The Productivity Paradox --We Aren't Working Smarter, We're Working Harder

[Vitruvius]

By STEPHEN S. ROACH

<SNIP> there is one aspect of the economy on which agreement is nearly unanimous: America's miraculous productivity. In the third quarter, productivity grew by 8.1 percent in the nonfarm business sector — a figure likely to be revised upwards — and it has grown at an average rate of 5.4 percent in the last two years. The favored explanation is that improved productivity is yet another benefit of the so-called New Economy. American business has reinvented itself. Manufacturing and services companies have figured out how to get more from less. By using information technologies, they can squeeze ever increasing value out of the average worker. It's a great story, and if correct, it could lead to a new and lasting prosperity in the United States. But it may be wide of the mark. <SNIP>

For example, in financial services, the Labor Department tells us that the average workweek has been unchanged, at 35.5 hours, since 1988. That's patently absurd. Courtesy of a profusion of portable information appliances (laptops, cell phones, personal digital assistants, etc.), along with near ubiquitous connectivity (hard-wired and now increasingly wireless), most information workers can toil around the clock. The official data don't come close to capturing this cultural shift.As a result, we are woefully underestimating the time actually spent on the job. It follows, therefore, that we are equally guilty of overestimating white-collar productivity. <SNIP> This is not sustainable — for the American worker or the American economy. To the extent productivity miracles are driven more by perspiration than by inspiration, there are limits to gains in efficiency based on sheer physical effort.

The same is true for corporate America, where increased productivity is now showing up on the bottom line in the form of increased profits. When better earnings stem from cost cutting (and the jobless recovery that engenders), there are limits to future improvements in productivity. Strategies that rely primarily on cost cutting will lead eventually to "hollow" companies — businesses that have been stripped bare of once valuable labor. That's hardly the way to sustained prosperity.

Many economists say that strong productivity growth goes hand in hand with a jobless recovery. Nothing could be further from the truth. In the 1960's, both productivity and employment surged at an annual rate of close to 3 percent. In the latter half of the 1990's, accelerating productivity also coincided with rapid job creation. In fact, there is no precedent for sustained productivity enhancement through downsizing. That would result in an increasingly barren economy that will ultimately lose market share in an ever-expanding world. <SNIP>

For all their wishful thinking, believers in the productivity miracle are right about one critical point: productivity is the key to prosperity. Have we finally found the key? It's doubtful. Productivity growth is sustainable when driven by creativity, risk-taking, innovation and, yes, new technology. It is fleeting when it is driven simply by downsizing and longer hours. With cost cutting still the credo and workers starting to reach physical limits, America's so-called productivity renaissance may be over before Americans even have a chance to enjoy it.


Stephen S. Roach is chief economist for Morgan Stanley.


MORE AT: http://www.nytimes.com/2003/11/30/opinion/30ROAC.html

Hence the "jobless recovery"; no need to hire people to do the work when the economy picks up; not if you can squeeze it out of your present employees by working them 60 hours a week while paying them for 40.

And it's a sweet deal for our featherbedding managers; no need to come up with new products or breakthrus or productivity advances -- not when they can sweat it out of the workers with threats that if they won't work 60 hours for 40 hours' pay, there are plenty of people out of work to replace them with.

Innovation, creativity, risk-taking are hard. Running a slave ship is easy. Guess which America's lazy overpaid Rethugnican managers prefer.

[havocmom]

1. Starts from the top with CEOs who are hired to sell stock

and not to assure that goods/services are produced.

American business is now a house of cards. The rush to put Social Security $$ into private investment portfolios was a clue. The CEO's and their Wall Street Shills had pretty well conned all the discressionary cash from the general public they could. To continue to keep the card pyramid afloat, they needed to find a way to force investments beyond what was volunteered.

When the CEOs aren't really interested in making a product, they will not invest in the mechanisms for production, whether that be plants, equipment, R&D, training and keeping a work force. They pass off the piddley details of keeping the business running as a facade for selling junk stocks to middle managers. Those folks aren't given what they need to do the job, but have been well drilled that if they cut expenses and keep squeezing blood from turnips, they have a shot at a big office.

All those MBA's from the 80's 'greed is good' days of Reagan are just poor dupes who need to get their collective consciouses raised.

[IrateCitizen]

5. Ivy League business schools

A good friend of mine attended Harvard Business School a couple of years ago. He's someone I've known since we were 8, we graduated high school together, and still have managed to stay in touch. My friend is a brilliant guy from working class roots. But when I went to visit him in Boston and hung out with some of his friends, I could see that he was becoming part of a VERY different culture.

It almost seemed that, among all of his friends that I met, that they were of the belief that they were "superior" people to everyone else. The conceit was really quite unbelievable. And in crossing that belief over to the real world, it is very easy to understand how they, the managers of tomorrow, can be quite content squeezing every last drop of blood out of the "common folk". After all, the "commoners" are not as valuable as they are, and therefore they are to be exploited. Such is only the natural order of things.

In their warped, guilded senses of reality, at least. :eyes:

[Interrobang]

2. Nine weeks, is it?

IIRC, the average American worker spends something like nine weeks more on the job than his or her European counterpart (and probably slightly longer than the average Canadian worker, don't know). I post a lot on Slashdot, and you simply would not believe the number of people on there (IT workers) who are fanatically *proud* that they regularly work 60 or 70 or 80 hour weeks -- I tell them they need their heads read. (You know, if everyone who now works 60-80 hour weeks started working 40 hour weeks like us regular people, they'd have to hire bunches more people!) Then again, most of them don't get the idea that they're just willing corporate tools, either... Sigh...

[Vitruvius]

3. Exactly! And now we know why so many IT people are out-of-work --

and the rest are taking zero raises or pay cuts. Work 80 hours a week and put a friend out-of-work. For no extra pay; in fact the boss will cut your pay because IT people are now a dime-a-dozen. Smart, very smart... NOT!

Great post, Interrobang -- and I'll use it on ALL of my IT friends!

[IrateCitizen]

4. The nine week figure is absolutely correct

I've read it from numerous sources over the past year or so. Americans have even surpassed "workaholic" Japan by a significant margin. The average European gets something like 25 vacation days per year while the average American gets only 10.2!

Personally, I think that the gains in productivity should be almost completely distributed among the workers -- to the point that the mandatory work week is only, say, 30 hrs/wk as opposed to 40! But then again, I'm someone who tends to think that Karl Marx might've had a point in some of his commentary.... ;-)

[Nadienne]

6. No kidding.

Our office works closely with a Canadian office, and that office has the option of taking 6 months off for maternity leave. (Or maybe every woman in Canada has that option?) Some of the women I work with - wow, do they grumble. How can an employee take 6 months off? How can an office survive one person short for 6 months?

I think it's rather revealing about what's a priority in Canada and what isn't a priority here in the states...