Wednesday, March 31, 2010

Productivity and Unemployment

Having recently covered both unemployment and productivity with my students, I was intrigued by this article in today's issue of The Washington Post.

It discusses the connection between unemployment and productivity. And, on the surface, it seems to confirm a connection made in my previous post regarding Okun's Law.

More specifically, it addresses whether there is a connection between the persistent unemployment the nation has experienced, and the increased worker productivity that we've witnessed recently. It seems to make the argument that the unemployment numbers would fall if only we weren't being more productive. And while that is a seductive argument on the surface, we need to dig further. To that end, I direct you to three other sources.

The first is an old post by Alex Tabarrok at Marginal Revolution. He wasn't buying the connection in this 2003 entry. It's important to note that he was writing during a time when high unemployment was a topic of debate - although it was not as high as we are seeing at the moment.

The next two posts are from the always excellent Becker-Posner blog. Last November, Gary Becker explained why there may not be as clear a connection as many would think. Richard Posner provided a convincing dissent.

All of these are both worth reading. And the combination should provide an opportunity to review concepts while also providing substance for in-class debate when discussing aggregate supply and demand and government policy, don't you think?

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