David Smith On Productivity

[easy2012]

And those same free markets have now commoditised labour and destroyed it's bargaining power relative to capital. I agree that while labour could exert enough muscle to gain a share of increasing productivity it made sense for labour to be more productive- my point is that this is no longer the case- what we see now is that almost all the gains from productivity go to the top, while labour's position is weakened by it's own success in reducing the need for labour.

Again with Caveat - "in the west". Chinese workers are getting very impressive wage rises.

You have already conceded the point that the post war period was better for the average person than today- so when our leaders tell us that the way to prosperity now is for labour to produce more this is only true if we take this to mean the interests of the 1%- because it is they who will benefit from that productivity increase- not the ordinary person.

No - labour produces more is good for the customers (who are the ordinary people), the money printers (the 0.001% ?) and to a certain extend the 0.1% (who are subject to other economic forces and will not have pricing power in a hyper productive world).

Also, another caveat - 'post war.. better..'' for the people in the West (Since 1980, the it is better for the other side of the world compared to the 1946-80 period)

Edited February 21, 2013 by easy2012

[wonderpup]

Again with Caveat - "in the west". Chinese workers are getting very impressive wage rises.

That's true for now- partly because their labour market is tightening and inflation is driving wage demands. But already manfacturers are looking to outsource to cheaper places or are starting to automate their production. There's no reason to think that Chinese labour will be immune from the impacts of technology and wage arbitrage- nor is there any reason to think that their 1% will be any more willing to share the benefits of such improvements in productivity.

No - labour produces more is good for the customers (who are the ordinary people), the money printers (the 0.001% ?) and to a certain extend the 0.1% (who are subject to other economic forces and will not have pricing power in a hyper productive world).

If labour produces more but it's spending power declines due to inflation in energy, food and housing costs the result is margin compression, wage compression and more poverty.

Higher productivity in the absence of increased demand is deflationary for prices and ultimately wages.

Also, another caveat - 'post war.. better..'' for the people in the West (Since 1980, the it is better for the other side of the world compared to the 1946-80 period)

That's true- I am addressing here the propaganda coming from western leaders claiming that by becoming more productive their ordinary workers will improve their living standards- this is not the case.

For example we can all agree that Germany is the poster child for a productive economy- so how does this work out for the ordinary german worker?:

Economic Miracle Eludes Germany’s Lowest-Paid

But hidden behind the so-called German economic miracle is an underclass of low-paid employees whose incomes have benefited little from the country’s stability and in fact have shrunk in real terms over the last decade, according to recent data.

And because of government policies intended to keep wages low to discourage outsourcing and encourage skills training, the incomes of these workers are not likely to rise anytime soon.

That, in turn, means they are likely to continue to depend on government aid programs to make ends meet, costing taxpayers billions of euros a year.

The paradox of a rising tide that does not lift all boats stems in part from the fact that Germany has no federally set minimum wage. But it also has its roots in recent German politics, which have favored measures to keep unemployment low and win support from employers.

While the top net income for middle- to higher-income Germans, generally defined as those earning 3,400 euros a month, or $4,870, rose slightly in real terms from 2000 to 2010, net incomes for low-wage earners, or those earning 960 euros a month or less, have fallen 10 percent, according to a new study by Markus Grabka, an economist at the DIW German Institute for Economic Research.

“Someone who earned 1,073 euros in 2000 earned 963 euros in 2010,” Mr. Grabka said.

Nowhere is this deepening chasm more visible than in Berlin-Mitte, the prosperous center of the capital, full of handsome government buildings and fine restaurants that cater to officials and lobbyists.

On a rainy summer morning here, only a 10-minute walk from the glamorous Unter Den Linden boulevard, hundreds of poorly dressed men and women lined up inside the district employment office. Some of them had come to look for work, some were applying for state help and some just wanted to accompany a friend.

Maria Müller, 63, works in a clinic in Berlin that cares for elderly handicapped people. “Before tax, I earn 900 euros a month,” she said while waiting for her friend to finish her business in the district employment office. “I haven’t had a pay rise since 2002. I can barely survive even though the government here talks about how good the economy is doing.”

http://www.nytimes.com/2011/08/19/business/global/many-germans-scrambling-as-economic-miracle-rolls-past.html?pagewanted=all&_r=1&

So much for high productivity leading to general prosperity.

Edited February 21, 2013 by wonderpup

[easy2012]

That's true for now- partly because their labour market is tightening and inflation is driving wage demands. But already manfacturers are looking to outsource to cheaper places or are starting to automate their production. There's no reason to think that Chinese labour will be immune from the impacts of technology and wage arbitrage- nor is there any reason to think that their 1% will be any more willing to share the benefits of such improvements in productivity.

Outsourcing alone obviously does not reduce labour demand - it just move labour demand. Automation is more of a game changer but the use of energy here will be interesting. I do not know the numbers but presumably through evolution, human becomes very good at the converting energy into useful works, not sure how much power robots and supercomputers and cooling etc cost.

If labour produces more but it's spending power declines due to inflation in energy, food and housing costs the result is margin compression, wage compression and more poverty.

Higher productivity in the absence of increased demand is deflationary for prices and ultimately wages.

