My old boss told me once, “When someone calls you with an opportunity, be assured that it is his opportunity. Words have a way of allowing a skewing of their definitions, depending on the situation and intent with which they are used.
The word that bothers me today is productivity, which in the socio-economic context correlates with increasing the amount of product you can get out of a person or a work force. It is measured by the change in the ratio of the value of things produced to the cost of the labor needed to produce them. Improved productivity in theory adds to personal and national well-being that results from growth in income. Theorists argue that the benefits are more real income, enjoyment of leisure, lower cost of goods and services, and improved housing and education. The truth of this is subject to question in the practical world. With the prices of automobiles at ten times what they were in 1970, gasoline at over four dollars a gallon, food prices buttressed by subsidies because producers can’t compete with foreign sources, a few raised eyebrows at this contention might be justified.
Attention to productivity improvement goes far back in history. James Watt got things really rolling in England in the late eighteenth century with his improvements on, and production of the steam engine kick-starting the Industrial Revolution. In current context it involves organization of work, attention to cost structure, adoption of accepted business processes, knowledge management and information technology, and improved and automated equipment. In many cases software with broad application is adopted for process upgrades.
The claim of increased income for workers at a time of rising productivity is open to question, as wages have shown no growth for more than a decade, and even some reduction. While productivity assessment works for most fields of effort, including wholesale trade, retail trade, medical, food supply, etc, it is handiest to look at the manufacturing segment, as that is where data is most readily available and where productivity seems to get the most attention. It is where the claim of increased income for workers begs the question: Is this for real? A startling piece of information generated by the labor department for the year 2009 compares the dollar per hour cost of labor for 18 nations, including 12 European countries, Australia, Canada and Japan. Norway ranked the highest, at $53.89 per hour. Spain was last at $27.24 per hour. The United states ranked fourteenth at $33.53 per hour. This tells us that the benefits of increased productivity are more likely in profits that are distributed to owners and shareholders and not to workers.
Since not much has changed in the socio-economic picture in the last three years, a review of more recent years would likely show similar results. In the first quarter of 2012 in the manufacturing sector productivity rose by 5.9% and unit labor cost fell by 4.2%. From an efficiency standpoint that looks great, but a lowered labor cost indicates that workers are not benefiting. The reality is that managers improve productivity by cancelling pensions, medical plans, retiring older workers who earn more,and making fewer people work harder. It is no surprise that workers complain that they have to work harder to keep their jobs.
When a widget manufacturer raises his work force efficiency to produce more widgets for the same labor hours, or accomplishes the same by installing automated machinery, he can boast about improved productivity. If the market can absorb more widgets, workers are assured of keeping their jobs. But if the market cannot absorb more widgets the work force gets reduced. Either way, the widget manufacturer wins, but the latter case is bad for employment.
What should one read into it when the President announces that productivity is up but the unemployment picture is still unsatisfactory? How does improved productivity correlate with employment numbers? Did improved productivity result in wage increases? Is it helpful or harmful?
In a benevolent commercial and industrial society, the profit that improved efficiency generates is heavily distributed to workers in the form of higher wages, medical insurance and provisions for a reasonably comfortable retirement. If wages are held stagnant, the economy isn’t going to improve. If improved productivity benefits the worker, then good things happen. There is no better way to stimulate the economy. But management that operates in this manner is at a disadvantage with respect to competition, which explains its rarity.
Rising productivity is deemed to be good. Why must this be accepted? No one can say what will be enough. Futurists like Ray Kurzweil (The Singularity Is Here) foresee human brains as adjuncts to far more powerful external computer brains, automated factories that can supply all human needs, that can replicate their machinery and even replicate themselves. But they give short shrift to the spiritual side of humans that propels them to be individually creative and productive.
In these few words, I have only touched on this complex word..... productivity. I could have written instead about productivity in baking bread. Should I use the bread maker, which is speedy and doesn’t measurably improve my life and produces something that tastes like bread but doesn’t look like bread? It will free me to do something else, say, water the plants..... or should I do it the old fashioned way, and spend the time kneading dough in serene contemplation, anticipating golden brown loaves that look like bread, lifted from the oven?
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