8/25/2011

So why is worker productivity falling: Some weird economics

In this past Sunday's New York Times, economist Tyler Cowen tries to explain the drop in productivity this way:

One problem may be offshoring by American companies, as stressed in a study by Michael Mandel, chief economic strategist of the Progressive Policy Institute, and Susan Houseman, senior economist with the W. E. Upjohn Institute for Employment Research. Some productivity gains from the manufacturing of the iPad are captured by workers in China, who make important parts of the device, rather than by American workers. American companies often save on costs by finding lower wages abroad, not by enhancing the abilities of American workers. That would help explain why measured productivity has often been high over the last decade while despite year-to-year variation domestic wages and job creation have been flat. . . .


The drop in productivity should concern everyone. Nonfarm business labor productivity fell by 0.3 percent in the second quarter this year, the second quarterly drop in a row. Lower productivity means lower wages. The claim here is that US productivity rates are falling because we are sending more production offshore. But offshoring increases output and profits and should thus be associated with increased productivity. What should be talked about here is how to increase the returns to investment. Increasing the amount of capital increases the productivity of workers.

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1 Comments:

Blogger Chas said...

Markie Marxist sez: "Increasing the productivity of workers in capitalist America? That's a terrible idea! Anyone who thinks like that is obviously NOT a good communist! Look at the example set by Comrade President Obama. He spends so much time golfing and vacationing that he must be one of America's most unproductive workers. Judging by his economic leadership, he's actually been counter-productive. That's exactly the kind of common communist sense leadership by example that America needs! And it seems to be working, or not working! Ha! Ha!"

8/25/2011 7:52 AM  

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