Sure - what you are saying is that the monopoly sectors exert the power of their static/decreasing productivities into pricing power, eating away the profits of the productive, but non monopolistic sectors.

That's true- I am addressing here the propaganda coming from western leaders claiming that by becoming more productive their ordinary workers will improve their living standards- this is not the case.

Quite obviously Western leaders only knows about printing money and talk on the TV.

Super productive workers in non monopolistic sectors improve the standard of livings of his/her customers and the governments (the capital owner will eventually faced the declining margin/profit problem).

Ultimately, economy is about balance and dynamics. Producing a cars enough for population demands is obviously good but if we can 3D print cars and the whole football fields are full off cars at £100 each, then it is obviously still a bad thing for car manufactures.

You have also rightly stated before that people's needs are limited, and unlimited production of goods beyond people needs are unlikely to be a good thing. We can of course further constrained by this money economy where everyone must transact (or rather must pay taxes) in the sovereign currency - otherwise I suppose if I can replicate potatoes in unlimited quantity then I really don't mind if you want a few of them in exchange of nothing other than some kind gestures/words - but I unfortunately I need to pay council taxes and the low productivity bureaucrats salary and pension in the sovereign currency - and so I must try to sell the potatoes for £.

[Georgia O'Keeffe]

Cars were once expensive and very few people had them, then they got cheap and lots of people had them. Each worker in a car factory was more productive, but there were more workers making more cars.

Cars never got cheap they got financialised/creditised

Reductio ad infinitum is very poor logic.

Supply, demand and price are highly linked. Therefore increases in productivity means things become cheaper, which causes supply and demand to increase.

clearly this is mince, things get cheaper due to technology, thats the natural market state, deflation as a consequence of innovation, but we have a FIAT system in which force overcomes technology as it always will

False binary choice.

Remember that in the 20th century communism made people a disposable commodity in a less affluent world, while at the same time free markets in the west made people a scarce resource in a world full of riches.

20th century communism was special flower force the same as capitalism, quelle suprise it has a use by date

More productivity could equally mean more time at home. Working hours have (generally) been on a downward trend since the industrial revolution.

i'll give you this, the welfare state is an economic rentier that has absorbed every technological added benefit and then some which should be as expected because its force and has no price signal

If it were true it would be a bad thing. However it seems to me the lot of the average person is better off now than at any point in previous history.

Today is today, tomorrow is tomorrow and what it brings is completely irrelevant to how we perceive ourselves today, 5000 years of good and bad and the ower of entitlement can completely ignore it, because youre worth it

Edited February 21, 2013 by Imogen Cunningham

[the shaping machine]

You have already conceded the point that the post war period was better for the average person than today.

Only in some ways; cheaper housing, better quality education, ease of finding a job.

In many other areas there has been continued improvement; health, and technology in particular.

Many of the things that have got worse are correctable, if the will were there.

When our leaders tell us that the way to prosperity now is for labour to produce more this is only true if we take this to mean the interests of the 1%- because it is they who will benefit from that productivity increase- not the ordinary person.

You say this, but provide no evidence. Also frankly I much don't care if "the 1%" also benefit from increased productivity.

Edited February 21, 2013 by the shaping machine

[wonderpup]

Only in some ways; cheaper housing, better quality education, ease of finding a job.

In many other areas there has been continued improvement; health, and technology in particular.

Many of the things that have got worse are correctable, if the will were there.

So we have situation where worker productivity goes up while in some ways the living standards of the workforce goes down- how does this fit the idea that increasing worker productivity always leads to a better outcome?

You say this, but provide no evidence. Also frankly I much don't care if "the 1%" also benefit from increased productivity.

The evidence is out there if you look for it:

Economists don’t agree on much but they do tend to converge on one idea – productivity improvements are the key to long-term prosperity. Except that who benefits from productivity increases matters as much as the efficiency gains themselves, according to two reports from the liberal Economic Policy Institute in Washington.

The first finds that rising income inequality in the United States means that the benefits of better productivity are accruing mainly to the very wealthy. The EPI offers this startling nugget of data as basic food for thought: U.S. productivity grew 80.4 percent from 1973 to 2011, while average hourly compensation rose just 39.2 percent in the same period, and median compensation, which excludes outliers, gained a paltry 10.7 percent.

Productivity growth, which is the growth of the output of goods and services per hour worked, provides the basis for the growth of living standards. However, the experience of the vast majority of workers in recent decades has been that productivity growth actually provides only the potential for rising living standards: Recent history, especially since 2000, has shown that wages and compensation for the typical worker and income growth for the typical family have lagged tremendously behind the nation’s fast productivity growth.

The minimum wage today, if it reflected productivity gains over the last 30 years, should be between $19-$20 an hour. Raising the minimum wage, then, to $8.50 an hour seems like a big deal – except when you understand that it hides the vast robbery that has taken place of the past 30 years and it certainly will not make it possible for people to live with dignity and respect.

http://blogs.reuters.com/macroscope/2012/05/04/the-u-s-productivity-farce/

The point is that only the 1% benefit from increased productivity- so why should anyone else care about becoming more productive?

Why are our leaders telling us that becoming more productive will make us better off- when in reality it might make them and their friends better off but we won't see much benefit.

Edited February 21, 2013 by wonderpup