U.S. Worker Productivity Down in Spring – That’s Fair
Link to article
The International Herald Tribune (September 6, 2006) observes that Labor Department data shows U.S. worker productivity slowing in the second quarter while labor costs rose. (Strange – my salary didn’t rise. Wonder what part of the cost of my labor rose?)
It’s not that workers are actually slowing down our productivity rate. We’re not that organized. Yet. We’re just not increasing our productivity as rapidly as we had been doing. Perhaps that’s because every mechanism—even the cyborgs our employers imagine us to be—has its maximum output limitations, and we’re reaching ours. We’re tired. Maybe that’s from the two jobs we’re having to work to even approximate the income of the one job we had in the 1990’s.
How badly are we slacking? Our productivity increased at an annualized rate of merely 1.6 percent in the second quarter after a 4.3 percent annualized rate the first quarter. Labor costs, meanwhile, rose at 4.9 percent – not so bad when you consider that in the first quarter it rose 9 percent, which was the biggest jump since 2000.
Inflation may be occurring, worries Bloomberg News: “The bigger than expected rise in labor costs, may heighten concerns that inflation will accelerate as businesses lift prices to compensate.” Right – along with the compensatory price increases for higher fuel and insurance costs. Businesses bearing the cost of tiny gains in treating workers fairly is, I’m guessing, far less than 10 percent of any consumer price inflation that businesses are passing along to us.
Wait – remind me who “us” is. “Us” would be the workers who aren’t running as fast at work as the labor costs are running up. And why are labor costs running up? Because the petro-fuel industry is reaping obscene profits from the prices it’s charging our employers and ourselves. Because the health and home insurance industry is pro-actively hedging its bet against our aging workforce’s predicted declining health and recent turbulent weather’s bludgeoning our homes. Those labor costs are somehow labor’s fault, how?
I’m waiting ….
You can’t figure it out either, huh? We’re not alone in our quandary.
Voice of America News headlined this observation just the day before Bloomberg bemoaned the labor costs: “Energy Costs Hurting US Worker Paychecks.” VOA cites National Association of Manufacturers’ statistics: “U.S. manufacturing output has grown 5.8 percent over the last 12 months. That is its strongest gain since 1998. The economy picked up 1.7 million new jobs to push unemployment below the five percent mark. The growth in productivity combined with a tightening labor market boosted worker wages by 1.7 percent. But N.A.M. president John Engler says his group’s annual Labor Day report shows workers are actually losing buying power. ‘Wages, when adjusted for inflation, are not rising. In fact, they averaged a decline of a half of one percent during that same period. The culprit, the main reason wages did not keep pace with inflation? Energy costs — they went up 23 percent last year.’ N.A.M. chief economist David Huether computes so-called ‘real wages’ by factoring in the impact of surging gasoline prices along with benefits and employer contributions. He says those ‘real wages’ have declined by nearly two percent since 2001.”
On September 4, a BBC News headline summed up the situation even more explicitly: “The end of the American dream?” That’s a rhetorical question.
The metrics the BBC cites provide the answer: “After growing at more than 3% a year in 2004 and 2005, the pace picked up to a blistering 5.6% annual rate in the first quarter of this year – although the pace has since then slipped back to 2.9%. So far, though, little of that growth has translated into the hands of the average worker, according to new research from the Economic Policy Institute (EPI).”
While corporate America is doing well, working America is not. BBC News gives us the real numbers. “During the five years from 2000 to 2005, the US economy grew in size from $9.8 trillion to $11.2 trillion, an increase in real terms of 14%. Productivity – the measure of the output of the economy per worker employed – grew even more strongly, by 16.6%. But over the same period, the median family’s income slid by 2.9%, in contrast to the 11.3% gain registered in the second half of the 1990s.”
The BBC piles on the data and the accurate interpretation of them. “Even for those with jobs, the fruits of economic growth have been more unequally distributed within the labour market. The incomes of the top 20% have grown much faster than earnings of those at the middle or bottom of the income distribution. The income of the top 1% and top 0.1% have grown particularly rapidly. From 1992 to 2005, the pay of chief executive officers of major companies rose by 186%. The equivalent figure for median hourly wages was 7.2%.”
There’s one more productivity measure I want now. What’s the productivity metric for CEOs? Is it up or down? How can we tell? Does anyone even bother to analyze it? Turns out, someone does. Irony continues in my next blog entry….
