Class Warfare Blog

December 30, 2016

The Productivity Paradox

From a N.Y. Times column by Neil Irwin (Faster Growth? Two Things Trump Supporters Won’t Like, 12-28-16) the following excerpt was taken:

The Productivity Paradox
Low productivity growth has been one of the chronic problems of the economy in the last decade, and an important contributor to the low growth rate, even if economists aren’t entirely sure why it’s happening. If we want living standards to rise over time, we need productivity to rise.
But the connection between productivity gains and higher incomes can take time to play out. Often it means short-term disruption — job loss — for workers whose jobs are rendered unnecessary.

Apparently the low productivity growth of the last ten years puzzles the author. It shouldn’t. Here’s why.

fig2_prodhhincome

Since higher and higher productivity over the last 40 years hasn’t resulted in higher wages, just what is the incentive for workers to produce greater productivity? I am sure the economically inclined could point to the earlier years described by the data on this graph as one in which workers produced more because of the salary incentives, precisely  because productivity and wages were linked and had been for quite some time. In fact, I can remember UAW negotiations for new labor contracts with Detroit automakers specifically mentioning that for higher wages to be part of any new contracts, higher productivities must be produced. It was a common discussion.

But now, all of the benefits of higher productivity go elsewhere than into worker’s pay envelopes, so what did Mr. Irwin think was going to happen? Does he thing that 40 years is an appropriate amount of time for “the connection between productivity gains and higher incomes … to play out”?

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11 Comments »

  1. “Productivity” is code for exploitation. Is there a chart like the one above specifically for CEO’s or company directors?

    Comment by The Pink Agendist, née Mr. Merveilleux — December 30, 2016 @ 9:20 am | Reply

    • Now that graph would be interesting! In a “pay as you go” culture, when one barters one’s labor, it is for a price. So, I do not make productivity a dirty word. But when one’s productivity goes up and up and up and there is no reward, maybe that ought to be a dirty word … like wage theft, or kleptocracy, or plutocracy, …

      On Fri, Dec 30, 2016 at 9:20 AM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — December 30, 2016 @ 9:48 am | Reply

  2. […] via The Productivity Paradox — Class Warfare Blog […]

    Pingback by The Productivity Paradox — Class Warfare Blog | gramirezblog — December 30, 2016 @ 9:21 am | Reply

  3. Automation is responsible for greater productivity.

    Comment by john zande — December 30, 2016 @ 9:58 am | Reply

    • True, it is one source of productivity gains, but only for things currently susceptible to automation. A study I saw recently compared the jobs lost in the U.S. to jobs gained in Mexico when “jobs” were shipped to Mexico by U.S. firms. The number of jobs gained in Mexico was substantially higher than the jobs lost in the U.S. Why? U.S. workers are the most productive in the world. It took more Mexican workers to replace the U.S. workers because of this, but the much, much lower wages made this “worthwhile” for those companies. Note that we are far behind some other countries when it comes to automation. There are many, many jobs that are not even being considered for automation at the moment, Plus, in the Toyota way, workers who run machines are supposed to suggest ways everything they do could be done better or more efficiently. If you replace those workers with automated machines, where do the ideas for betterment come from? Lots of “unintended consequences” are still to be worked out.

      Plus, why do we allow corporations to focus solely on profit making. In the past, corporations had other goals, including providing high quality jobs for the members of their community. Those goals have been swept under the rug, in favor of greed. What if a very profitable company were to accept being 5% less profitable because they decided to enhance their workers working conditions and pay. Can you imagine the howling? This should be commonplace.

      If we are going to have a “pay as you go” culture, then we need to provide reasonable ways for people’s labor to be exchanged for the money they need to pay. Otherwise we are just consigning a substantial part of our populace to poverty.

      If you go back to the 1950’s, futurists were describing a future in which more and more automation existed, but with people having a shorter, and shorter workweek, for the same pay (4-day workweeks, even 3-day workweeks were “predicted”). Instead, Americans put in more hours now in this era of automation than we did before. Why might that be? Greed, maybe? (Thank you, Church Lady.)

