“Productivity isn’t everything, but in the long run it is almost everything,” wrote Paul Krugman more than 20 years ago. “A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise output per worker.”
The Case for Investing More in People
There is a virtuous cycle between productivity and people: Higher levels of productivity allow society to reinvest in human capital (most obviously, though not exclusively, via higher wages), and smart investments result in higher labor productivity. But the cycle is broken. Productivity in most developed economies has been anemic. And wages are stagnant. New evidence shows we could reinvigorate productivity if we stopped underinvesting in human capital. Beyond wages, other forms of investment in human capital include education and training, improved healthcare, and other, less obvious investments, such as the time and space to explore new ideas and professional development opportunities. Such investments do indeed pay off: The top-quartile companies in our study unlocked 40% more productive power in their workforce through better practices in time, talent and energy management.