The Productivity Scam
BROCKWAY 13, GEORGE p.
The Dismal Science THE PRODUCTIVITY SCAM BY GEORGE R. BROCKWAY Several Sundays ago the New York Times business section had one of its recurring roundups of professional opinion on productivity....
...The Times, for instance, says: "The entry of 20 million new and inexperienced workers into the labor force during the 1970s acted as a drag on productivity...
...Labor may be the largest factor of production, but looking back on the others the Times mentioned ("the machines that are used, the worker's education and skill, advances in technology, the working environment"), you will note that the first and last of these are supplied by capital, the second is largely the responsibility of the state, and the third is a joint activity of capital and the state...
...In addition, you'd have to say that the apprentice's productivity was equal to the journeyman's...
...and the share of those who do no labor, who merely have money, is being increased most of all...
...Or as Karl Marx did put it, "We save ourselves a superfluous operation, and simplify our analysis, by the assumption, that the labor of the workman employed by the capitalist is unskilled average labor...
...It may occur to you to wonder why the denominator of the productivity ratio is "hours worked...
...Companies that deal in a variety of products have no choice except to measure their total output in dollars...
...The worker can be praised or blamed for few of the items in this little list...
...All you can add is the prices of the widgets and shoes and so on, and you get a result in dollars that depends as much on the prices of widgets and shoes as on the numbers of widgets and shoes...
...Well, there may be some things more important than clean air, but a widget isn't one of them...
...Yet the whole debate is an elaborate scam, because what is presented as a value-free examination by sober social scientists is actually a struggle over the distribution of the national income...
...Nor is this procedure necessary only in market economies...
...most are someone else's doing...
...the catching up, if any, would appear to be due to the fact that they have fewer managers, who have fewer Lear jets, stretch limousines, three-martini lunches, tax shelters, and golden parachutes...
...As long as you focus on hours worked, you meld his allegedly productive hours with the less valuable hours of the operator, thereby improving the index and demonstrating your scientific willingness to put the faltering American workingman in as favorable a light as possible...
...Increased regulation," says the Times, "aimed at such things as clean air and water and increased safety in the workplace . . . absorbed management time and business resources in the '70s...
...Or of someone separating management productivity from working-stiff productivity and introducing a brand new ball game: It would no longer seem that the Japanese are catching up with us because their production workers are workaholics, while ours are goof-offs...
...The GNP has nothing to do with widgets, or with shoes or ships or sealing wax...
...If you take it seriously, you believe that clean air and water and increased safety are bad and should be opposed...
...As the Times puts it, "A worker who produces 100 widgets an hour, for example, is clearly more productive than a worker who produces only 50 widgets an hour...
...The numbers would not be markedly different, but they'd have a vastly different meaning...
...The Atari Democrats also fancy the issue, though they began keeping their heads down once their advisee, Gary Hart, became a serious candidate for the party's Presidential nomination...
...Now that the pace of new regulation has slowed, if not reversed, business will be freer to concentrate its money and effort on other things, such as productivity...
...Why not "workers' compensation...
...You also diminish the risk of having someone point out that CEOs are often paid five or six thousand times as much as widget machine operators (I'll say more about this in another column...
...Some (maybe most) of those perpetrating the scam may know not what they do...
...The Times article provides a good example of the mischief that results...
...If it manufactures 100 widgets and can sell only 50, the remaining 50 are not products but waste...
...In a rational world, what you produce is a more important question than productivity...
...Productivity, at least as everyone measures it, is a grievously misleading notion...
...This is a live issue because publicists and politicians keep it alive...
...In the purest communism of our time, the brief reign of the Gang of Four in China, several streets in Shanghai were lined with thousands of boilers quietly rusting under the plane trees...
...This is what Reaganomics (or, if you will, Volckerism) is about, and the Atari Democrats have been gulled into going along with it...
...You can carry this a step further...
...For the chief executive officer of a company is a wage slave just like the operator of the widget machine...
...The denominator is suspect in its own way...