September 15th, 2006 at 3:06 pm
It’s even worse than you think. The 1.7 million new jobs is not a net gain. Since the recession started, the US economy needed to create 10 million net new jobs to keep up with population growth. This does not include population increases from millions of legal and illegal immigrants. Only 3 million were added. Half were government jobs. The private sector could not create one net new manufacturing or high tech job. The job growth was concentrated in low-skilled, low-paying domestic services. That means there are 7 million unemployed people that don’t count in the unemployment statistics, because they didn’t qualify for benefits. The unemployment rate is also low because many more have exshausted their benefits and dropped out of the labor force and are no longer considered unemployed. America, welcome to the third world.
September 18th, 2006 at 4:38 pm
Related articles of interest:
In ”Technology’s march leaves many behind” New York Times op-ed columnist Paul Krugman’s weighs in on the ambiguities inherent in keeping these thoughts simultaneously in one’s mind: (1) ”The U.S. economy is far richer and more productive than it was a generation ago.” (2) ”[I]n spite of all this technological progress, which has allowed the average American worker to produce much more, we’re not sure whether there was any rise in the typical worker’s pay.” And (3) ”The economic riskiness of life has incresed.” Krugman has one suggestion for a good place to start rebuilding the base of the middle class. This article is not yet available online, but similar recent Krugman columns are ”Progress or Regress” and ”The Big Disconnect”.
More optimistically, ”Where Working Lives Start All Over” tells the story of a Pasco County (near Tampa), Florida beneficiary of an AARP program that helps older job seekers rejoin the workforce. Trude Diamond
September 21st, 2006 at 10:37 am
This article has an unfortunately deceptive title. It is not about worker productivity actually slowing (ie going down) but merely the rate of increase that is slowing, a very different thing. We are still producing more per worker/hour than even before, that increase is not just not as much as in previous periods. We are still being exploited at a constantly increasing rate every day (amount of exploitation being the difference between what we produce and what we get paid), and this will only stop incrreasing when we either increase (real) wages faster than productivity increases (to get a bigger piece) or actually lower our productivity (not just the rate of its increase). Sorry to be so technical about this, but this is a good example of how the discussion of economic facts relevant to workers is regularly confused and obscured in the press and media, even among our advocated and leaders, much less the rank and file majority.a
September 26th, 2006 at 8:25 am
As an owner of a midsized public relations firm, I see scores of highly-educated, but down-on-their-luck, white collar executives whose quiet desparation is written all over their faces and bodies. Your website and organization are outstanding, and will help this entire ”lost generation” feel better about themselves and their opportunities. It’s a great, and long overdue, step in the right direction.
October 7th, 2006 at 6:49 pm
I see start-up businesses using highly experienced but desperate people like ammunition. When you join a start-up, you expect a low salary because you are working to build a business. However, some business “leaders” hire these workers and then use them for their experience and knowledge. When the company makes it, they are fired for contrived reasons.
Alternatively, if company doesn’t make it, but the top few people walk away with a bunch of cash while the rest are lucky to get unemployment.
Bait and Switch. Damn right.
October 10th, 2006 at 3:04 pm
Steven Cody,
I was happy to see that a business owner can admit that there is a need for change. I haven’t seen very many comments by business owners on this or Barbara’s blog. Kudos to you, dear sir. You have renewed my belief that there are still some decent business owners who recognize the plight of their workforce. We need a lot more like you.
We need businesses to adopt a policy of equal pay for equal work, instead of the “suck ‘em dry and then throw ‘em away” attitude so prevalent today. We need businesses that recongize the need for a work/life balance and commit themselves to allowing their employees the right to actually spend time with their families. Businesses have to realize that the Machiavellian concept of ruling by fear is not an effective way to engender the support and cooperation of their employees. They need to wake up! If the status of the middle class erodes to the point of extinction, there won’t be anyone able to afford the products and services that they are trying to sell. When you’re broke you can’t buy a new TV, or car, or go to movies, or go out for dinner etc. To not recognize this basic economic truth is a slow and painful suicide!
P.S. Perhaps, if the need arises you can post your career opportunities on the website once its fully functional.
October 11th, 2006 at 5:47 am
One notion that I read from time to time is that since people are living longer, the retirement age should be increased. Increasing the retirement age is often suggested as a solution for the (fictitious?) Social Security problem.
At the same time, many people over 40 find the employment situation difficult at best. At 61, I count myself lucky to occasionally find part-time employment at low pay with no health care. This is after a career in which I published numerous papers, was issued ten patents and earned a six-figure income. Now I am over-qualified for any job that would use my skills.
