An important question for economists on "productivity"

I am confused and need a bit of help here. Lately I have heard the phrase "increased productivity" implemented as a rationalization for US job loss. This, if I understand the phrase correctly as it applies to economics, is an intentionally obfuscative moniker used to describe the fruits of US job exportation to cheap labor markets.

Here is the question. Does the "productivity" of US corporations include that of cheap labor performed by non-US employees? In other words is importation of productivity being used as a defense for the exportation of US jobs? When the term "productivity" is used is it describing US employee productivity or US corporate productivity, which takes advantage of those in foreign country's, who are forced to work for penny's on the dollar? If it is the later how may it logically be used as an argument to defend the deflated US job market? Again, if I am understanding how productivity is being calculated, the term seems to be nothing more than a superficially appealing, yet hollow and misleading term describing the profitability of destroying the US job market via implementation of foreign slave labor.

RC

The productivity number only includes goods and services provided from within the U.S., not U.S. companies doing work overseas.

There is probably a slight discrepancy due to things like a U.S. phone number transferring to a technical help desk overseas. But, that's probably a small number. It's not that hard to factor that out.

You are correct in that the productivity gains are only on a per worker basis, and if there are less workers, making nearly the same goods and services, the number would go up. The absolute productivity (q) is not going up. Just the per worker value. So, the economy is negatively impinged by this fact.

You're not confused at all. You got it pretty close to the facts.
The Professor

Productivity is merely total revenue divided by the headcount. It is a measure of how many dollars each employee brings in.

The increase in the use of network infrastructure is largely credited with much of the productivity gains of the last decade.

However, I worked at a LARGE company that was playing games with this number by laying off people, and hiring back contractors to do their work. Since contractors do not count as part of your "headcount" (i.e. you do not pay payroll taxes for them or benefits), they help maintain the same workforce, while increasing the apparent productivity per employee.

I suspect that similar shell games are happening with the off-shoring trend.

Geoff

Is the foreign slave labor pool being used to skew "productivity" valuations as the company you worked for used that of contractors?

If not, if foreign slave laborers are included in the head count is their wage, the conditions under which they work and the hours they work taken into consideration?

How exactly is "productivity" determined? Again is it the productivity of the corporation workers en toto or the productivity of US workers exclusively? You say "revenue devided by head count". Is it revenue exclusively or does the hard count of goods manufactured have some import? Does the trade deficit come into play here? Are products manufactured for US corporations by foreign slave labor considered US products or foreign products?

To ProfessorGAC...I'm sorry if I seem a bit dense here....economics is not one of my strong points, unfortunately. I am seeking this information because I am getting ready to unload both barrels on some local freeps and I don't care to appear illinformed on the subject...even though I am...hehehehehe. Anything I know of economics is based pretty much on logic....the finer points of the science, I'm lacking in.

I feel it is very important for those of us not skilled in economics to become informed to the degree that we might provide truthful or countervaling arguments when faced with what seems to be Neo-con mind humping.

RC

Assuming the same total number of workers per company, and part of those workers are replaced by low wage workers.
And assuming sales prices remain the same.
Then the reduced cost will cause increased profit; both total profit and "revenue per worker" (productivity).

So instead of saying "thanks to outsourcing we make more profit", they say "productivity has increased". But in this case it comes down to the same thing.

However, i'm not an economist.

nt

RC

...working longer hours so that they can keep up with their mortgage payments and don't get evicted from houses in neighborhoods with decent schools, so that their kids still have a chance at a bright future.

that would have more to do with the dollar not stretching as far as it used to.

and it goes up if people work more overtime and take fewer vacations.

I could be wrong.

I think people need more money, so they're working more overtime, and productivity is up.

because you have to pay them more per hour. This is true of almost all blue collar jobs and some white collar. If you are salary and not paid by the hour then of course working ovrtime is better for productivity, that's one reason why Bush and company have been trying to redo the wage laws.

your current employees value free time more than time and a half for overtime.

