Again the question of low productivity is raised from United State to European countries and beyond. This decrease in productivity is happening, despite the fact that most of us are working harder than ever and our pay has hardly increased over the last few years. One wonders why. May be it is a ploy by the corporations to get us to work harder for a less pay. But, there is a big but, for those conspiracy theorists to consider. Most of these data come from pretty reputable and independent organisations. May be the productivity is not calculated correctly, but independent studies by IMF and US Fed show that there is a downward shift in productivity.

So why is productivity is declining. National productivity is effected by a lot more factors that what effect our individual productivity. It is effected by the rate on retirement, which in general means loss of highly skilled and experienced workforce. Also lower birth rate, which effectively means lower number of young people joining the economy. There are other factors, which have positive effects on the productivity, like new technology, automation, new communication tools, etc…

So what has changed, these factors have been there and we can see their trends over a long span of time. There is noting new there. Ms Rana Foroohar, in her article in Time magazine September 2016 issue, has got it right. Since the 2008 crash, there has been a reduction in research and development investment. The lack of investment in R&D and effectively in training and staff development is the key factor in the weakening of the productivity.

Expecting an ever-increasing performance without innovation is a fool’s dream. Innovations needs money. Good ideas need financial backing. Finally you need to invest in people to acquire the new skills to use the new technology.

As Rana writes in her article:

It’s a well-known fact that many companies have hoarded cash or paid out money to investors in the form of share buybacks and dividends over the past decade, rather than investing in research and development. Read more…

There you have it.

You want higher performance and output then invest in R&D and staff training.