The Dark Side of the Productivity Surge (Sqeezing More Work Out of Employees During Hard Times)

Business Week ^ | 11/6/2009 | Peter Coy

[SeekAndFind]

Rising productivity is usually one of the best things you can hope for in an economy. It means people are producing more for each hour they work. That's the path to higher living standards.

But the huge burst in productivity that the U.S. economy experienced in the third quarter is not entirely good. In fact, it's a sign that the U.S. economy is still in a sickly condition—a conclusion that is likely to be driven home by the latest job-loss figures release on Nov. 6. Economists who cheered the productivity number are ignoring the dark side of its sudden growth.

On Nov. 5, the Bureau of Labor Statistics announced that productivity—that is, output per hour of work—in the non-farm business sector grew at a 9.5% annual rate in the July-September quarter. That was one of the three biggest gains in the last 30 years, and it followed a strong annualized gain of 6.9% in the second quarter.

What could be wrong with that? The problem is how the productivity growth was achieved. It wasn't because of clever efficiency measures or the purchase of wonderful tools that help people get their jobs done faster. Such improvements take years, not mere months. Rather, it was because companies cut jobs and work hours drastically.

Work hours fell at a 5% annual rate even as output increased at a 4% rate, the government said. So people working shorter hours had to do the same amount of work as before, or more. People who kept their jobs had to pick up the work of ex-colleagues. Many workers probably put in extra hours that weren't counted in the statistics in order to get all their work done. That would exaggerate the output-per-hour gain.

Speedups are rarely good for worker morale.

[ClearCase_guy]

Pretty much everyone I know is stressed. Whether they have a job or are out of work, no one is happy. Here in MA, people blame Bush but I think that will be hard to sustain for much longer.

[jdsteel]

OK, so someone tell me why this is different than ANY OTHER business cycle we’ve been through? This isn’t new at all. Productivity rises as the least productive are cut and the ones left work their butts off. Then consumers start buying and businesses eventually have to hire more workers. Same old same old.

[HangnJudge]

More cheerie news...


http://market-ticker.denninger.net/

Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009. Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3-3/4 percent. In September, consumer credit decreased at an annual rate of 7-1/4 percent.

We are a credit-based system, as are all modern monetary systems. No meaningful economic recovery can or will occur until the consumer has purged his balance sheet of the inappropriate debt he has and is once again able to earn and borrow.

[jhw61]

I can’t believe I’m 100% nerd.

[HangnJudge]

And...



http://market-ticker.denninger.net/

The turn upward in this chart was a near-exact correlation with the end of the recession in the early part of the decade. Not only are we dramatically worse now, we haven't even begun to turn, and those who have exited the labor force continues to skyrocket.

The key item here is loan losses. They will not begin to stabilize until year-over-year job loss turns.

[HangnJudge]

And...

[Plumres]

Something that was not in this article are salary people being forced to work many hours overtime for no pay. My wife is a retail manager. She works many 12 hours days for no extra pay. She does not get bonuses. She is paid a flat salary. I don't understand why this is not slavery? The job market does not allow her to move now, but if she could get a different job she would take it. She has been trying to get out of retail for 2 years, but can not. There just are no companies in Pittsburgh willing to interview someone that does not match an exact profile.

[elpadre]

Having lived through several economic depressions while working in HR in heavy industry, it is my experience that once the necessary layoffs are made, the hard work of reorganizing starts. Better methods, streamlining processes, automation introduced, etc. are all part of it. The company becomes "mean and lean” productivity rises and, hopefully, profits result.

It almost cyclic as companies go through the same process each time the economy tanks. Once the economy improves, production managers begin requisitions for more, and often unnecessary people, costs of production go up and profits slide.

[the invisib1e hand]

OK, so someone tell me why this is different than ANY OTHER business cycle we’ve been through?

1. debt burden squeezes profit margins, forces "productivity" at the expense of...you name it: quality, customer service, etc.

2. outsourcing. not new to this cycle, but to this generation.

3. the myth factor. not all "productivity" is productivity. For example: you wait on hold for tech support for an hour, because there is simply not enough staff. That's hours that a company doesn't have to pay, that's "the same output with less labor," from their perspective. But what's your hour worth? They've outsourced tech support partly to you. Their productivity at your expense. What a country!

[glorgau]

They may be working me harder, but I’m weaving a complex web of confusion. The trick is to get called back as a consultant at twice the pay on your own schedule. ;-)

[jdsteel]

Really, details may differ slightly, but my point was that I have read this same headline over and over and over through the years.

[yawningotter]

The place where I work has cut hours and positions to the point that productivity is now suffering and customers are going elsewhere because of poor service in the most important areas. And guess who was tapped to take up the slack?

[NVDave]

And the consumers will start buying with... what?

Wages are down. As the above charts indicate, consumers are de-leveraging, ie, they’re not increasing their credit.

So with a downturn in wages, consumers not taking on more credit (and credit being increasingly difficult to come by), what will consumers spend? Quatloos?

[dr_who]

From beginning of wikipedia article on the Economic Policy Institute mentioned in this article: Jump to: navigation, search The Economic Policy Institute is a US think tank. Economists who founded the nonprofit organization in 1986 included Jeff Faux,[1], Barry Bluestone[2], Robert Kuttner[3], Ray Marshall[4], Robert Reich[5], and Lester Thurow.

Same old marxist trash.

[lentulusgracchus]

[Your quoted article]
We are a credit-based system, as are all modern monetary systems. No meaningful economic recovery can or will occur until the consumer has purged his balance sheet of the inappropriate debt he has and is once again able to earn and borrow.

Recent articles in Minyanville.com and FinancialSense.com raise these same consumer-credit/consumer-income issues and challenge the idea that the recovery "this time" will actually be a recovery at all in any meaningful sense, rather than an "L-shaped recovery" i.e. stabilization at a permanently lower per-capita GDP, recovery suppressed by job/income/purchasing-power loss.

[Notary Sojac]

stabilization at a permanently lower per-capita GDP

Since most of the GDP "growth" of the last fifteen years consisted of pumped-up consumer goods spending financed by overseas borrowing, no one should be surprised to see this happen.

[Notary Sojac]

It's true that consumer credit has dropped. However I see that as a "bad thing" in the same way that a rapid drop in body temperature from 103 degrees to 99 degrees is a "bad thing".

It's just this generation of Americans finally learning that life lesson about not spending money you don't have.

[lentulusgracchus]

Right, but none of the "playahs" are saying it in public. They're talking "Happy Days Are (Soon) Here Again" and hoping that investors will bail them out by piling back into the stock market so the happy times can continue -- without a fully discounted correction of the Fed's pumped-up market peaks of 2000 and 2007.

Investors and traders don't believe it -- they're staying away in droves, and all the volume that is driving the averages higher since last November, esp. since the March low, is coming from a short-list of stocks being played furiously by back-office black-box operations, many of them fully automated, at a few of the big investment banks, esp. Goldman Sachs. The market is a chimera, a charade.

And it still hasn't corrected properly, and both "it" and everyone watching, knows it.

[Just mythoughts]

Why a few more months of this ‘fear’ of job losses and we just might have an insurgence in seeking ‘union’ protectionism. s/