Obliteration of the Zero Marginal Product Workers Theory–How It Affects Public Schools
Last Friday, the Bureau of Economic Analysis revised Gross Domestic Product (GDP) numbers between 2003 and the first quarter of 2011. The economy increased 1.3% in the second quarter of 2011 and was revised from 1.8% to .4% in the first quarter. The earlier GDP numbers incorrectly displayed an economy that was growing at an annualized rate of 2.8% in 2010. Consequently, the faux productivity surge has been severely downgraded to a no growth economy.
Consequently, some analysts like Tyler Cowen at Marginal Revolution are revising their hypotheses as to why productivity surged during and after mass layoffs. Cowen specifically referred to the zero marginal product worker theory (ZMP) where he made the argument earlier in 2011 that “laid off workers were either producing very little to begin with or they were producing for the more distant future” since there was increased growth and output coming out of the private sector. He also outlined that some workers were classified as ZMP since demand was low; some workers weren’t producing much to begin with; laid off workers possessed deteriorating skills. Since economists and analysts believed the economy was growing at a positive pace individuals like Cowen questioned the productivity of laid off employees especially if output surged after their exit.
However, the revised GDP numbers now clearly illustrate that private sector productivity was hampered during and after mass layoffs. The previously held notion that job layoffs were resulting in productivity and growth because of a supply and demand curve is erroneous. The slow GDP growth has also illustrated that trying to lay-off the less productive employees does not always lead to productivity. Millions of private sector workers have lost their jobs since 2001 and that has clearly impacted productivity. The notion that executives can use a bad market to squeeze workers harder to sustain or increase output is naive and dangerous. Eerily enough, public schools went through a similar process during the last two years. Public school community members can learn a lot from this current period of GDP slow down.
The public school budget cycles during the past two years have been filled with acrimonious calls for schools to run like businesses. Subsequently, this places demands on public school governance structures to sustain productivity with leaner budgets and downsized work forces. School community members across the country routinely called for public school board members to get rid of excess and non-productive workers. The ideology that schools could produce the same or even better output with fewer but younger and more motivated staff members pervaded discussions. Consequently, the idea of a value-added assessment tool was heavily referred to ensure this could take place in the future. In essence, public education was looking to find zero marginal product workers.
However, whether in the private or public sector, governing bodies need to keep in mind that it is very difficult to sustain productivity when people are in fear of losing their jobs. Mass layoffs that impact millions of people across the country is generally not a good long term solution to increase productivity since it is difficult to achieve organizational goals with fewer people who happen to be very anxious about their own job security. During this time, employees don’t tend to focus on their work on hand and are generally distracted. They often do not understand why mass layoffs are taking place or feel resentment towards the organization for taking such action. Furthermore, employees who are fearful of being laid off tend to become closed to new corporate or organizational strategies and initiatives. They tend to react adversely to any kind of change. Consequently, change is extremely difficult to enact during a time of mass layoffs since productivity does not surge but stops. In fact, the organization as a whole experiences zero marginal product.
As a result, management or leaders tend to mandate orders to their employees to get work done. Bureaucratic and structural management takes over. Managers rely on their formal authority in order to get employees to comply to mandates. Over time, they tend to over-rely on implementing mandates to ensure employees are doing their jobs. Consequently, communication often breaks down between management and their employees and the workplace culture can become extremely fragmented. In short, mass layoffs during severe economic decline creates a very challenging environment for organizations to get anything done in terms of productivity.
Subsequently, the public and private sectors can learn from these similar realities of decline. It is vital for leaders to keep communication and decision making processes open to their employees. Hopefully leaders and organizational members can keep these lessons in mind as the country continues to trudge through economic decline.