Productivity growth is getting more for less. When we make ten widgets in an hour on Mon and 11 on Tues, productivity is up 10%. So, it's a measure of how efficiently we turn inputs into outputs.

You probably don't need me to tell you this, but the generally accepted measure of productivity in America is GDP per capita (perhaps because under this measure we are the most productive nation in the world).

That being the case, your assumption above is nice in theory, but not really applied in practice when we measure productivity. We apply it much more crudely by simply measuring what we are getting out of the workforce, and worrying much less about how we have done it.

For example: take 1 employee working 9 hours a day generating revenues of $450; if he works a 10 hour day, and generates $500 in revenues, is that a productivity gain?

The way we measure productivity - GDP per capita - of course it is.

But Olivier Blanchard for example would disagree. He argues that the appropriate measure of productivity is GDP per capita per hour worked. Under the example above, by his measure, there's no improvement.

And as I am sure you know, under the Blanchard measure, France is in fact the most productive nation in the world, America lagging significantly behind the (European) leaders.

I see what you take away from this is that the French spend their productivity gains in increasing their leisure-time. Not sure I think this is the key point - for me, the key point is that there are diminishing returns to worker productivity, and policy ideas for improving our quality of life should probably take account of this evident Laffer curve in productivity.

The macro-measure of productivity (GDP per capita) is not very meaningful.

One of the problems with private sector productivity is that valuation is in dollars.  In a consumer society fed by advertising, people will spend money on many perverse things.  Perverse productivity, driving us closer to global warming and catastrophe, seems a bizarre notion.

As already noted above, another problem with private sector productivity is that distribution of wealth is not considered.  We live in a society designed to make more money, but without concern for who gets the money. 

The public sector measures are more effective, but very scattered.  Public goods are measured in outcomes, but many outcomes take time to achieve and are not easily measured.  Further, the measurement itself is costly and may not be as valuable as simply living in the hope that the service works.

So, this productivity talk seems like a lot of hokum to some. 

Yeah, French (and European) productivity growth per hour worked is equal to and sometimes better than American productivity per hour. But is it that we take ours for more consumption or that our bosses take ours by demanding me work more?

thosethingswesay.blogspot.com

Using fiction to discuss the real world is always dangerous [not least the danger of the pundit being ridiculed ;-) ], but I will plunge ahead anyway...

Back in the 1960s and 1970s Poul Anderson wrote many stories in which he explored the concept of advanced societies where all material needs had been satisfied. He assumed that at that point the human race would turn its sights both inward (to philosophy, art, etc) and outward to exploration [1]. In fact most of his stories included a statement similar to "once we had the machines set up to do all the work, we had to figure out what to do with our time".

Well, guess what: we are essentially there. Setting aside the fossil fuel question for the moment there is more than enough food and material goods produced each year on the Earth to provide a comfortable living for every Earth citizen. Not as much as Anderson posited, and plenty of physical labor is still required, but there is more than enough for everyone.

And what happened? Well, we (the advanced economies in particular) have set things up so that the majority of that wealth is concentrated on the upper 10% (perhaps even 3%) of the population - and everyone else is kept nose to the grindstone 24/7/365. Not only do we not have time for philosophy and exploring, we are working more hours than even our farming ancestors did, enjoying it less, and becoming less happy by the year.

Wonder who set that system up?

sPh

[1] Yes, he also assumed reasonably fast space travel so that exploration could occur off-Earth. Not a big deal as there is plenty to explore (although not colonize) at Jupiter, Saturn, etc.

I wasn't able to make that link work, but yes, I think it would contribute to the argument in the sense that these workers are unlikely to be paid their "marginal product"--their contribution to the firm's output.

Another point might be that these workers are contributing to the growth in output but, because they're undocumented, not getting counted in hours, imparting an upward bias to productivity's growth.

BTW, I would guess that industries with lots of illegal immigrants face less, not more, wage pressures.

The 'benefits' of enhanced productivity may be one of the most difficult concepts for economists to communicate to people who have just lost their jobs to some technological improvement. I think perhaps the best way to explain it is by pointing out how productivity improvements throughout history have made possible nearly all of the aspects of modern life that we enjoy.

At about the time when our nation was born, the vast majority of the population needed to work in agriculture in order to produce the food that people consumed. Tremendous improvements in agricultural productivity made it possible for more and more people to produce other things of value, like trains and railroads and cars and planes and schools and sewage systems and air conditioners, and restaurants, etc., etc.

