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Post by agito on Sept 4, 2008 15:26:42 GMT -6
try not to punch your monitorAmericans' productivity soared in the spring while labor costs declined, two welcome outcomes that should relieve concerns that inflation is getting out of hand.gee- wonder how productivity rose with gdp flatlining. (yes- that was a rhetorical question)
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Post by unlawflcombatnt on Sept 5, 2008 3:17:07 GMT -6
Why are wages declining while productivity is increasing? (That's another rhetorical question.)
It's long been the dogma that rising productivity leads to increased wages. And that "dogma" has pretty much been disproven under the Bush plutocracy. There is no mandate that employers have to pay workers more, just because they produce more. And Corporate America has proven it.
If fact, it is this wage-productivity gap (well-characterized by economist Ravi Batra), that is sinking our economy. In aggregate, if workers aren't paid as much as they produce overall, they can't purchase all of what they produce. The end result is there's less demand for what they produce, causing less demand for their labor, leading to lower employment AND wages. The result is reduced consumer spending, causing a reduced demand for production, causing an reduced demand for labor to provide that production.
And the cycle repeats: Layoffs-->reduced employment and wages-->decreased spending-->less production demand-->reduced labor demand-->reduced wages, employment, and aggregate income-->reduced spending--reduced production demand-->reduced labor demand-->reduced employment, wages, & spending power. And on and on and on.
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Post by judes on Sept 5, 2008 16:01:28 GMT -6
I read a similar article and it made me cringe as well. Does anyone know where the data comes from to measure productivity? How are they measuring it? I used to have to calculate productivity for the manufacturing site I worked at, and it was a sham basically.
We measured the total number of units of finished product going out the door divided by the total labor hours worked in the plant to get that number. So when we outsourced say, upstream fabricating operations, that fed final assembly, it looked like your productivity was going through the roof. I mean you still have the same number of finished units going out the door, but now the molded parts you need to make those are being shipped in from China instead of being made in the molding department with internal labor. So while you are still making the same number of finished product, you have less labor since you are purchasing many components you used to make yourself. So it can be a very easily manipulated measurement in my opinion, if you don't compare apples to apples. I'd be curious about the data.
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Post by agito on Sept 6, 2008 13:26:53 GMT -6
if i was in your situation judes- i would have measured productivity as a ratio of costs to income. IE- income of product made divided by cost of production. which really just reduces it to basic business keeping. I'd only measure hours if i was bringing a new technology online to see how the hours were different.
the article i linked had a few hints:
so obviously they are using GDP divided by "labor costs" - i'm going to guess that's a sampling of wages....
more
the third quarter of last year might have been a "genuine" productivity increase, but this last quarter's productivity increase is simply a result of labor costs being reduced from job termination than it is by an increase in GDP.
that being the case- wonder how productivity will be affected if deflation sets in... which- if this article makes the point that inflation fears are allayed- then deflation becomes the next worry. the companies left producing goods are going to have to drop their prices to move product...
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Post by judes on Sept 6, 2008 16:21:35 GMT -6
Thanks for your comments agito, this is something I have been curious about for a while. I don't think that can quite explain it however. From the article, it pretty much states the denominator is "hours worked". It also says the numerator is the total output. What that is exactly isn't clear to me. Maybe it is GDP, but I don't know if that really makes sense, since much of our GDP has nothing to do with output produced in this country. From the article:
The Commerce Department reported Thursday that productivity, the amount of output for every hour of work, jumped 4.3 percent at an annual rate in the April-June quarter, a full percentage point higher than economists expected.
I really would like to know how they collect the data on the "amount of output " produced, if it is similar to how we measured it in our manufacturing facility it is a silly measurement, if you can greatly increase your productivity just by outsourcing work you used to do in this country.
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Post by blueneck on Sept 6, 2008 21:21:03 GMT -6
And that is exactly what has been happening in manufacturing.
Much of the remaining domestic manufacturing has become a hollowed out shell - final assembly and packaging operations for foreign made componentry. Some operations are merely putting the "knobs" or labels on an item and sticking it in a box.
The auto industry is becoming a final assembly point for mexican, chinese and japanese made parts as the automakers continue to shed their parts operations.
No wonder the productivity numbers look so good
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Post by judes on Sept 7, 2008 9:42:35 GMT -6
Exactly Blueneck!! That is what has been happening, it also explains why the disconnect between rising productivity and falling wages, which have historically trended together.
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