The question then is how people are supposed to survive in that period between 50 and 70 when employers find them too old to hire, but society finds them too young to retire.
I wish UP the best of luck in addressing this problem.
October 11th, 2006 at 5:51 am
What do we expect in a society that has for the last 50 years had one record making year after another on the backs of the workers, and the consumers who are fueling the economy, by following the ideas that were put out there by people like ourselves?
New is better, get rid of the old, and in with the new! We created the mindset for a disposable society, so it follows that “people” join the ranks of the glass pop bottle, milk jug and any appliance that could repaired. That is why health insurance is being torpedoed to reverse the gains made in longevity of life, who wants to live a long life in poverty or better yet what government wants to support a huge number of nonproductive oldsters cluttering the landscape?
All of the hype about the baby boom generation being a ‘different group’ is exactly that. For most of those I know who are my age (58) that I know, are extremely nervous and if they have a job in which they are protected by a union and are eligible to retire, they are not. Why? Because they don’t want to get screwed by the company, the government or the organization who might change the rules of the game, when they are vulnerable and have no power. So they are continuing to work, to keep their power and relevancy to those in charge at all levels.
Staying relevant is the main concern, for we seen what has happened to the poor in this country, gone from the relevancy equation. When was the last time you heard a politician talk about the poor? I think it was Walter Mondale in ‘84, and we all know how effective that was in that election. To be relevant means hanging on to the middle class illusion in our culture, and what is middle class these days? Some say that $30,000 is the entry level of middle class. But I think that the entry level is actually much higher, maybe as high as $80,000 in this timeframe. Most of the professionals I know will not make much that on their retirement, so we get back to relevancy again. You say, well, they should be able to live on their retirement, not in a consumer driven culture that focuses on the accumulation of ‘things.’
Many people are turning down ‘buyouts’ for that very reason, to keep working, to be able to acquire ‘things’ so that they feel relevant in our culture.
October 12th, 2006 at 9:28 pm
I applaud each of you working to set up this organization.
P.R. Saunders’ comments reminded me of the musing about the propulsion of fashion statements i have done over the last several days as I shop for items for my impending wedding. During this period, I have spent more time in malls and chain stores than I usually do. Walking among the cheap clothes and cheap housewares manufactured in (other) third-world countries, and seeing my fellow shoppers in the latest designer-promoted styles, I wonder when the endless buying will finally stop. In these underdeveloped countries where these items are made, the workers cannot afford to buy them. When we tire of them, the items are often donated to charities who sometimes send them back overseas for the poor to wear. How ridiculous it seems to me to feel compelled to buy this gathered-neck T just because it’s pictured everywhere now and a plain-neck one is so six-months ago. Do we really need the latest advertised and promoted styles for everything we own? Must we have those pointy shoes with the 3-inch heels and those very white teeth that require a $20 to $50 toothpaste to find peace and happiness? Just because “everyone” is getting into podcasting, do I need to spend the money on that little appliance or might I better spend my money and my time making this a better world for all of us? Are plump lips, an SUV, 5 or more televisions in a house, 3000+ square-foot homes, and $3.85 lattés bringing meaning to anyone’s life? When we as individuals value ourselves and our time more than we value what others tell us to hold dear, we will shift the way this country runs and state with our pocketbooks that “We are mad as hell and we’re not going to take it anymore.” (Paddy Chayefsky)
I appplaud those who make the effort to refocus our energies on what we can accomplish. When our so-called leaders get the message that they can no longer distract us with ephemera and divide us with blaming, we will be able to move this country back toward democracy.
October 13th, 2006 at 5:15 pm
Michael,
You mentioned the US becoming a third-world country. Have you read “The Flat Land?” It’s written by an economist who proclaims that the US is becoming just that – a third world country.
I haven’t read it, because I can’t find it at the library.
And the unemployment statistics are false, for the reasons you stated. Did you hear about the 62 yr. old man who robbed a bank just so he could go to prison while awaiting his S.S.?
He said he couldn’t afford to live: all he could find were minimum-wage jobs!!! (This was on MSNBC.com)
October 14th, 2006 at 12:21 am
JM,
I heard about that 62 yr old bank robber. Something similar happened in northwest PA not too long ago where a 58 yr old lady was busted in one of the outlying regions of the coounty for running a meth ring. Same reasons…….couldn’t get a chance for a job and couldn’t afford to live, and of course, couldn’t get enough help to be able to live because only young single mothers can get anything here in PA.
