Jobs, Productivity, Investment

Whenever politicians talk about Americans and the jobs they do, they always mention that the US has the highest productivity rate in the world.  You would think this would be a good thing, right?  I guess that all depends on who you are looking at and what you consider the roll of business to be.

One would think that as productivity rose, the workers who were being more productive would be able to see a greater increase in their wages.  After all, If production increases while sales remain constant, then those things produced, whether goods or services, are going to cost less.  This means increased profits for the business owners.  But wages have not been linked to tremendous advances in technology that have made American workers as productive as they are.

As you can see from the graph on the right (here’s the original) that wages and productivity were linked up through the 1970s.  This was the first push of automation, in manufacturing, in computers.  When I worked in the Gulf of Mexico, I knew a diver who had worked on a dam project in India during the mid-1980s.  He said he watched thousands of men carrying shovel after shovel of dirt away.  He asked one of the foremen why they didn’t buy wheelbarrows at the very least.  The foreman said one wheelbarrow would put ten men out of work.

It’s the same thing here in America.  In manufacturing, whether it’s cars or silverware; in publishing; services like accounting or engineering; even in food harvesting and production; an increase in technology means a decreased need for labor.  In manufacturing it means fewer assemblers or machine operators; newspapers and publishers no longer needing typesetters; computers mean faster results so fewer people are needed to work on a given project.

In fact, wages have decreased over the years.  In 1980 a high school graduate’s median income was $44,000.  In 2009, it had declined to just under $33,000. (Adjusted for inflation in 2009 dollars.)  With a bachelor’s degree in 1995, the median income was over $49,000.  It has since fallen from the high at the turn of the century ($56,000) to $51,000.  This mean that we have lost almost fifteen years of growth where wages are concerned. (See original.)

This has not been so for those people who either own or sit in the upper echelons of business.  I alluded to the amount of cash held by business in the first post.  But it is not just the cash held by businesses.  The only major index of growth since the Great Recession started has been noted by the stock markets.  While not all that was lost in 2008 has been recovered, those that work on the trading floors and their companies have seen huge growth.

This growth is what many say is needed to put people back to work, reduction in taxes, regulations so that people can invest in business and get things moving again.  Everybody is very pro-business nowadays.  But there is a difference between being pro-business and pro-worker.  When a company benefits from added investment, whether private or public, they can take on all sorts of new orders of business from renovating, buying or replacing equipment to expanding production lines.  New upgraded technology/machinery means an increase in productivity.  It also means reduced need for   workers.  You can see in this chart the difference between the levels of capital spending versus labor spending.  At the beginning of the recession, it was all over the media how workers were agreeing to lower wages to avoid layoffs.  Those wages have still not gone up for the most part, but spending has.

A great many people who lost their jobs in the past decade will never work in the same field again.  They simply won’t be needed.  You can look all over the web at the new industries that are growing, healthcare, green technology, but how many people have the time and resources to return to school?  In the 19th century, the robber-barons used men as just so many machines.  After the unions became strong enough to demand a fair days wage for a fair days work, there has been an agreement between the two camps that business and labor can work together for the good of the whole.  It is no longer that way.  And it is no longer just in the manufacturing fields but spread across every industry in America.

America seems to have problems growing in both quantity and scale.  I see the door closing on the threshold of opportunity we have of addressing them, much less solving them.


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