Rising Productivity, Deepening Inequality

...Contemporary Transformations of Work and Politics (MIT Press, 1985), p. 14...

...LAST JANUARY, the New York Times reported that assembly line workers at Detroit automobile factories, who have been earning around $28 per hour, would be "bought out" and gradually replaced by workers earning as little as half of that...

...More fundamentally, however, the state as agent of society at large must ensure job and income security where threatened by possibly uncontrollable competitive or technological forces...

...But our results raise doubts...

...The retraining potential of displaced mature workers is generally low...

...But "there is another factor that might have raised the return of capital relative to labor in a lasting way, namely the integration of China and India into the world economy, along with their vast supply of cheap labor...

...it rose 3.8 percent in motor vehicles manufacturing...

...Head questions the fairly widespread assumption that the new electronic technologies have fundamentally altered the objectives of efficiency, time limits, and accuracy...

...Census Bureau...

...Although productivity is usually construed as a "value-free" concept, it is not in fact value free...

...The State of Working America, 2006/ 2007...

...It remains true, however, that it has broadened as well as intensified the mandate of calculability that informs capitalist enterprise and weakens employees' bargaining power...

...Leffingwell, an admirer of Taylor, published a path-breaking book in 1925 on efficient office management...

...This culture has made for the standardization of production and products...

...The rising productivity trend is based not only on the effort of living wage and salary labor but also on the state-oftheart of the equipment to which it is applied, the competence of the work force, cooperation at the workplace, and the wider social division of labor on which the workplace and its members depend...

...That is an inference drawn by the authors of a Working Paper published by the Bank for International Settlements (Basel, Switzerland, July 2007...

...HORST BRAND writes frequently for Dissent...

...Treasury's depreciation schedules favor such premature replacements, thus increasing available cash flows to the owners while reducing the tax burden on them...

...A century earlier, Marx, in the Grundrisse, similarly recognized the impact of science on industry, the development of "fixed capital" bearing witness to the degree to which social knowledge has itself become a productive power...

...As part of employer pressure for more "flexible" work practices, and hence also for wage flexibility, 44 . . . wage differentials have widened in many countries" and the "individualization of wage determination" has increased, writes Guy Standing of the International Labor Organization...

...1973 '2005 68 n DISSENT / Fall 2008 DEEPENING INEQUALITY income distribution...

...In its February 10, 2005 issue, the London Economist showed that 2004 after-tax profits in Britain, Continental Europe, and Japan were the highest in seventy-five years—and that the share of profits in national incomes had never been higher, while that of labor had never been lower...

...Calculability, the imperious need to "balance the books," has always been at the core of capitalist enterprise...

...Explorations in Historical Political Economy Cambridge University Press, Cambridge, New York, etc., 1987, p. 65...

...Time-and-motion studies of task performance were among the methods of this science...

...The value of a worker's skill-based assets and specific occupation within a firm may vanish when technological changes or other forces result in job loss...

...Such adaptation is not merely technological...

...72 n DISSENT / Fall 2008...

...See also his chapter on "The Politics of Productivity . . . etc.," this volume, p. 121 ff...

...How, or in what form, has this mandate been exercised in recent years...

...These pressures may be mitigated, income and employment losses may be lessened if labor and its allies regain some of their political clout...

...Taylor focused on the efficiency of the individual worker...

...Management, rather than the line worker, took full responsibility for ensuring the efficiency of operations...

...These two examples illustrate what is happening to the bargaining power of trade unions—a steady weakening, a loss that began with the defeat of the air traffic controllers strike in 1981 by Ronald Reagan's administration, a loss, therefore, that is political in nature...

...In the mind of the employer, productivity is equated with efficiency—it is a means of reducing labor requirements and labor costs...

...The concept of the assembly line, while not original with Ford, was applied to a variety of cognate parts and components (of which there were five thousand in the Model T), the worker being subjected to detailed time-and-motion norms, and the moving line in effect imposing its own control and discipline...

...Between 1947 and 1973, both productivity and median family income grew by an identical 104 percent...

