Examining Okun's Law: An Interview with RSF Author Arne Kalleberg

by
Rohan Mascarenhas, Russell Sage Foundation
September 23, 2011

In recent weeks, the national debate has turned once again to the country’s persistently high unemployment rate, which remains above 9 percent. Policymakers have offered competing proposals that seek to stimulate spending through tax cuts and more public investments. But what exactly is the relationship between economic growth and the number of jobs in the American economy? Does a more productive economy consistently produce more and better work?

In an interview with RSF earlier this year, Arne Kalleberg, author of the RSF book Good Jobs, Bad Jobs, offered his own assessment on the historical relationship between productivity and job growth:

During the postwar period, wages and productivity both grew together; strong productivity growth led to the creation of many good jobs and a strong middle class in the United States. Since the 1970s, however, the profits of organizations resulting from productivity increases have not been shared with workers or with America’s working families. Despite the strong productivity growth in the United States during this period, economic compensation (including wages and employer-provided health benefits) has not kept pace for nonsupervisory workers and in some cases has declined. The gap between productivity and compensation began to widen in the late 1970s and has grown ever since. Indeed, the 2000s have seen a historically large gap between productivity growth and compensation. Hence, the growth in productivity has not been paralleled by the growth of good jobs during this period.

Okun’s Law specifies a rough but empirically regular relationship between increases in GDP and decreases in unemployment. In recent years, however, the growth in productivity has been associated with higher levels of unemployment than would be expected on the basis of Okun’s Law. This reflects at least in part changes in work organization such as the growth of temporary and other forms of nonstandard work. Thus, we can no longer assume that growth in productivity will translate into better jobs.

Read the full interview with Kalleberg for more, or buy a copy of his book.

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