The number one benefit that increased productivity gives us is TIME; time to produce other things of value, or simply extra time to spend on leisure. Unfortunately, our market economy does not naturally function in a way that enables us to painlesslly exploit this tremendous benefit. Instead, people are heartlessly thrown out of work without any assurance that they will ever be able to find another job that pays remotely close to what they were making before. Bucha know what? It just doesn't have to be that way.

We would seldom hear complaints about productivity improvments if the demand for labor in our economy were so strong, employers were willing to aggressively outbid each other for the services of the few workers who were available. This is not something that is impossible or even unthinkable. It would not be at all difficult for Congress to simply spend more and more and more on infrastructure and investments in human capital until finally private sector employers were forced to compete seriously for the workers they need.

What amazes me is how difficult it is to find a 'Democrat Economist' who will openly embrace this approach. I'm talking about economists who claim to be 'Pro-Labor', who go out of their way a couple of times every year to complain about the steady decline in wages that has occurred over the past couple of decades and then weakly suggest that maybe a hike in the minimum wage would 'help' some. Am I wrong to see them as sniveling hyppocrites?

They believe in a market economy; they claim to speak for the working class; but they still seem to want to distance themselves from an economic agenda that would actually provide workers with the market leverage they need in order to recover from the losses they've suffered over the decades. (Indeed, it is the only way unions will ever be able to make a comeback and thrive.)

To echo Brad DeLong, one of the 'pretend-advocates' of the poor and working class that I am referring to, "Why oh why can't we have some legitimate Labor Economists who will speak up for the economically disadvantaged?"

I wasn't able to make that link work . . . .

Shows you haven't been here long enough. :-)

A two line url in a comment will generate a space at the line break -- and unless you remove that space, the link will appear to be broken.

To me most productivity discussions (by business) are simply part of the continuing effort to emasculate workers and destroy organized labor once and for all.

the problem with the organized labor movement is that it isn't a populist movement since the arrangement creates have's and have not's.

the "blow back" to the unionization movement, IMO, has been globalization since it effectively trumps labor organization.

our "blow back" will, I think, be a "universal rights" movement that is invariant of country or company. it has to be since the WTO doesn't recognize anything else.

Those who think their skills and job positions make them above it all are in for a rude surprise. Tutoring has now been outsourced to India, can college teaching be far behind?

absolutely. you may have seen this advertising banner on TPM recently:

Learn Japanese Live, Online

overall, I think that campus based colleges are doomed because of their costs and sentimentality won't protect them from capitolism's history of cost cutting and consolidation which occurs when costs get out of line with affordability and benefit;

in my mind, students will get smart and stop paying the mortgages of fancy college campuses!

great things are ahead and I look forward to the efficiencies that the internet brings to learning stuff! I just paid $25,000 for a year at the University of Minneosta and those costs just don't allow "lifelong learning" to happen there! That is, I'd be bankrupt if I depended on them.

of course, the internet won't be the entire platform. I envision a wal-mart buildout of science facilities where students of all ages can go and do chemistry and biology experiments. however, the schedules will be very flexible and not locked down to semesters and "when professors want to teach."

in fact, these centers could have video conferencing so students could pull up personalized help as needed and perhaps pay $10 a minute for assistance and wouldn't that motivate students to think through things first?

the more literacy I have, the more I realize its rewards!

and, I think that educators will like this because they know that learning is non-linear and we need a new paradigm that supports non-linear learning scenarios!

I am sure you are right about consturction. Jerry Brown and Lou Dobbs in their debate on CNN yesterday mentioned agriculture and restaurants. I know that Danny Meyers, a major NYC restauranteur, has said that Central Americans are the backbone of the restaurant business.

Daniel A. Greenbaum

Those are really interesting thoughts.

FYI, most economists worry that we're overstating inflation's growth--but I'm closer to you and others who've posted on this.

I do believe that there's been a bona-fide acceleration in our economy's efficiency, and that our use of IT has something to do with it.

But on inequality, I think you're onto something very important.  I fear the one's ability to claim ever larger slices of growth has more and more to do with your assets, your ability to craft the clever deals, play the derivative market, etc...and less to do with your actual contribution to output.

Human nature responds to differences more than absolutes. As long as most people are not literally starving, perception will not dwell on whether one has a TV, but on where one stands in the status game. (This is why families don't settle for one wage-earner anymore.)