...Thus, the part did not need to be hand-carried, social intercourse between workers was curtailed, and monitoring by the foreman was facilitated...

...The authors present data suggesting that the share of profits across a range of developed countries has risen strongly in recent years, that it is "unusually high at present (and the wage share unusually low...

...work force...

...These issues were of some concern in the earlier decades of the twentieth century...

...In contrast, Henry Ford and his engineers sought to replace human labor by machinery wherever feasible...

...Rather, the authors trace the rise to the increased use of IT-equipped capital goods, which, having been installed at different times "embed different technological levels . . . and faster innovation rates," increase the turnover of labor, and create greater "search frictions" in labor markets, in turn increasing "firms' bargaining power over the economic surplus, thereby shifting income in favor of profits...

...It was accompanied by a somewhat more equitable distribution of income, that is, of the gains from advancing productivity...

...1. Lawrence Mishel et al...

...Each machined workpiece was moved by a gravitational slide to the next machine for the next operation...

...The no70 n DISSENT / Fall 2008 tion of "scientific management," originally defined by Frederick W. Taylor as determining "the one best way" of optimizing efficiency, remained a strong influence...

...To the extent that this increases the global ratio of labor to capital, "it will lift the relative return to capital...

...5 Acting on this belief, the United States sent teams of efficiency and productivity experts to Europe under the Marshall Plan...

...THERE EXISTS, however, a more fundamental problem involving the status of labor under capitalist conditions...

...Karl Marx describes the dynamics of this economy with great acuity in the first volume of Capital: "[T]he productive power of work . . . develops incessantly with the uninterrupted flow of science and technology (hence) a more effective and, considering its volume of production, lower cost machinery, tool, or equipment takes the place of the old one—leaving aside the incessant smaller alterations of the existing means of production...

...Two-tier agreements, double-digit wage cuts, health care cost shifts, work rule changes, and defined pension . . . rollbacks have occurred in one major contract settlement after another...

...Measurement of output per unit of time has been widely introduced into white-collar work, even into the work of hospital personnel...

...The accompanying table, taken from studies by the Federal Reserve Bank of Kansas City and the Economic Policy Institute, demonstrates the skewed evolution of the income distribution over the past three decades...

...That applies particularly to the common and conflicting interests of labor and capital...

...The high rate of economic growth in the developed countries has been associated, he writes, "with the capacity of this scientific knowledge to augment productivity, to increase the command of labor over resources"—such growth furthermore benefiting from the "easily cumulative character of modern tested knowledge...

...But since the mid-nineteenth century, the modification of this principle for the sake of labor's protection has been a political issue (for example, the legal restriction of hours of work, occupational health and safety rules, collective bargaining contract provisions...

...The threat that firms could produce offshore helps to keep the lid on wages," even if they choose not to outsource jobs to low-cost countries...

...I do not deny the vast benefits that the computer, like other generic technologies, has made or will make possible...

...It would also mean—though this escaped the Times reporter— that output per hour (productivity) would remain unchanged or, more likely, continue to improve (as it has hitherto in the industry...

...Such authority often represses employee interests and initiatives...

...investment...

...The setting of wages, the rate of productivity change, the threat of job displacement, have always been and will continue to be political issues, not mere matters of "objective economic facts," to which Taylor and his intellectual heirs intended to reduce them...

...This would save companies like Ford and Chrysler $30,000 per lower paid worker per year, in addition to reductions in benefits...

...This decline is probably linked to the growing prominence of lower paying industries, especially in the service sector...

...Working Paper 11842 (National Bureau of Economic Research, Cambridge, Mass., 2005...

...The 22 percent increase in median family income should not obscure the fact that family income frequently consists of the contributions of two, at times three, workers...

...Here, Simon Head's The New Ruthless Economy: Work and Power in the Digital Age is pertinent...

...In one industry alone, airlines, wage and pension concessions given back to employers since 2001 . . . totaled over $15 billion," writes Labor Notes (January 2008...

...in 2007 they had dropped by 15 percent since the early 1970s...

