US "productivity" a question

[G_j]

I keep hearing "productivity" in the US is way up. How is this measured?
If workers that were making $12/hr were suddenly payed $10/hr instead, would "productivity" go up? If overtime and health insurance are taken away from workers thus making a product cheaper to produce does that
mean "productivity" is higher?
I've never been big on economics. Thought you all would know.

[htuttle]

1. You understand economics well enough

Yes, you're right.

Basically, if a company can reduce labor costs IN ANY WAY (such as laying people off, reducing pay, etc...), and continue to produce what it did before, it means that their 'productivity' has increased.

I never see that as a particularly good thing in this environment.

[G_j]

2. so reintroducing slavery

would send productivity through the roof?
to take the logic to it's extreme..

[ProfessorGAC]

7. In Theory Yes. In Practice No

There are Maslovian aspects to productivity apropos compensation and hours.

Remember that when the south had slavery, they had essentially free labor, yet with about 40% of the people, they had only about 9% of the profits in the United States. Slavery doesn't breed efficiency.

Remember that the american worker became the envy of the world for their productivity, when? During the 1920's, when unions started making gains and when a psych school of business behavior realized that the better you treat workers, the more you get out of them for the money you spent.

So, in simple 2D theory, you would get infinite productivity. But, in practice, no.
The Professor

[Granite]

9. Law of Diminishing Returns

So, in simple 2D theory, you would get infinite productivity. But, in practice, no.

Productivity is curvilinear. Case example - increasing work hours increases productivity to a point. But add too many hours and workers become less productive.

I liked your example of the 1920's. Another example is the high-road companies that have experimented with shorter working hours (the Kelloggs's 6 hour workday, etc.) which provided evidence that workers were more productive when asked to work less hours then when they were asked to work more.

So the idea that you can bleed workers to death (more work hours, less pay, less desirable work conditions) and increase productivity in the long-run is bunk.

[ProfessorGAC]

4. However, It's Not The Hourly Pay

It's the total production cost owing to labor. So, if a company has a thousand workers making $500 million in goods per month, they're getting $500k in goods per worker.

If it then lays off a hundred, and produces $470 million in goods and services for the month, they would have a productivity of $522k per worker. So, productivity would be said to rise by 4.44%.

That's how traditional economists and analysts look at it. I come from a different school of caustive economics that indexes that value to the total value of goods and services, corrected for the change in market value. So, in the example i described, the productivity drop in absolute terms is 6%, while the traditional view says it goes up 4.44%.

If you divide the former by the later, you get a value <1. Real productivity gains are achieved only when that number rises to >1.

There are lots of modeling issues i have with the bought and paid for economists who are proclaiming a lot of this nonsense as good news.

The real fact is that the economy is roiling because the government has spent 90 billion dollars in special appropriations money since August. That's 9% of GDP in 4 months. Of course, we're going to see GDP growth. But, it's ALL BORROWED MONEY.

The other factors being trumpeted by the press are immaterial. It's not sustainable because the productivity gains, in the absolute, are non-existent, and the source of increased monetary velocity is governmental borrowing.

So, you're right about the productivity. The people reporting it are the ones who have gotten it wrong.
The Professor

[G_j]

8. interesting

I knew I'd get below the surface with you folks. thanks!

My gut feeling on hearing about "increased productiviy" was that it was a dishonest distraction.

[adriennel]

3. productivity=fewer workers

people who are gainfully employed really don't want to lose their jobs right now; do you this accounts for some of the recent increased productivity?

basically it is the corporation trying to squeeze the most out of their workers while giving them less pay and benefits and in many cases, an increased work load (with no corresponding increase in pay).

I was just shopping at Old Navy. This Old Navy store has 12 cash registers at the front of the store. 90% of the time, only 1 or 2 registers are staffed. Today, during the busy holiday shopping season, there were a whopping total of 3 registers staffed.
Why build a superstore that runs on a skelton crew? Productivity.

[SlavesandBulldozers]

5. so if all of your workers are in China

that means you're really productive right? What I'm asking is that do they delineate between U.S. workers and other workers when measuring productivity of U.S. companies?

[ProfessorGAC]

6. Yes They Do

The productivity numbers measured goods and services generated here no matter where they are sold.

The final mathematical component of GDP is the Net Export number. In the last 20 years or so, that's been a negative number, since we buy more foreign made goods they we ship out to other countries. The productivity values of those workers is part and parcel of that figure.

So, what those folks do does not go into the productivity numbers.

However, read my first reply above to get a better picture of why this number going up is not necessarily a good thing.
The Professor

[schultzee]

10. While its not the hourly pay, it could play into it because it means

the amount of productivity one worker creates. For instance my spouses productivity is 2.5, which means it would take 2.5 people to do the amount of work he does. Businesses who hire one person and make them work harder have higher worker productivity. Now that there will be no overtime for many people the rePiglicans can make us even more productive.