Consider that in an aboriginal group, the highest-status guy has perks that are not unimaginable but there for the taking if another can challenge his strength or wisdom. But can anybody here imagine any chance of being in the billionaire's club without getting just plain lucky? Our skills and savvy don't stand a chance, starting that far back. And the power commanded by the extremely wealthy makes most of us look like mushrooms. This is not a prescription for healthy society.

Economics is not a thermodynamic measure, or should not be, since the agents are not molecules, but people, with desires. And when those desires have no chance of fulfillment, resentment or despair accompany them. A peaceful, civil society depends on its average members feeling at least close in worth to the highest-status members.

When the elite say "Let them eat cake", watch out. 

I think you're too quick to embrace the view that productivity growth is some kind of mirage. 

It's output/hours.  I'm sure there's all kinds of ways we get these measures wrong around the edges but output=consumption+investment+gov't spending+net exports (with gov't not included in productivity).

You can raise all kinds of legitimate beefs about unproductive money sloshing around at the top with ESOPs and M&As, but I don't get why that disproves our productivity accounts, which are based on how much people buy, invest, etc...

Re: overall, I think that campus based colleges are doomed because of their costs and sentimentality won't protect them from capitolism's history of cost cutting and consolidation which occurs when costs get out of line with affordability and benefit

Only if online credentials become as respectable as in-person degrees, and I have reason to doubt that. Remember, what is actually learned in college is not really what the job market values in a college degree: rather the degree is a filter asserting that the holder can "hack it" in the working world. Getting an online degree isn't as valuable for this purpose, especially when the field is polluted with diploma mills. And how would one replicate the snob appeal of the Ivies, and other top-rank universities (Stanford, U of Mich, etc.) which grant the children of the well-heeled more valuable credentials than their plebian peers?

Please understand. I'm not arguing that there hasn't been an increase in productivity growth in the past fifteen years or so -- although not as great, perhaps, as reported (advertised?). I'm arguing that "productivity" and how it should be carved up is -- uninteresting, that is, "uninteresting" in an academic or professional sense of that word.

Winner-take-all theory and examinations of corporate finance and investment ptactices may have explanatory power in respect of income distributions. I don't see that a comparison of productivity increases with wage increases has much to offer in the way of explaining increasing income and/or wealth inequality.

Nice graphs--especially the last one.

Sure, re unions.  They've always been about giving workers a voice and more clout, and the research is clear on their positive impact re distributional outcomes.

But as unions have dwindled, full employment--truly tight labor markets--have become that much more important as a souce of bargaining power.

Sorry, only the naive think there is zero public productivity.  There is a huge literature on public productivity.  Many fine people make their living simply in the business of helping other people try to measure their outcomes (I make a part of my living that way).  This confusion debases the discussion.

It didn't used to be but it leans too much that way now.  The Fed is supposed to balance unemployment and inflation concerns, but there is a solid argument to be made that they've focused on inflation more than maintaining full employment over much of the past few decades. 

Only if online credentials become as respectable as in-person degrees

right now, the quality of "in-person" degrees haven't actually been assessed. president bush actually stopped testing charter school and private school students because public school students tested better.

as testing standards are used to evaluate college achievement, the myth that a branded diploma means something might be dispelled.

home schoolers, for example, have shown that state based regulations aren't required.

the major trend of online learning is that smarter people are starting to use it as a tool and, with their success, the reputation of online learning will go up. the financial rewards of making online learning a cost effective way to learn is very, very high!

as you know, colleges have traditionally screened their applicants looking for the brightest so, can colleges really make a claim that they can actually educate people? or, is it a foregone conclusion?

as you noted, when the ivy leaques choose for other reasons than skill, the student remains a dunderhead regardless of the seal on his/her diploma.

Getting an online degree isn't as valuable for this purpose,

how did the world operate before degrees were around? in the future, i think it's entirely plausable that online degrees will actually be worth more because the student can selectively choose each course based on merits not because their college offers it.

rather the degree is a filter asserting that the holder can "hack it" in the working world.

????? bill gates did just fine without it, as have others. because of the "diploma bias," we've all read about employees who fudge their credentials to slip past perhaps unnecessary hiring requirements.

one of the reasons why I changed my mind about universities was because I saw a mexican immigrant outperform me on a very difficult electrical enginering project and he had no formal education-- just curiosity, intuition and a lot of creativity.