...At least two White House commissions are supposed to have been working on the question for the past two or three years (no one knows the results, if any...
...For although productive capital is not money, it is bought with money, and money has a cost, namely interest...
...A capital productivity index would be at least as reasonable, therefore, as a labor productivity index...
...Employees' compensation—wages, salaries, bonuses, fringe benefits—comes to about two-thirds of the Gross National Product...
...Then you wouldn't have to pretend, as the Times does, that management has been wasting its valuable time on the environment...
...The next difficulty with the GNP is— as I argued last year—what it includes and what it excludes...
...That fact is not noticed by the judgmental types who complain that people don't work as hard as they used to...
...Even the rare company that makes widgets alone judges its productivity in numbers of dollars rather than numbers of widgets...
...As I said at the beginning, the uproar about labor productivity is a scam to distract attention from a massive shift in the distribution of the goods of the economy...
...It is a scam, nevertheless...
...This is a moldy fudge...
...They were waste, not products, and (if they're not still there) they had eventually to be broken up for scrap...
...The figure usually used is the total hours worked by everyone in producing the GNP...
...The scam has yet another aspect...
...Innumerable editorials have been written on it, and not a few books...
...On this basis, you'd have to say that if a skilled journeyman carpenter could increase his output 50 per cent by taking on an unskilled apprentice, the result would be a 25 per cent decrease in his productivity...
...There is the real drag on the American economy, and on the world economy...
...But the trouble with the Productivity Index starts with the GNP itself (see " Sinking by the Numbers," NL, May 2, 1983...
...The reason for this is obvious enough: You can't add shoes and ships and sealing wax and widgets, any more than you can add apples and pears...
...Then at least you wouldn't have silly results like our journeyman-apprentice example or the all-too-real unemployment problem...
...This is true for the economy as a whole, and it is true for the firms that make it up...
...There are many sleepers in the seemingly innocent example, and the Times is aware of some of them: "the machines that are used, the worker's education or skill, advances in technology, the working environment...
...the share of managerial labor is being increased...
...The share of nonmanagerial labor is being reduced...
...Worse still, you'd have to say—and people do —that it's better for national productivity to have millions of men and women unemployed than for them to be working and producing less than their co-workers...
...You've heard so much of this kind of talk that you may not be immediately struck by how fatuous it is...
...The prime rate has gone from 1.5 per cent (really and truly) in 1947 to 12.5 per cent today, having had flings as high as 21.5 per cent along the way...
...Since you can't think how to quantify (except in dollars, of which more later) the relative contributions of the designer of the widget, the operator of the machine that stamps it out, and the fellow who sweeps up the scraps, you sweep the problem out with the scraps and conclude that Gertrude Stein would have been right if she had said, "Hour is an hour is an hour...
...You would, however, be in danger of calling attention to one of the hidden aspects of the scam—that is, the place of management, especially top management, in the whole picture...
...That being so, it would seem plausible to take this largest factor as an index of the efficiency of the whole...
...Somebody had built them and no doubt got a commendation for exceeding his quota, but there was no use for them...
...You believe, too, that employing young people and women and blacks and others without experience is bad, and that therefore an unemployment rate of 8 per cent is not merely acceptable but desirable...
...Any theory that makes you say things like that is silly, and any figures that lead to such conclusions are mischievous...
...So far we have dealt only with the numerator...
...President Reagan and his retiring, but not bashful, chief economic adviser, Martin Feld-stein, never tire of talking about it...
...If you will read the passage again, you will notice the unstated (and unstatable) assumption that clean air and water and increased safety are worthless in comparison with more widgets or cheaper widgets or anything at all (a widget being the ultimate nondescript object...
...As pseudo-science, the argument goes like this: Of the various factors of production, labor is the largest...
...Productivity is a ratio (see "Productivity: The New Shell Game," NL, February 8,1982...
...In other words, with every dollar American industry now pays (actually, or as opportunity cost) for interest, it is able to buy only one-eighth as much of capital goods as it could have at the end of World War II (and this is without counting inflation...
Vol. 67 • May 1984 • No. 69
