May 29, 2024

We’re happier at work. But are we less productive?

After years of focus on workplace wellbeing, it’s official. We’re now happier than ever at work. But has our joy come at the expense of productivity?

 

Studies reveal a happiness boom

In 2022, overall job satisfaction in the United States reached 62.3%, according to the Conference Board’s Job Satisfaction Survey. That’s the highest level of job satisfaction since the survey began in 1987. 

The survey’s authors attributed this increase to a tight labour market and a rise in flexible work arrangements. They also found that, beyond competitive pay, the rise in job satisfaction was being driven by factors including improved organisational culture, better work/life balance, reduced workloads and more appropriate performance review processes.

Interestingly, employees with hybrid work arrangements reported the highest job satisfaction compared to fully remote or fully on-premises workers. Hybrid workers were particularly satisfied with pay, benefits, and access to training opportunities.

Unfortunately, women reported significantly lower satisfaction compared to men across almost all job satisfaction components – 60.1% of women agreed they were satisfied with their work, compared with 64.0% of men. Although, it was still the highest level of job satisfaction recorded for women, too.  

Here in Australia, the Commonwealth Treasury’s study into employee satisfaction reported similar results. 

It found that, nationally, job satisfaction has been rising rapidly since 2017. However, Treasury’s survey also revealed that, in Australia, women and men scored relatively evenly when it came to how satisfied they were with their jobs.

 

But what about productivity?

Conventional thinking suggests that a happy worker is also a productive worker. 

An Oxford University study backed this up by finding happy workers were 13% more productive than their counterparts. 

But, over the last few years, we’ve been seeing productivity growth stall at the same time as job satisfaction goes through the roof.   

While this seems to be a worldwide phenomenon, Treasury reveals that, in Australia, productivity growth has been falling rapidly since 2016 – although there was a slight pause in decline at the start of the pandemic during FY 2019/2020 and FY 2020/2021. 

Financial year 2021-2022 saw the lowest productivity gains per Australian worker this millennium – with productivity lifting just 1.2%, compared to a consistent annual boost of 1.6%-1.8% between 2000 and 2015.

 

Are the two related?

So has increased job satisfaction contributed to our flagging productivity? Some experts believe it may have – at least in the short term.

Hybrid and remote work models have contributed to higher job satisfaction, but they can also come with challenges in maintaining consistent productivity levels. That’s especially true, as employees and organisations adapt to new ways of working.

But this should hopefully be one development that resolves itself over time, as employees and employers manage remote working properly and better understand each other’s expectations. 

Besides, worker happiness is almost certainly not the main factor behind decreasing productivity. Instead, research has shown that several factors are likely at play. 

First, in the early part of this millennium, we actually went through a productivity boom after years of declines. 

Some believed this was the result of a recession-like environment where people feared losing their jobs unless they worked hard. When good times returned, they slacked off – and then – after the GFC hit, they began working hard again.

Some proponents of this way of thinking also noted that it has been an employee’s market over the past five or so years – the same time as productivity has fallen. Now, however, with unemployment on the rise, we may see productivity growth return. 

But there are other theories, unrelated to how employees perceive their jobs or whether they work from home. 

One is that productivity boosts chrome as the result of technological change, and these take some time to wash through. They also require complementary investments – such as in data collection, training and infrastructure – to realise their full productivity potential. (This phenomenon is referred to as the “productivity J-curve”).

That means that productivity increases several years after a technology becomes standard.

The early part of this millennium is likely to have seen huge productivity gains as a result of the rise of the internet, email and the first wave of online work. However, over time (especially by 2016), the boost effect of these technologies declined. 

If AI becomes the next real wave of technical disruption, will we be likely to see another surge of productivity down the track? 

Finally, and perhaps even more importantly, some – including the OECD – argue that traditional economic metrics may not accurately capture the productivity contributions of digital goods and services, where most of our gains have come from lately. 

They also argued that intangible assets like corporate culture and business processes are often under-measured.

So, it may be that it’s the figures that are flagging, and not our productivity after all.

 

In short…

The boom in employee happiness may have something to do with lower productivity growth. However, there are many other factors at play too.

Our view is that keeping employees happy through measures such as remote working, flexibility and well-thought and cost-effective wellbeing initiatives, are much more likely to benefit a business than detract from it. 

After all, our experience is that happy employees usually mean a more engaged and vibrant workplace, with higher levels of staff retention and better quality output.

If you’d like to know more about how to achieve this in your workplace, get in touch. 

say hi to our author

Merilyn founded Catalina Consultants in 2012 on the belief that all organisations, regardless of size, should have access to top quality bespoke HR services. She enjoys working closely with her clients and believes that the best results are built on relationships of rapport, trust and authenticity. Growing up, Merilyn had her sight set on stardom and dreamed of becoming an actor. She also sang and played the piano, but ended up studying accounting and HR. Whilst she hasn’t won her Grammy just yet, she still loves a good karaoke night. Merilyn loves to travel with her family, with South Africa being one of her most memorable destinations.

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