Visualizing Labor Productivity

Weekly updates on the innovation economy.

Before we share the rest of this newsletter, we would like to take a quick moment and wish everyone a Happy Thanksgiving! There are so many wonderful things to be thankful for in life, and we hope that you can share warm and happy memories with your friends and family. 


Today’s Drawing Capital newsletter discusses the topic of labor productivity, which measures the relationship between output from work and number of hours worked. 

Common methods of improving labor productivity include the following:

  • Use of additional and better equipment, automation technologies, robots, and machinery

  • Optimizations and improvements in allocating resources, particularly with the use of data science, pattern recognition, and supply chain management

  • Improving the physical & mental health of employees and providing adequate work motivation

  • Improvements in the knowledge base and skills, either via on-the-job training, job retraining, experience, and formal education of employees. 

  • Technological advancements, digital transformations, improvements, and innovations, particularly when they promote a declining cost curve per unit of value creation

The following three charts from the Bureau of Labor Statistics highlight that California ranked among the top 5 states in positive percentage change in labor productivity, growth rate in labor productivity, and total contribution to America’s total labor productivity in 2020

Improvements in Labor Productivity by State

Largest State Contributors to National Labor Productivity

Labor Productivity per State from 2007-2020

Concluding Thoughts:

  • Labor productivity measures the relationship between output from outcomes and input labor hours

  • There are three methods of earning higher pay from work:

    1. Increase the effective hourly wage (often via promotions), increase employee productivity, or demonstrate the increasing value delivered to the employer

    2. Increase the number of hours worked

    3. Increase benefits associated with an employer, such as receiving employee stock options, restricted stock grants (RSUs), matching of retirement account contributions, and additional work-related perks 

  • In 2020, the 5 states with the fastest growth in labor productivity were the following:

    1. Hawaii, 8.5%

    2. Nevada, 8.0%

    3. Alaska, 6.3%

    4. California, 6.1%

    5. District of Columbia, 5.9%

  • In 2020, California was the highest contributing state to America’s national economic growth. Given that several leading companies with corporate offices in California have significant expertise in software engineering, cloud computing, semiconductors, biotechnology, video conferencing, e-commerce, venture capital, innovative technologies, and more, it’s no surprise that California was the leading economic contributor to America’s GDP among all 50 states. 

  • In 2020, labor productivity actually decreased in 5 states: Idaho, Montana, South Dakota, Oklahoma, Tennessee. 

  • In 2020, Idaho was the only state with both lower labor productivity and an overall increase in labor hours. Ideally, labor productivity should increase over time in order to efficiently generate more output per hour of work, thereby enabling more people to maintain more flexible hours based on their desired compensation preferences and value generated to the employer. 

  • From 2007-2020, labor productivity increased in the District of Columbia and 48 states. 

  • At Drawing Capital, we believe that a significant source of future performance returns in financial markets and labor productivity in the economy in the coming decade will derive from investing in innovation and disruptive technologies. In particular, we have identified 10 fascinating themes that we believe will help drive transformative and disruptive innovation over the years ahead:

1. Automation, Additive Manufacturing, and Robotics

2. Blockchain Technology, Bitcoin, and the Cryptoeconomy 

3. Cloud Computing, Software, Work Productivity Tools, and Consumerization of the Enterprise

4. Connectivity, Internet of Things, and 5G

5. Cybersecurity & Cryptography 

6. Data Science, Machine Learning, Neural Networks, and Deep Learning

7. Financial Technology (“Fintech”)

8. Medical Devices, Gene Editing, Computational Biology, Wearables & Health-Tech

9. Space Exploration & Technological Exhaust from Space Industry R&D

10. Sustainability, Renewable Energy, Decarbonization, and Climate Technologies


  1.  “Bureau of Labor Statistics | Productivity by State - 2020”. 27 May 2021. Accessed 14 Aug. 2021. 

This letter is not an offer to sell securities of any investment fund or a solicitation of offers to buy any such securities. An investment in any strategy, including the strategy described herein, involves a high degree of risk. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the loss of principal.

Any projections, forecasts and estimates contained in this document are necessarily speculative in nature and are based upon certain assumptions. In addition, matters they describe are subject to known (and unknown) risks, uncertainties and other unpredictable factors, many of which are beyond Drawing Capital’s control. No representations or warranties are made as to the accuracy of such forward-looking statements. It can be expected that some or all of such forward-looking assumptions will not materialize or will vary significantly from actual results. Drawing Capital has no obligation to update, modify or amend this letter or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

This letter may not be reproduced in whole or in part without the express consent of Drawing Capital Group, LLC (“Drawing Capital”). The information in this letter was prepared by Drawing Capital and is believed by the Drawing Capital to be reliable and has been obtained from sources believed to be reliable. Drawing Capital makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this letter constitute the current judgment of Drawing Capital and are subject to change without notice.