Wednesday, August 10, 2016

Is There a Sustained Trend Line of Falling Productivity Now?

There is confusion of late, in the world of economics, as to whether overall productivity has pushed over into a sustained downward trend. Not surprising at the get go when you consider how many ways you can come at trying to deduce productivity. On the one hand you might use the ratio of total GDP to total hours worked, as the Bureau of Labor Statistics uses. Or, you might get a bit more granular in considering actual unit labor costs industry to industry and aggregate them in some way.

Lately, as the article linked below indicates, unit labor costs have been rising, but a lot of economists still question whether that is actually decreasing productivity, with a consensus that may be forming that we just aren't getting a good handle on how to measure it properly any more; especially given new complexities with not only the introduction of new technology, but with how labor is applied industry to industry.

You need only consider the IT industry for a minute or two to see how this goes. New tools are constantly being applied to make analysts and developers more productive. Sometimes, though, the pace of change itself makes the potential for productivity improvement quite problematic in the face of never ending learning curves and integrating past and present systems designed by different paradigms, or approaches. And if that were bad enough, you then throw in the whole world of temp workers.

With temp workers you get a very peculiar situation. The up front costs to the company that utilizes them can be higher on an per hour basis as they quite often pay a premium to the agency that plays middle man between hiring company and worker. The overall costs can be lower because the employed won't be adding to the employer's benefits bill (considering both 401K's and healthcare). This might then produce a spike in the unit cost per hour for that employee, that really isn't related to that person's actual productivity.

One has to wonder, when considering this sort of thing, whether the situation should give us cause for hope or not within the context of whether a means to clarity will be found. I, for one, cannot help but be pessimistic in this regard.

Just as the added speed of change, with the speed of actual operation of systems in, say financial transactions, are making oversight and control ever more difficult, keeping track of the ever more evolving relation of labor to production, and the need for the rapid flow of capital, with assured net gain, is also increasingly difficult to know how to pin down; let alone to know just how problematic the value of one snapshot in time may be in telling you what to expect from the massive mix down the road. One might even be forgiven to think that, within such complexity, in the compression of change, period to period, that the whole exercise has become a fool's erand.  Just remember, this is, overall, an electrically amplified feedback system that is cycling through itself ever more out of the reach of human comprehension. That is the fundamental nature of hyper competition, and the technological change that both feed into each other.

What ought to be irritating, however, is that what you get paid will be affected by this obviously imperfect system. Even more irritating, though, ought to be the question why the productivity of capital is hardly ever questioned, with profits often being applied far outside what might be either practically applied to economic efficacy, or socially applied to real human need.

In Longest Stretch Since 1979, U.S. Productivity Falls Again