Cole's Take: Rethinking the U.S. Productivity Edge

Productivity isn’t a trophy you hang on the wall.

BNY’s “The U.S. Advantage: Higher Productivity” hangs a big, confident headline on an old idea: American firms, in many corners of the economy, squeeze more output from each unit of input than peers abroad. Sure, but a country “having” productivity is like a city “having” weather — it’s an average of wildly different microclimates, and some of them are stormy.

Here’s the thing: the one-number framing is the real problem.

Aggregate productivity is seductive because it sounds like a scoreboard. One line on a chart, one country ahead. But productivity is built, not found. It’s the sum of choices about technology, sector composition, accounting rules, and where work physically happens. When a tech firm automates customer service, the productivity gauge jumps. When a retailer shifts warehousing abroad, U.S. numbers can look sleeker even if domestic workers don’t see bigger paychecks or better conditions.

Treating that blended figure as a kind of national personality trait — “America is more productive” — turns a messy, uneven process into a clean story that happens to flatter the winner.

Some sectors barely show up as heroes in that story at all. Health care, education, local government — these are areas where measuring “output” is slippery, and where the lived experience of workers and users often doesn’t match any aggregate glow. Even within the private sector, regional clusters matter: a high-output finance or tech hub does not magically pull up a town whose main export is résumés.

And yet, investors and policymakers love this headline because it suggests a policy shortcut: keep doing whatever drives that line up and to the right.

That’s where things go sideways.

If your policy lesson from BNY is “double down on the drivers of productivity,” you still have to name those drivers. Automation, capital-intensive investment, trade openness, organizational redesign — each tool shifts benefits and risks differently. Automation in logistics or retail can lift GDP-per-worker on paper while hollowing out mid-wage roles on the ground. Skills programs can help, but labor markets rewire slowly. If child care, housing, or transportation are broken, retraining is just a nicer waiting room between jobs.

This is where distribution stops being a footnote and becomes the whole plot. Gains from productivity don’t automatically trickle; they flow through bargaining power, corporate governance, and plain old geography. Capital owners and highly skilled workers often catch the early upside. People with weaker bargaining positions or stuck in low-opportunity regions can feel only the downside: job loss, instability, and higher local prices.

Think of it like William Gibson’s line about the future being here but unevenly distributed — productivity growth works the same way.

Funny thing is, businesses quietly recognize this tension when it shows up on their doorstep. Manufacturers that can’t find maintainers for complex equipment start doing on-the-job training not because of some grand theory of human capital, but because the line literally stops if they don’t. Tech companies that build internal academies are not hosting book clubs; they’re trying to align their own productivity with a workforce that can actually use the tools.

There’s a lesson for policy in that gap between the glossy national metric and the gritty local fix.

If you take BNY’s core claim as directionally right — that the U.S. currently enjoys a productivity edge — the smarter response isn’t triumphalism. It’s to treat that edge as a fragile asset that can either compound or curdle. Tax and regulatory rules can nudge firms toward investing in workers as complementary to capital rather than as a cost center. Regional policy can focus less on spraying incentives everywhere and more on building the connective tissue — housing, transport, broadband — that lets people actually access high-productivity clusters without uprooting their lives.

There’s also the timing issue, which headlines quietly skate past. Productivity gains can show up in national accounts well before households feel any relief. Profits can rise, valuations can jump, and yet wages stagnate and local job markets stay brittle. If you interpret the BNY argument as moral proof that “things must be getting better for most people,” you’ve skipped several chapters in the causality book.

To push on that point: markets are very good at rewarding efficiency, but they’re agnostic about who gets rewarded. Expecting them to auto-correct distribution is like expecting your router to mediate family screen-time rules. That’s not a market failure; it’s a category error.

There is a counter-argument worth taking seriously: even if gains are skewed now, higher productivity expands the pie, and a bigger pie gives you more room for redistribution or institutional reform later. That view treats current inequality as a political choice layered on top of an economic success. It’s not wrong on the arithmetic, but it quietly assumes the political system will, at some point, choose to rebalance — and that prolonged skew doesn’t corrode the very institutions you’d rely on to do that.

BNY’s headline is directionally optimistic, and that’s fine. The risk is that it becomes a comfort blanket for those in the winning zip codes, while everyone else is told to be patient and “let productivity work its magic.”

My bet: in a decade, the countries bragging the loudest about productivity will be the ones that treated it as a design problem — who builds it, where it lands, and how it’s shared — not as a single number you can frame and forget.