It truly is a sad state of affairs. Our nation is becoming a banana republic.
October 20th, 2006 at 6:05 am
Cheers to all:
I had just finished reading “Bait and Switch”. I am a late 30s college graduate that was a member of the U.S. Custom Service (in the pre-Homeland Security Days). I made 23K starting out fresh from school.
Six months after Homeland was formed, a whopping 20,000 employees were laid off to save money (probably to help pay for the on-going, unsuccessful Hunt for Osama) Being at the bottom of the seniority ranks, I was let go WITHOUT unemployment insurance (federal employees do not have the private sector unemployment–we get a “Special Fund”). Too bad it rejected my claim…
At the time of the pink slip (May 2003), I made 3 predictions.
A. Bankruptcy was inevitable.
B. I had to leave my home in Tampa due to its cost.
C. Payback of student loans for my Master’s Degree would be difficult to impossible.
From the spring of 2003 until the summer of 2004, I sent out hundreds of resumes, gone to several job fairs, used the Internet, and got just 2 interviews. No success.
August 2004–Bankruptcy was filed, I lived with some college friends after vacating my apartment,
and I started work as a public school language specialist for a mere $9500 a year working full time. The County I work for picks up the cost for health care. I was feeling a good deal of job satisfaction while working in my new field.
Oct. 2006–I love the job and I may clear $10,000 a year thanks to the labor union that represents me (SEIU). The bankruptcy is over with (I even kept my 2001 vintage car). The student loans are a lost cause. I am awaiting the eventual court case that will take the IRS EIC and dock some of my pay. This case will probably come in 2011 or so.
Housing, what is that ? It is a good thing I have good friends. Even the Bankruptcy Trustee was stunned that I was a college degree holder that was also homeless.
Being born in the last half of the 1960s, I a now too old to be hired by Corporate America. The college debt prevents me from finding work with the federal government. Even my transcripts are impounded !
I am effectively stuck at a job I actually like to do and it offers a pension and benefits. I am blessed in that regard.
My web site was a school project I did in 1996. It is amazing that the computer I used for that site still runs ! I still use it for letters and borrow my friend’s system for web and email.
Suggestions for UP.org–
1. See if Congress will issue an amnesty for Stafford/Perkins Loans issued from 1995 on. Those loans are not recoverable given what little money some college graduates are earning. I myself would like to take care of not being purpetually homeless first before trying to tackle any loan repayment.
2. Something has to be done with housing for the poor. Great Depression style shanty villages are already appearing along rivers such as the Missouri and in national forests. Housing is out of my reach.
3. There is now a need for government supported health insurance. I was very lucky to find one of the last jobs in the US that offers such as part of the benefits package. I even get a pension !
As for the elderly bank robbers looking for prison shelter before retirement, this make perfect sense since they are FORCED into very early retirement. It is a pity it has come to this.
Chao !
MMJR
October 22nd, 2006 at 4:22 pm
JM mentions an interesting book, but I believe the title is: The World is Flat – A Brief History of the Twenty-First Century, Expanded Edition by Thomas L. Friedman. Amazon.com has used prices as low as $15.
Here is an interveiw with Friedman:
http://yaleglobal.yale.edu/display.article?id=5581
I think United Professionals is the best thing since muckraking first caused Congress to pass reforms such as the Pure Food and Drugs Act (1906) and the Meat Inspection Act (1906).
Perhaps you can get Kieth Olbermann to write on the subject of America’s deplorable employment situation as one result of our country’s financially exhausting war on drugs and terrorism?!
October 27th, 2006 at 12:08 pm
To MMJR:
Thank you for bringing up the issue of student loans. I was one of those who fell for the “get an education/re-training to be worthy/quslified for good jobs in the New Economy” mantra. I never got a chance for a good job. I never got a chance for a job in my field (the bachelors degree I earned in math/computer science was for nothing). All I got were various flavors of commissions-only paying “jobs” with NO benefits, no base salary to live on, etc. I was poor due to becoming disabled in my early 20’s. SO I had to take out student loans. Many others who all tried to do “all the right things” who are our age and older with exorbitant student loan debt have ended up having their Social Security garnished – involuntarily I might add – by the federal government for repayment of those loans after not being able to repay them when denied any chances for good jobs. One case was a disabled 59 yr old man living in Section-8 housing. He gets about $600/mo and the gov’t is taking 15% of his meager income – leaving himunable to buy food or pay his utilities.
