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Missouri ranks low for labor productivity

by Cameron Gerber | August 5, 2022 at 6:25 a.m.

Recent data has shown labor productivity on the decline across the country during the past few years, and the Show-Me State has been no exception, a recent report found.

Missouri ranked No. 37 among other states in terms of labor productivity, with data giving the average employee’s hourly productivity value at $69.95 for the state’s 2.6 million employees. The data showed an average of 1,608 hours of work per employee, amounting to $291 billion in total value-added output — which is the output remaining when inputs like energy and resources are subtracted — per year.

The report, published by research firm Smartest Dollar, ranked states based on data from the U.S. Bureau of Labor Statistics (BLS) Office of Productivity and Technology, which focuses on output statistics. The data covered private, non-farm business statistics for 2021.

Some of Missouri’s neighbors fared better in the ranking, though only one broke into the top 10. Illinois ranked No. 9, standing out as the highest-ranked state in the Midwest region as well. The data showed an average hourly output of $88.42, with $778 billion in total value-added output for 2021. A total of 5.3 million employees worked an average of 1,652 hours each.

Nebraska came in at No. 21 with an average productivity output of $76.83 an hour for its employees. Kansas followed at No. 22 with $76.14 in hourly productivity and $150.6 billion in output for the year, with 1.2 million workers putting in more than 1,600 hours on average.

Iowa ranked No. 28 with an average hourly productivity rate of $73.10, generating more than $167 billion in total output. Average total hours reached 1,666 for more than 1.3 million employees.

Tennessee was one spot ahead of Missouri with $69.95 in productivity an hour. Kentucky, Oklahoma and Arkansas came in below Missouri at No. 42, 44 and 49, respectively, with their workers’ average productivity at $64.68, $63.83 and $59.80 per hour.

While the region was primarily near the back half of the list, there was a wide gulf between No. 1 and No. 50 on the ranking: Top-ranked New York saw $117.86 in labor productivity, while Mississippi rounded out the bottom at $58.03.

The study noted recent speculation about a looming recession, citing a sharp decline in labor productivity as an indicator of the future. While there had been an extended lull in productivity, the pandemic presented a possible economic shift, they said.

“After more than a decade of below-average productivity growth, the COVID-19 pandemic raised the prospect of a productivity boom,” the study reads. “Many low-productivity jobs were eliminated early in the pandemic, while major infrastructure investments and the accelerated adoption of automation and artificial intelligence created conditions for productivity to rise.”

Despite the prospects, more recent data have once more shown a dip in output, with BLS reporting a 7.5 percent decline in the first quarter of 2022 — the steepest on record since 1947.

The study pointed to several factors for the decline, including stagnation in wages while labor output skyrocketed over the past several decades, with a 253 percent rise in productivity and only a 144 percent increase in wages since the 1940s. Smartest Dollar released another report studying the correlation last month, ranking the Jefferson City metro area No. 298 out of 354 areas across the country with a 2.8 percent increase in wages between 2020-21 which came in at -3.6 percent when adjusted for inflation. Missouri as a whole saw a 4.5 percent non-adjusted increase and a 2 percent adjusted decrease.

Another critical factor identified in the latest report was pay stagnation for industries with the greatest productive and economic output, including the manufacturing and technology sectors. It said the manufacturing sector was shifting more toward automation and outsourcing to cheaper labor markets, while tech companies have been riding a wave of massive growth throughout the past three decades.

The report found an emphasis on technology contributed to New York, Washington, Delaware, California and Massachusetts taking the top five spots on its ranking, with a prevalence of the technology, financial and capital and higher education sectors contributing to their high outputs. It also noted that all but one of its top 10 states were coastal, with Illinois being the outlier.

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