WSJ reports:
Both the U.S. and South Korea saw productivity rise 1.2% in 2008, the first full year of the recession, from 2007. They experienced the largest increases of the 17 countries included in the Labor Department's international manufacturing-productivity report released Thursday. Productivity, which is defined as output per hour worked, declined in 12 of the countries, with the largest drops in Singapore and Denmark.
In the U.S., "productivity growth in manufacturing has been above that in services for some time," said Mike Elsby, an assistant professor of economics at the University of Michigan. "Put another way, manufacturing has been progressively doing more with less for 40 years. Consequently, I would expect it to continue."
Over the long run, productivity is key to improved living standards because it spurs rising output, incomes and asset values. But in a down economy, improving productivity with existing workers might mean hiring fewer new ones.
Source: BLS
Jake,
ReplyDeleteOver the long run, productivity is key to improved living standards because it spurs rising output, incomes and asset values.
Productivity is key, but it is not the only key factor to improved living standards.
Historically, rising output per hour had to be accompanied by a slowing of the population growth rate in order for general living standards to improve.
Distribution of output is also a big factor. Kings and queens of 1700 lived much better than their counterparts of 1100. Yet the improved living standards of royalty didn't translate to the majority that had little more than subsistance in both periods.
Sadly, it appears history is again rhyming.
Is this a statistical error due to the fact that goods are being outsourced and that value is not captured in output statistics?
ReplyDeleteOr is this due to labor market restrictions where employment is falling more slowly in Singapore then factory production (compared to the US, where a firm may cut 1/5 of the workforce, but only cut production by 1/6).
my guess is #2. as long as the workforce has been slashed by a greater amount than the production decline, this will appear positive. this is exactly what has happened in the U.S.
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