Another was an older cancer patient who was threatened with seizure of his car in lieu of outstanding gov’t student loans – even though he needs his car to get to and from his medical treatment at a local clinic. He too is on a very low fixed income.
When I couldn’t get a job (a real job that paid a living wage w/ a guaranteed salary and medical benefits – NOT commissions-only without benefits and where you have to pay licensing fees, etc just to be able to work) after 4 1/2 years of searching and doing everything humanly possible, my student loans went into default after my last Unemployment Deferment was exhausted. I was offered consolidation to bring them out of default, through the WIlliam D FOrd Direct Loan COnsolidation program. Repayment is income-contingent where if you make federal minimum wage or less, you are granted deferment. I graduated college at age 35 with $38,000 in student loan debt. The additional fees from those loans going into default before being offered the consolidation plus all the capitalized interest from the deferments has made my initial debt of $38,000 turn into a student loan debt of over $50,000 – which I will NEVER be able to afford to repay without a chance for a good job! ANd now that I am almost 40 and have a 16 yr gap in my work history (self-employment does not count as work history) I know I’ll never get a chance for anything.
Basically, I feel like I am being punished for being a victim of age and disability discrimination in the job market – for what few good jobs that remain which were NOT off-shored, or filled by 23 yr old kids and insourced foreigners on guest worker visas.
The least the government should do for people like me and others in the same boat is give us amnesty and debt forgiveness for those student loans!
October 28th, 2006 at 5:30 am
It’s an annoyingly persistent urban legend, but
receiving unemployment benefits has nothng to do
with being counted in the unemployment rate. The
latter is calculated from a survey of 60,000
households, in which people are asked if they are
employed, looking for work, etc. If you’ve been
looking for too long, you may get classified as
being “without realistic prospects” and counted
as not a member of the labor force.
The 150,000/month net payroll job creation rate
that’s usually cited as corresponding to
population growth is also something of a `legend.’
It apparently represents what some economists once
figured would ensure a small but positive GDP
growth.
Labor demand is rather the force behind US
population growth, which is entirely through
immigration—without which it would be zero or
slightly negative.
It used to be said that a 1% decrease in the
unemployment rate would contibute 3% to GDP: it’s
now plainly an _increase_ in unemployment that
raises GDP.
October 29th, 2006 at 2:16 pm
We’ve been fed this “free-market” excreta for a quarter of a century and allowed the “invisible hand” to pick our pockets, but the fact is, even before the New Deal regulations were scrapped by self-proclaimed FDR enthusiast Ronald Reagan, the playing field was already far from level. The “free market” is not only a scam, but a myth as well. Except for the occasional aberration, the system works primarily to keep the haves having more and more and the have-nots from getting an even break. In fact, when the haves are members of the ultimate scam, the banking cartel, they are, for all practical purposes, above the law, whether here or anywhere else in the world, and even their money-laundering and terror financing are treated with the same slaps on the wrist Neil and Jeb Bush received for their roles in bankrupting the FSLIC. (Not to worry, however, because the taxpayers can always be counted on to make restitution for these crimes.)
November 25th, 2006 at 11:23 am
Our global competitiveness problem is not educational it’s housing.
I read somewhere that first-world countries will need to reduce wages by 50% to remain competitive globally. There is nothing we can do about Global offshoring except wish them bad luck and get on with our lives.
The 50% wage reduction is simple economics, how and when we achieve the wage reduction is up to us. Neocon resistance to raising the minimum wage is because $7.00 will be pretty good pay in the coming years.
Our competitiveness problem is overpriced housing, exacerbated by immigration. America is fat and addicted to immigration and the business lobbies are telling America to keep eating.
The coming housing crash is inevitable, a simple adjustment in the stockmarket will be the catalyst. Business has already divested (with the help of guestworkers) from the American adjustment.
We need a New Deal. Stop bombing houses abroad and start building here houses in America. The goal is to get single unit apartment costs down to $200.00 per month in live work neighborhoods.
Economic immigration would be curtailed, we need the service sector jobs.
The Live work New Deal would reduce oil dependence, breadwinners would rent near work during the week and cut 8 commutes out of each workweek.
The Live Work New Deal will also help to Resolve our children’s educational difficulties — with reasonable housing costs one parent will have the option of staying home with the kids.