      On Fri, Dec 30, 2016 at 9:58 AM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — December 30, 2016 @ 10:22 am | Reply

      • This is from TOOAIN 2

        In 2010, in Dongguan, China, The Changying Precision Technology Company factory employed 650 workers to produce 8,000 cell phone parts per day. In 2016, that number had dropped to 60 humans churning out 21,000 pieces; a 162% increase with defects down from 25% to below 5%. The company is however hoping to have that number further reduced to 20 in coming years as more production line robots and autonomous warehouse equipment comes online

        Comment by john zande — December 30, 2016 @ 10:58 am | Reply

        • Yep, and did you also read the Times article about the billions of dollars China has spent building “iPhone City?” This included housing for over a hundred of thousands of workers. They were taking those steps because the region had little development and was attracting few people to it. (“Build a nest, and birds will come.”)

          Consider what CNC machines have done to tool and die workers in the U.S. The number of jobs has decreases substantially. This happens on all kinds of scales. But the numbers of people employed keeps going up and up and needs to go up because of population growth. The number of jobs created under the Obama Administration barely kept up with population growth.

          Again, if we are going to have a “pay as you go” culture, we must arrange for the jobs necessary for this. A lesson from history was overtime pay. Most people thought this was a victory for workers being exploited through required overtime. Instead, the lawmakers were focused on spreading more jobs around because most overtime was quite voluntary and one of only a few ways a worker could increase his gross income. Existing workers were sucking up a great many jobs in an attempt to do just that, make more money. By requiring overtime pay, employers had an incentive to hire more workers at straight time, rather than paying extra for overtime work by existing workers.

          We have done progressive manipulations of the job market before, and we can do these things again, if the plutocrats let us. (Pretty please, Plutocrats, can you wait just a while longer for your third billion of net worth?)

          On Fri, Dec 30, 2016 at 10:58 AM, Class Warfare Blog wrote:

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          Comment by Steve Ruis — December 30, 2016 @ 11:09 am | Reply

      • Did you see Finland is starting a universal wage experiment now in 2017?

        Comment by The Pink Agendist, née Mr. Merveilleux — December 30, 2016 @ 12:17 pm | Reply

        • And I think Denmark, too. Long overdue.

          I remember a Scientific American article, which I think was published back in the 60’s, which addressed the negative income tax as a device to accomplish such a thing. The idea has existed for a long time, but in this country, the idea has been promoted that governmental charity or social supports or what have you, are only being partaken of by freeloaders (mainly black freeloaders). There was no push back to this campaign, with data like the fact that very much the largest recipients of such support are elderly white women.

          Even if these experiments prove to be wildly successful, don’t expect the USA to follow suit any time soon. We are exceptional! we lead, we don’t follow! Our definition of leading doesn’t include any of that “get out in front and try things stuff.”

          On Fri, Dec 30, 2016 at 12:17 PM, Class Warfare Blog wrote:

          >

          Comment by Steve Ruis — December 30, 2016 @ 12:24 pm | Reply

  4. “What if a very profitable company were to accept being 5% less profitable because they decided to enhance their workers working conditions and pay”

    This is the argument I keep making where this conversation takes place on line but the pro-capitalists act like I asked them to commit suicide. 19 states are increasing the minimum wage beginning January 1st and there is a lot of hoopla about how this is going to raise the price of burgers and tacos. Suggesting that profits take a hit on this where they can and gradually ease into price increases seems incomprehensible to most. They know it would work but no one wants to be the first to set such a president.

    Comment by lbwoodgate — December 30, 2016 @ 3:56 pm | Reply

    • Since the companies won’t regul;ate their own greed any more, it is up to us to do it. “Us” being our elected representatives. (Don’t hold your breath.)

      On Fri, Dec 30, 2016 at 3:56 PM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — December 30, 2016 @ 9:12 pm | Reply


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