It's one areas where the interests of the upper classes and the workers (of the industry itself) are perfectly aligned.

how so? if the education industry fails to create a middle class, it seems to me that, ultimately, the industry becomes a hood ornament.

and social movements on campus seem to be a thing on the past, so intellectual thought could start withering within the walls of politically correct universities that need to pander to state created propaganda in order to keep their coffers full.

So, I guess information like this is of no interest to you?  Perhaps looking for it didn't occur to you.

Education is very highly associated with your future earnings, although people who foolishly hang around for a Ph.D., like me, do worse than professional degree holders.  Actually, I imagine those professional degree holders are greatly distorted by the medical degrees.

You may, however, think the degree comes AFTER the propensity to earn, which would lead me to wonder what is wrong with my brothers....  Of course anecdotal reasoning leads to bad analysis (although it can give us some insights).

To the French, money is (buys) time.

It's late and I have other things to do, job or not, but let me give you another example.

I read yesterday about something HR professionals are calling "the misclassification crisis." I know something about it personally - I've been affected by it - it should be called "the intentional misclassification crisis." You can google for it to find some background, I'm sure.

Here's what's going on. Older, more experienced technicians are people who can essentially develop product, but because that product is technology, it obsoletes the technician. Once it's been produced, the company for which it was produced no longer needs that technician. So they don't hire such technicians as permanent employees with benefits if they can help it; they hire them as short-term contractors. These developers tend to be older workers; developing technological product requires more knowledge, skill, and thus experience than younger (and thus likely healthier) people are likely to have.

The people who get hired as permanent employees with full benefits (that they don't use much, and that thus don't cost a company much) are not product developers; they're service, e.g., support, technicians (if technical at all; they don't have to have any technical skills in many cases). Service people are needed on an ongoing basis; product developers are not.

As more product is developed, there is less work for product developers, especially if those developers do their work well. And, as it turns out these days, their work is done as so-called work for hire - they don't own it; the companies they did it for own it. They just get paid effectively for their labor, and leave empty-handed otherwise. And they do leave, because they are not permanently useful to the companies that use their product.

This is effectively age discrimination; it's illegal. But it's apparently so easy to get away with, that it's standard operating procedure anymore, hence the so-called crisis.

By the way, I've tried owning my product work. If we really had an "ownership society," that would be the conventional case, and it wouldn't be so bad that developers don't work indefinitely, they would be getting royalties or other such compensation to support themselves; that doesn't often happen with technology, though. I've been through the wringer more than once trying to oppose this status quo, but it's pretty pointless; most don't even understand that there's an issue, and trust me, US intellectual property law is greatly stacked against the individual developer, despite the fact that the Congress was directed by the Constitution to protect us (Article 1, Section 8, Clause 8, off the top of my head).

And why is it stacked against us? Because for years, economists have been lobbying to protect businesses from their own best employees. I'm sure you know what I'm talking about. Well, you folks got what you wanted. Take a deep breath, look around, and see what you've done.

When you talk about incentives for investors, you're not talking about people like me; you're talking about the people who have stolen from people like me, legally, for years now. People like me couldn't invest if we wanted to - we own nothing, not even the work of our own hands and minds. So thanks for nothing, and the least you could do is be honest about whose doing this all is, and think about whose side you're really on.

You may, however, think the degree comes AFTER the propensity to earn

I do and think that the earning power comes from the abilities of the student, not the degree itself or the professor.

as someone else noted, and it's probably true, colleges filter out those who aren't persistent and most good colleges are selective and only take students that will eventually earn good money anyway.

bill gates is the richest man on earth and he dropped out of college. I think Steve Jobs did too.

as you know, association is not causation and studies that link college to earnings don't necessarily prove causation.

some of the college signs around minneapolis imply that "brand matters" and if you "go here" people will hire you because of that. and I think that the good 'ol boy networks do work.

my mother had a masters in math from columbia university, I think, and she couldn't get a teaching job because "she was too expensive." so I've actually seen education work both ways!

Well done, Jb. Seconds to JBRaider and Tom Wright.

JohnOneOne is completely full of shit.

50 people cannot "babysit" enough machines to replace 10,000 workers. We're not talking about a Casio wristwatch having more usefull memory than a 1950s computer, and comparing the two in size, weight, and cost.

Excuse me if I took your comments to be insulting, but they are to me.