...2. "Where Did the Productivity Growth Go...

...The introduction of IT and its refinement permitted the progressive formatting of white-collar work, that is, of standardizing and timing it in ways that Leffingwell described...

...the relatively low cost of labor has become a much proclaimed factor in the "comparative advantage" of developing countries, which are now a key source of American imports and the loci of U.S...

...But productivity as such—rising output per hour of work—cannot be a primary goal of labor, even while it remains a key interest...

...Both the volume of profits and their share in national income have unquestionably contributed to a concentration of personal (or household) income in the top brackets of the Growth and Distribution of Household Income, 1973-2005 by Quintiles Quintile 1974-1995 Avg...

...Not only have the bottom 90 percent of American workers failed to keep up with productivity growth, many have been harmed by it.' It has been a fundamental concern of labor to ensure that it share equitably in productivity gains...

...Every machining operation was precisely timed so that the worker had to achieve a standard output each day...

...If it weren't for possibilities of increased productivity the struggle between capital and labor would be more severe and dangerous than it is...

...Whatever the cost of education or scientific advance—a matter not of concern here—the cost of incorporating science or technology or innovative techniques into the means of production, operated by educated or skilled or semiskilled labor, is subject to the capitalist mandate of calculability, hence also the pressures of efficiency...

...A history of the near 70-year relationship between the United Auto Workers and the Detroit Big Three could be written largely as a prolonged dispute about speedup," writes Head...

...The widening gap between domestic productivity advances and stagnating real household income indicates not least the global competitive pressures on the U.S...

...The research director of the Committee for Economic Development— an organization of businessmen at the time favoring strong state action to spur economic growth—said in 1947, "Productivity is a vitally needed lubricant to reduce class and group frictions...

...BLS data show that average weekly earnings in nonfarm private industries, in constant dollars, have been steadily declining...

...His thesis and research confirm what Shoshana Zuboff wrote in her authoritative work In the Age of the Smart Machine: The Future of Work and Power: "[T]he logic that motivated the early purveyors and adapters of scientific management has continued to dominate the course of automation in the 20th century workplace...

...But business certainly plays a part by favoring and even promoting wage dispersion, as indicated by its resistance (more or less successfully since the 1980s) to pattern bargaining, which was once a key union strategy to help solidarize worker interests...

...Even machinery of recent vintage that becomes prematurely obsolete may quickly be replaced (the U.S...

...This, in turn, depended in large measure on the negotiating strength of such unions as the United Auto Workers that aligned wage increases with productivity gains (the wages being protected by cost-of-living adjustments...

...annual growth Distribution** Lowest 0.4% 5.5% 0.0% 4.0% Second (20-40) 0.3 11.9 0.5 9.6 Third (40-60) 0.4 17.5 0.7 15.3 Fourth (60-80) 0.7 24.0 0.9 22.9 Fifth (80-100) 1.4 41.1 1.4 48.1 (Top 5 percent) (1.9) (15.5) (1.6) (21.1) Sources: DeNavas-Walt of U.S...

...Yet, output per hour in air transportation rose at an average annual rate of 2.9 percent between 1987 and 2005, according to the Bureau of Labor Statistics (BLS...

...Moreover, other advanced countries set health, pension, vacation, and other benefits through legislation in a universal manner regardless of sector or firm—unlike the United States, where such benefits, to the extent they exist, are linked to the job or possibly the sector where the worker is employed...

...This has not simply been driven by recent strong global growth...

...the simplification of the work process by transferring, or seeking to transfer, the worker's skill and know-how to the engineer and machine...

...business as against the persistent weakness of labor and its allies...

...The owners of capital," writes Offe, "are free to decide whether or not they wish to purchase other means of production suitable for combining with labor power (with less or other qualifications) . . . " Capital, in effect, does not age...

...Louis Uchitelle's The Disposable American DISSENT / Fall 2008 • 69 DEEPENING INEQUALITY graphically documents the grievous loss of skillbased assets by airplane repair and maintenance mechanics laid off as their employer sought lower-cost alternatives, as well as the dearth of acceptable retraining and job alternatives they faced...

