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What Would Marx Say About American Workers?

Mark Whitehouse writes editorials on global economics and finance for Bloomberg View. He covered economics for the Wall Street Journal and served as deputy bureau chief in London. He was previously the founding managing editor of Vedomosti, a Russian-language business daily.
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Not long ago, the U.S. was beginning to look ominously like the dystopia described by Karl Marx. Companies appeared to be freeing themselves of the need for workers, relegating the latter to chronic joblessness and penury.

Lately, though, U.S. employers seem to be hiring more workers than they know what to do with. Troubling as that may be for productivity, it suggests that Marx will have to wait a while longer for his vindication.

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Typically, labor productivity is seen as a crucial driver of prosperity. The more goods and services people produce for each hour worked, the more there is to go around. With plenty of supply to satisfy demand, the economy can keep growing, and income per capita can keep rising, without stoking damaging inflation.

Around the time the U.S. economy hit bottom in 2009, however, things got turned upside down. Companies slashed costs and workers so quickly that productivity rose even as the broader economy languished. Output per hour grew faster than it had in the same part of any of the last six major recessions.

This created a decidedly Marxian picture, in which corporate profits boomed, aided in part by the growing ranks of the unemployed, whose desire for jobs kept downward pressure on wages. Productivity began to look like the enemy of prosperity: If companies could keep increasing output without hiring new workers, millions of people might be condemned to permanent unemployment.

Here's how Marx described the phenomenon back in 1867: “The condemnation of one part of the working class to enforced idleness by the over-work of the other part, and vice versa, becomes a means of enriching the individual capitalists.”

Happily, the situation in the U.S. has changed somewhat. While still far from normal, the economy has added 5.6 million jobs over the past two years, and wage growth is showing signs of picking up its meager pace. Because the broader economy hasn’t grown as fast as employment, the job gains have translated into a decline in productivity. Overall, annualized growth in output per hour has been slower in the current recovery than in previous expansions.

The productivity slowdown has engendered much concern among economists. Some hope it’s a data glitch. Others worry that the benefits of the information age may be waning, or that the economy has somehow lost its entrepreneurial dynamism.

That said, the U.S. has bounced back before. The country's history of innovation, together with constant advances in automation, strongly suggest companies will keep figuring out ways to produce more with fewer humans. Whether that leads to a time of abundance or a Marxian dystopia is another question.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Whitehouse at mwhitehouse1@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net