There is indeed a shift in this country to devalue the workers as fast as the dollar, but it has little to do with technological advances or automation where I work. Advances in productivity come in the form of the new machines that the owner pays for being added to the old, decrepit shit he bought 30 years ago being used in a "cell".

That is, we are now expected to run 3 machines at the same time, if their proximity allows it, if the part takes 3 operations from raw stock to finished product. Deburred first, wiped down, tool changes, inspection sheets, and put a label on the box too, you bastard,- or we'll write you up.

Whomever said higher education was essential to being a member of the middle class assumes that such an entity exists. If it does, perhaps a new term should be added, such as downwardly mobile.

Or an old standby- like PEASANTS.

J11, we're both obviously unhappy with our lot in life. I guess thet Trickle-Down Economics hasn't worked out any better for you than it has for me.

Re: primarily because I've seen jobs go over seas because other countries are better at math then we are.

How many jobs require higher math knowledge? And with the omnipresence of calculators and spreadsheets how many jobs require old-fashioned pen-and-paper math skills?
I was a physics major, and I took math classes up through differential geomtry. And never have used one iota of any of it at work. Outside of work a little algebra and maybe a little trigonomtry.
Don't fall for Bill Gates' BS. If microsot et al prefer to hire foreigners it's not because of their math skills, it's because serfs are cheaper.

Johnoneone--I've tried to stress the difficulties of skilled workers like you who've been displaced by tech and by offshoring tech jobs.  Like I said, among the gum flapper/chin music crowd here in DC, we at EPI are among the only ones who stand up to the 'blame the victim,' default policy position of practically everyone else: 'the opportunities are there if you're skilled enough.'  That's far too simplistic and no politician should be allowed to get away with it.

That said, I don't believe that history re productivity and jobs has somehow been revoked (ie, in a healthy economy, productivity's not a job killer).  We'll have to see. 

JNBraider's points re time: we work more hours then anybody--again, we do so in part because we're gaga for consumption.

Check out the tbl below--(if it looks funny, sorry for lousy paste-in).

It's the consumption share of GDP by country.  We're a pretty significant outlier. 

Why?  I'm not sure.  We seem pretty driven relative to other cultures.  Advertising plays a role, too.  But, and I'm sorry to be a one-trick pony on this theme, inequalities reinforce this.  Somebody told me the other day that Paul Allen's got a yacht with a submarine...there's a lot of high-end consumption going into that US number.

US70.5%Japan55.9%Germany57.4%France55.7%Italy58.5%United Kingdom62.1%Canada54.1%Denmark47.8%Finland49.4%Ireland42.4%Netherlands48.0%Sweden46.5%Switzerland58.3%

James,
I read your essay on full employment policy - very nice work there. You sketch out a broad and totalizing economic philosophy in what seemed like less than 3000 words. - Reminds me a little of some of TPM member rdf's bite size essays.

I think the most important point you make is the first lesson of economics 101 - you can't consume dollars. They are simply chits to trade for consumables.

It seems germaine to our current 'finacialized' economy, where we just trade debt to China for things we need, and allow our auto industry to die an ignoble death - a victim not just of not so blind neglect, but an inflated dollar caused by the issuance of too much US govt. debt.

Re: a victim not just of not so blind neglect, but an inflated dollar caused by the issuance of too much US govt. debt.

I have trouble seeing the connection here. After all, "cheap" US dollars ought to increase US exports, if the US was producing something people wanted to buy at all. IMO, the auto industry is a victim of A) healthcare costs and our Rube Goldberg healthcare non-system (under any sensible national system, even one with private insurance still in the mix, these companies would not be burdened with immense caosts for employee healthcare) and B) its own stupidity and failure to anticipate changing demand as gas prices have skyrocketed (too many SUVs, not enough fuel efficient vehicles)

We don't teach statistics in high school because we are too busy teaching pre-calculus and calculus for that 0.01% of the population that might some day become a physics professor.

I certainly agree with the statistics. Of the "higher math" disciplines, I use calculus (mathematical analysis) the least, with the caveat that I need to know some principles such as convergence and divergence, and other things that let me use black box functions in probability and queueing theory. I don't need to know how to derive an Erlang B distribution, but I need to know where it is applicable and not, and how it's parameterized.

"Abstract algebra" is one of the most misnamed areas, since I have a good deal of practical applications. As far as topology, I suppose it depends on where you place graph theory.

--
Howard

*equal opportunity offense to both extremes*

"Those who cannot remember the past are condemned to repeat it" [George Santayana]