downturner

Why productivity increased during the downturn

October 3, 2013: 12:23 PM ET

The least productive workers stepped up their game.

Mixed race man laying on desk

FORTUNE -- If you're a manager in a locale where unemployment skyrocketed during the recession, you might already have noticed something you didn't expect: The people under you who contributed the least in boom times suddenly started bringing their "A" game, in some cases even outshining your stars.

That's the conclusion of a study from Stanford University's business school and the David Eccles School of Business at the University of Utah, published by the National Bureau of Economic Research. Called "Making Do With Less: Working Harder During Recessions," the study set out to analyze why productivity rose sharply from 2007 to 2009, according to Bureau of Labor Statistics data, while the recession was at its worst.

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"The prevailing wisdom was that productivity went up in large part because firms were laying off their least productive workers," says Christopher Stanton, an Eccles finance professor who co-authored the paper.

Instead, researchers discovered something quite different. "Productivity increases were too big to be accounted for by changes in the composition of the workforce," Stanton says. Rather, "the people who had been the least productive, before the recession, started putting in much more effort. Star employees, meanwhile, did not increase their efforts or their output much, if at all."

The difference between the two groups was especially marked in geographic areas where unemployment was higher than average. In examining the productivity of 23,000 employees in 10 states -- all of whom provided "technology-based, traceable services," so their output could be measured precisely -- the researchers found that lofty local jobless rates almost always inspired so-called Homer Simpson-types to try harder. In one geographic area where unemployment jumped by five percentage points, for instance, what the study calls "laggard productivity" shot up even more, by 5.65 points.

By contrast, "employees who were already stars were much less responsive to unemployment rates. Their productivity stayed about the same," Stanton notes. Why? Stanton speculates that stars assumed their jobs weren't in jeopardy, or else they were more confident of being able to find other work if they did get laid off.

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Now that joblessness is easing a bit in many parts of the country, will the Homer Simpsons among us go back to their old laggard ways? "When it gets somewhat easier to find another job, some people's efforts may decrease a little," Stanton says.

But on the other hand, it's also possible that recession-induced boosts to productivity will prove long-lasting. "People may have gotten accustomed to working harder, and often they've learned ways to do their jobs more efficiently. In some cases, they may also have been pushed to pick up new skills," Stanton muses. "All of that may mean they stay more productive than they were before -- even if unemployment drops back to pre-recession levels."

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