...Yet, it must be recognized that this weakness does not stem from organizational factors alone...

...Capital possesses, to speak with Claus Offe, a high degree of "fluidity" compared to labor's abilities...

...EPI states that the absence of an DISSENT / Fall 2008 n 67 DEEPENING INEQUALITY institutional structure in the United States that would lessen inter-industry pay differences is a critical factor...

...O]ver the entire period 19662001, only the top 10 percent of the income distribution enjoyed a growth rate of total real income (excluding capital gains) equal to or above the average rate of economy-wide productivity growth...

...Advances in technology, not so much in the manufacture of computers and their building blocks as in the incorporation of information technology (IT) into wide varieties of productive and/or service equipment, have contributed to strengthening the bargaining power of business while further weakening that of labor...

...it is renewed incessantly...

...It is based on, or derives from, principles of "scientific management" restructured so as to fit white-collar work by William H. Leffingwell...

...This conflict between employee and employer, Offe writes, "can certainly be channeled through organized surveillance control, instructions, supervision, accountability...

...The very findings concerning the widening gap between the strong gains in the American economy's productivity and the stagnant, in part even declining incomes of large numbers of working people manifest the political weight of U.S...

...DISSENT / Fall 2008 n 7 1 DEEPENING INEQUALITY Daniel Bell, commenting on the "Treaty of Detroit" in Fortune magazine (July 1950), declared that the contract "unmistakably accepts the existing distribution of income between wages and profits as 'normal' . . . It is the first major union contract that explicitly accepts objective economic facts . . . as determining wages, thus throwing overboard all theories of wages as determined by political power and of profits as 'surplus value.' " It was a misperception of Bell's, understandable perhaps in the context of the time...

...The employee's view of productivity has by no means been confined to blue-collar workers...

...Both Head and Zuboff stress the adaptation of much white-collar work, whether performed by professionals or clerical employees, to the computer, more specifically to informaDEEPENING INEQUALITY tion technology...

...Some of these high profits, the Economist reported, may eventually be competed away (the contraction in the U.S...

...EPI, State of Working America, 20062007, p. 59, Table 1.9, information cited by permission of Cornell University Press...

...economy at this writing spells a decline in profits though not necessarily of their share...

...Only the top brackets matched or exceeded the annual productivity growth rate of 1.4 percent over the 1974-95 period or came close to it in the later years...

...In fact, the extent and cross-country scope of this outcome has no precedent over the past 45 years...

...both Taylorism and Fordism (mass production in the highly engineered factory) were believed to help resolve social conflict owing to the productivity they promised, and therefore the availability of larger "shares...

...The vigorous economic growth of the following two-and-a-half decades (1950-1975) was carried forward by strong productivity improvements and the application of recently developed technologies...

...Enormous increases in productivity resulted—as well as unceasing complaints about speedup...

...and close monitoring of the process and its operators...

...Using data from the Internal Revenue Service so as to overcome certain technical limitations of the Census, Ian Dew-Becker and Robert J. Gordon write in a Working Paper of the National Bureau of Economic Research, A basic tenet of economic science is that productivity is the seed that creates the flower of a nation's standard of living...

...The Economic Policy Institute (EPI) calculates that between 1973 and 2004, output per employee hour in the nonfarm business economy rose 76 percent, while median family income in constant dollars increased by only 22 percent.' No such gap appeared during the earlier post-World War II period...

...It can also be "channeled," perhaps more stringently, by means of IT, further tending to maximize the employer's interest.' In a period of great insecurity, employees will be doubly cautious in exercising their autonomy...

...the measurement of the minimum time needed to perform a certain task...

...THERE REMAINS the wider problem of the severe maldistribution of income in the United States, the result of productivity gains going largely to capital and its owners...

...They further note that the post 1995 productivity growth did not automatically signal good news for the majority of American workers and households...

...ILR Press (an imprint of Cornell University Press), 2007), p. 45...

