Bloomberg Business: How can U.S. productivity growth be slowing down at the same time that innovation in everything from smartphones to 3D printing seems to be speeding up?
A trio of economists from the Federal Reserve and the International Monetary Fund think they have the answer and it’s not particularly pretty. They argue in a new paper that the down-shift in productivity is for real. It’s not a mirage of mis-measurement by government statisticians unable to keep up with rapidly changing technology.
To show how important that conclusion is, the paper’s authors cite one telling statistic. U.S. gross domestic product would have been about $3 trillion higher in real, inflation-adjusted terms in 2015 if productivity hadn’t slowed over the last decade.
It’s not that the researchers give the federal bean counters a pass and say they’re now accurately toting up every bit of the economy. It’s just that the measurement problems have been around a while and aren’t new.
So they can’t explain why efficiency gains have slackened in the past 10 years from the previous decade, when statisticians also had trouble gauging the economic benefits of information technology. (read more)
10 comments:
Maybe I'm too thick, but, wouldn't more time spent on the phone translate into less time working?
Why is it that we never have enough money for Social Security, but we always have enough money for welfare and welfare fraud. ?
Innovation happens in the US. The resulting production happens overseas.
Or blame the phones.
A neighbor owns two restaurants. Both are nice, upscale, casual dining venues. Excellent food, well trained staff, always crowded, etc. And he's been frustrated by what seems to be a slowdown in service, and a concomitant reduction of profit margins. He hired a consultant.
After monitoring the restaurant activities for a couple of weeks, the consultant told the owner that he was doing everything right. Problem is the customers, who arrive, are seated, and immediately check their email and texts, and then post on Facebook where they are and who they are with. Photos are taken and posted, then drink orders are taken. The drinks arrive and photos of the drinks are taken and posted. No time to look at the dinner menu yet, so the waitperson has to come back several times and watch as the menu is discussed and photographed.
When dinner finally does arrive, it is likewise photographed. Then a review is posted on Yelp. Ditto dessert. When dessert is finished, the diners stay at the table reading the replies to their Facebook posts, checking messages, and emailing.
The result of all of it is that customers now sit at tables about twice as long as they used to, tables are slow to turn over, people who have reservations leave, and the amount of food and drinks purchased has declined.
The owner responded by placing a sign in the lobby advising guests to turn off their cell phones before being seated, and keep then off during their meal. During the first week of the new policy quite a few customers simply left without being seated. Then a couple of neighboring restaurants did the same thing. It has become a new norm.
Not surprisingly, profit returned to the past level.
Saw this article on Instapundit's comment section for Andy Grove's obituary:
http://www.bloomberg.com/news/articles/2010-07-01/andy-grove-how-america-can-create-jobs
I think this is part of it. Although, the BIG thing I think everyone seems to be missing is brushed on in this paragraph:
"As time passed, wages and health-care costs rose in the U.S. China opened up. American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering."
Our rules and regulations make it more profitable to not manufacture certain things here. China doesn't have the same rules. See many of Bags business comments.
To phrase it another way, why do Americans hate the poor Chinese so much? That we are willing to forgo their health in a manufacturing process because they aren't subject to our EPA, OSHA, etc. Such racism. 21st century Chinaman's chance. To abuse these poor desperate humans who if properly educated and equipped, would kill for the government we used to have.
Our culture only values the side of productivity that is less work, less effort, and less commitment. It (meaning us) doesn't value the side of productivity known as results. The other thing is that these labor saving technologies often come with their own time sucking issues, and they usually have no backup technology to fill in when they go down. It used to be that if your typewriter broke, you could grab another, or hand write something. Now if your computer goes down, you need to wait for the IT guy to fix it or get you a new one, which usually puts you and him out for the day.
In manufacturing, the technology has made an incredible difference. I have laser cutting machines with which I can imagine a metal part of almost any geometry, draw it in the system, and cut it out complete - all within a few minutes with only one person required. Often a customer will ask for a sample of a part in the morning and have it before lunch even a few hundred of them if needed. That process would have taken months in drawing, tool design, tool building, and production - requiring a number of skilled people. What if that part needed a change? Start all over. Today, I can change it and make a new one in minutes
In 2007 it took 200 people to do the same amount of manufacturing business we now do with less than 100.
The real loss of productivity is obvious if you are in business. It's the amount of personnel and expense required to meet new government regulations. I have people inside and companies outside working daily just to fill in forms that usually accomplish nothing and usually get read by no one. Most of it is new in the last 10 years. It's just people checking boxes, and other people checking to see if boxes are checked. There is tons of that stuff going on all through our economy and it's draining us.
Two points:
1. The study's conclusion was that the interval 1995-2004 was a one time period of exceptional productivity growth due to the initial integration of computer controls, lean manufacturing and IT into the workplace and when this was completed in the larger industries we reverted to the mean.
As this matches my own experience (with the exception that the very large corporation I worked for started a few years earlier), I agree.
2. The idea that most Chinese manufacturing is a Wild Wild West of unregulated environmental, health and safety activities that would not be allowed in the US is simply wrong. Most of the Chinese-made products that you buy in the US are built in modern, efficient, foreign affiliated factories using essentially the same rulebooks that was we use in the US. The rules are looser, but not by much, and smaller non-affiliated companies do cheat to no end, but for the most part you would have trouble distinguishing a Chinese factory from an American one (except for the uniforms and the Chinese people). Plus, you have the benefit there of having a Party cadre planted in proximity to all the key functions!
As for box-checking and forms, the Chinese invented paper and shortly afterwards they invented paperwork.
They invented explosive weapons too, but likewise it was us who found a way to make it bring a nation to it's knees, as we are also doing with paperwork.
less people are working, so companies are doing more with less. Duh. Paradox solved morons.
Rabel, I don't know anything about contracting business with China. I just assumed due to the nature of it being cheaper there, they must have much more lax rules and regulations. If everything is more or less equal, why doesn't the almighty federal government mandate that business contracting in China must pay US wage standards, complete with health insurance packages and all.
Remove whatever cost incentive there is to do business there, and the work can return to this country. I think?
Do chinese factory workers pay income tax in USA? I know when a US citizen goes to a foreign country and earns money they have to pay taxes there and here.
I believe if the rules were really equal, then we wouldn't do so much widget manufacturing over there. We could keep our common sense environment standards, and keep growing the pool of taxpayers here.
I get that it is also a better allocation of capital when things are cheap. We can simultaneously lift up poor chinese workers and american families as the chinese are paid less but are wiling to work for it, and the families save money on the cheaper goods.
I just see that it is obviously cheaper to make some things in China. Why? What is the mechanism that causes this? Instead of adding another layer of sh*t, like forcing companies to follow american rules abroad if they want access to our market, I would go for removing the layers that make it unprofitable to operate here.
AS terrible as he may appear, Trump says to cut corporate taxes to 15%. That would help. 45% tax on chinese goods would be bad, yes, but the only other option is to reduce our regulations at home. Life is not always black and white but gray, but for so many things I think the solution absolutely is binary.
Do I want to listen to the radio? Yes? On. No? Off.
Some economist said We enact trade embargoes on our enemies during war, and we do the same thing during peace with taxes.
Post a Comment