If you get more work from the same number of employees, you're more productive even if you are paying time and a half. Obviously these people aren't sitting around doing nothing when they're working overtime, and if there were no profit margin on that overtime activity, the boss wouldn't be asking them to do overtime.

that is exactly what is happening with my spouse's job. Even though his boss restricts his overtime, he still allows it when there is a deadline and he doesn't want to hire anyone new. He just moves his guys around therefore causing more work for less pay on longer hours.

The end result: poor, tired and overworked causing severe burnout!

I really need to get as much input as it possible here. Will be out for the rest of the morning so I hope we get some contributers on this thread. Will try and do more net research myself tonight.

Thanks,

RC

The U.S. Department of Labor reports that you worked an additional 61 minutes a week this past quarter without any increase in pay. The stock market climed another 3% on this news, but given the fact that by the time you reach retirement there will be two people trying to sell their 401k holdings for every willing buyer, what the hell do you care?

working more, and not getting paid much more for it (or, as this report suggests, not getting paid anything for at least the first hour).

Measures of workforce productivity focus on (reported) direct labor hours and attempt to exclude supervisory and other nonproductive labor hours. As more workers are coerced into working "off the clock" and more workers are speciously categorized into nominal 'supervisory' positions (for exemption purposes), measures of productivity are inflated.

What's missing in the public discussion regarding productivity is the argument that a 36-hour workweek (and increased vacation time) would encourage a greater degree of enfranchisement in our economic system.

The factory I work in in my department has 8 machine operators on 1st shift, 6 on 2nd an 3 on third shift which is what I work. We had 4 for awhile at the end of 2003 but one guy got fired but he wasn't replaced and management said he wasn't going to be. The kicker is that each shift is expected to run the same amount of machines and they offer no shift differential and raises were only around 10 cents this year for those that got one. I didn't because I already make too much thanks to a former supervisor that liked me and gave me good raises before the new management took over. And yes I'm looking for a new job.

So anyway yes our productivity is up, wages are stagnant and hiring is frozen for the foreseeable future. Time for management to give themselves a bonus.

and when a corporation tries using productivity as an excuse to outsource , its bogus. The reason they are leaving is low wages. They believe the cost of shipping along with the low wages can still beat the high cost of good wages in the US. I have a hard time believing this can last. Shipping , insurance, theft, weather all add to the cost of outsourcing since most products are coming back here. Im of the opinion that they are willing to take the hit until the wages here, go down the tubes, then they can come back.

For example, the biggest local grocery chain has been gradually converting from employee-manned checkout counters to "self-checkout" counters. The grocery chain's productivity increases because it has shifted work onto the consumer.

Also, I noticed fewer and fewer sales people in retail establishments over the past few years and have I have spent much more time waiting for assistance or to be checked out.

And then there's my favorite productivity increaser, company voice mail systems that require me, the consumer to endure 5 minutes or more of menu choices before I can get a human being on the line.

GRRRR!

I never thought about how theyve passed labor to the consumer. Good point

service, they can get away with it.

I actually think retailers who do this are losing business to Amazon.

I'd rather buy on Amazon than waste my time at a retailer which is understaffed by people who know nothing about the products anyway.

hollow artifice referred to as "productvity".

http://www.morganstanley.com/GEFdata/digests/20040112-mon.html

This article clears up much of my confusion and confirms my suspicions. In short, "productivity" is a measure of Global Corporate "efficiency". It's calculation is somewhat circuitous. ProfessorGAC sais the labor variable does not include foreign labor. Unfortunately it also appears not to include any accounting for the lower wages and lost jobs of US workers who are unable to afford to purchase any product regardless of how low "more efficiently produced" products are priced. As such, an at present, slow, non-recoverable revenue leakage is occurring which, in spite of profit gains and "increased productivity", calls into question any cumulative long term economic recovery based upon "increased productivity". At least that's how it appears to me...

Here is what the Freepers have to say on the isseu....

http://209.157.64.200/focus/f-news/1056574/posts

What's your take?

RC