Tuesday, August 11, 2015

8/11/15 Productivity Schizophrenia – I am going to have to be committed

There was a lot of hue and cry over the poor increase in the unit labor cost index.  Here it is year over year.  Very disappointing they say.  Why?  Because it wasn’t higher.  Like in higher cost to employers.  Well which is it we like?  We like employers to have low labor cost and we like employees to be paid well.

Worse, here is the year over year of total output per man hour.  Everybody today was saying how we need better productivity.  That productivity is the key to higher wages and a better living standard.  One leading financial website called it a crisis.  But I ask, with more automation, that is, more productivity, what happens to wages in general?  Suppose businesses respond to this wailing about low productivity with an all-out effort to buy robots and replacing their workers.  Productivity will increase on this chart nicely.  But what happens to that living standard with laid off or not hired workers?

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