...The alignment of rising wage rates and rising productivity, viewed once as a key to resolving social conflict—and actually adopted as such by John F. Kennedy's Council of Economic Advisers in the 1960s—has been rendered obsolete as multinational corporations have combined low-cost labor and high-level technology in developing countries...

...For productivity growth commonly takes place within a framework of managerial authority, which in turn derives from and is sustained by vested property interests and (if called upon) legal enforcement...

...Federal Reserve Bank of Kansas City...

...This parallel movement was, perhaps, historically unique, ascribable to the vigor of the labor movement in those years, as well as to lower levels of immigration and to an international competition that took place chiefly among countries with similar labor standards—that is, labor costs were not an important competitive factor...

...And it is in this sense that we must view the widening gap between the advances of productivity and the stagnation of working people's incomes...

...Labor power inheres in the worker's person, so the labor contract is not comparable to the sales contract which unambiguously changes ownership of a given object...

...Thus, for many workers, productivity retains a negative connotation, succinctly commented upon by a student of the matter as follows: "In the mind of the average worker, productivity is a scare word— it is management's euphemism for speedup, it is a potential threat to his job security...

...Head's essential argument is that the computer and its applications in the workplace renewed and refined the "industrial culture" of mass production and subjected it to routine white-collar work throughout the twentieth century...

...The lower the real value of resources used for an output, the higher the efficiency...

...It need hardly be stressed that such knowledge, if it is to bear fruit, has to be embodied in "fixed capital" and activated by human labor...

...Head offers a number of examples illustrating uses of IT, such as call centers and managed care organizations—a basic feature of all similar computerized white-collar work being managements' drive to incorporate employees' knowhow, or knowledge distilled from experience, in the computer, thereby making the employment of relatively unskilled, lower paid persons possible...

...How widely this belief was accepted (it also implied changes in business organization, not always welcome), we cannot say...

...Zuboff presents a number of case studies, arguing, "In each case, cost reduction and increased productivity were preeminent goals, which required systems that would simplify transaction processing while substantially increasing the volume of work that could be completed by one clerk...

...As long as we can get more by increasing the size of the pie there is not nearly so much temptation to try to get a bigger slice at the expense of others...

...I N HIS SEMINAL work Modern Economic Growth, Simon Kuznets states that "the stock of useful knowledge and the extension of its application are of the essence in modern economic growth...

...The social costs of efficiency—such as loss of jobs, occupational illness, environmental damage and its health risks—may be and often are shifted to individuals or society at large...

...annual growth Distribution* 1995-2005 Avg...

...Author's Note: Measures of productivity in principle reflect the efficiency with which given inputs are used to produce given outputs over time...

...The productivity measure is derived by dividing an index of employee hours into an index of the real value of nonfarm business output, as published in the national income and product accounts...

...The bottom 90 percent of the income distribution fell behind or even were left out of the productivity gains entirely...

...The design and configuration of machinery were meant to simplify the worker's role so that no particular skill was required...

...few seem able or willing to raise their skill levels after their mid-twenties...

...The worker, by contrast, often cannot adapt readily to such changes...

...Still, in the workplace, the employer's interest in profits comes into conflict with the employee's effort to guard a measure of autonomy in applying the labor power the former has "purchased...

...EPI argues that the decline in weekly earnings "is not the simple consequence of some natural evolution from an agricultural to a manufacturing to a service economy" Downward pressure on wages would not occur "if service sector wages were more closely aligned with manufacturing wages, as is the case in other countries...

...Indeed, to the extent that the productivity growth "explosion" of 2001-2004 was achieved by costcutting, layoffs, and abnormally slow employment growth...

...then the historical link between productivity growth and higher living standards falls apart...

...Although no longer a "new" development, it is still accelerating...

...3. Joseph Goldberg, Collective Bargaining and Productivity (Madison, Wis., Industrial Relations Research Association, 1975), p. 1. 4. Claus Offe, Disorganized Capitalism...

...5. Quoted in Charles S. Maier, In Search of Stability...

...As is well known, this is no longer the case...