The Labor Department said non-farm productivity rose at a 6.4 percent annual rate, the biggest gain since the third quarter of 2003, from a revised 0.3 percent gain in the first quarter. Productivity for the January-March quarter was previously reported as a 1.6 percent gain.Why would companies start hiring again anytime soon if they know they can still squeeze this kind of productivity out of workers? Why not keep laying people off, have more furloughs and wage cuts?Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 5.3 percent rate in the second quarter.
"It's good because it helps keep inflation low; labor costs are pretty benign," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla.
"On the other hand it means you can do more with fewer people," he said.
Why should workers get paid for these productivity increases, after all? Gosh, if there were only some sort of union that workers could join to demand a share of these increased profits...Oh wait, I'm sorry. In America, only shareholders count, not workers. Unions are evil organizations that hurt shareholders, remember?
And you wonder why you haven't had a raise in years, while companies are recording huge profits. America has been brainwashed into hating unions, into pulling everyone down into the hell of "right-to-work" employment where you can be let go for any non-illegal reason with no notice, and companies will continue to squeeze employees into working more and more off the clock.
The loss of collective bargaining power has decimated this country's workforce and will continue to do so. Built on the backs of the American worker, indeed.
[UPDATE 11:03 AM] Yggy on productivity:
Rising productivity is basically good, but it means that either the economy is going to grow very rapidly because we’re now so productive, or else that modest growth is going to be accompanied by massive unemployment. And I don’t really know anyone who’s expecting very rapid growth in the near term.Amen to that. How much blood can you get out of American workers? We're about to find out. Once again, why should American companies hire right now when desperation equals motivation?
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This is a real shame, but I don't think we could reasonably expect wages to increase in an economy this bad. The labor market is glutted with qualified people; even if we had stronger unionization, I doubt things would be much better. The trick is going to be getting EFCA passed, and addressing other workers' issues before the economy starts to heat back up, so that hardworking Americans get their fair share when it can be gotten.
So, how much should a worker be paid?
If productivity is up 6.4%, shouldn't compensation for the same time period be more than a lousy four-tenths of a percent, Serv?
Well, I know that at my company all of this makes perfect sense. We are a small business that laid off people we could no longer afford to keep on the staff, my hours were reduced and the rest of the staff had their wages cut. I'm sure we are also more productive, but we understand that the company is struggling just to reach profitability or even break even. It is just reality that we would rather keep our jobs intact, though diminished, rather than be out in the current labor market seeking a job where there are six applicants for every opening.
And yes, Paul...many Americans are being asked to make the same sacrifices.
But there's only so much we can do.
Not necessarily. And not necessarily in the same time frame.
If the companies are making huge profits, the trend will be for competitors to eat into those profits with a combination of wage raises to hire the productive workers away and price cuts to pull the customers away.
In this way, real wages will tend to increase while real prices tend to decrease.
However, I'm presuming a marginal utility theory of value. Something tells me you hold a labor theory of value.
You're assuming that the company doesn't want to maximize its own profits by doing the same thing the competitors are doing: laying off workers and giving the survivors more work to do.
There are a number of ways to maximize profits though. If they don't want to increase their size of the market and drive up efficiencies then laying off workers and doing the same thing with less people might make sense. But, if they think that they can outmaneuver their competitors and pick up skills and customers by expanding it is more likely that they will want/have to increase the payroll.
So it boils down to if they don't think the current market is a good one to expand in then they will follow Zandar's fears but if they see the oncoming recovery as an opportunity then they will go towards Servius' predictions.
Also. At the current time we're witnessing the unraveling of the capital structure which was distorted by the previous bubble. An individual worker may be more productive but there's not the need to produce as much as previously needed.
This will also delay the normal market effect of productivity increasing wages and decreasing prices.
We're not unraveling a bubble. We're creating a new one to try to reinflate the last one.
You think that's a good idea?
No, I think it's a hideous idea. I've had all kids of problems with Helicopter Ben and Timmy, and if Obama has a real weakness, it's his craptastic economic team.
Are you familiar with Austrian Business Cycle Theory?
I kinda think we can do without the booms and busts.
http://mises.org/tradcycl/econdepr.asp
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