Silicon Valley’s contrarian take on America’s productivity slump. ... To Mr. Varian and other wealthy brains in the world’s most innovative neighborhood, productivity means giving people and companies tools to do things better and faster. By that measure, there is an explosion under way, thanks to the shiny gadgets, apps and digital geegaws spewing out of Silicon Valley. Official U.S. figures tell a different story. For a decade, economic output per hour worked—the federal government’s formula for productivity—has barely budged. Over the past two quarters, in fact, it has fallen. ... [Varian] says the U.S. doesn’t have a productivity problem, it has a measurement problem, a sound bite shaping up as the gospel according to Silicon Valley. ... The only way goods and services move the official U.S. productivity needle is when consumers and businesses pay for them. Anything free, no matter how much it improves everyday life, isn’t included. Many in Silicon Valley say it is just a matter of time before new innovations surface in salable products and goose the official productivity tally. First, though, businesses must harness the innovations to the products they sell." Timothy Aeppel in The Wall Street Journal.

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