Redstate

Thanks for bringing this to our attention!

We've had years for the Bush Administration's policies to take effect, five of them actually.The undereported story  is due to the fact that good news for some is bad news for others.  The others would much prefer misery, it pays politically.  I might travel over to some of the left/liberal sites and see how this is being celebrated, they must be happy for the country don't you think?

are really the only lasting foundation for proseperity. Luckily for us, socialism, even the watered down version known in France is utterly incapable of keeping pace with freer men and women like we have here. I'm not sure I'm too upset at the parsimonious treatment this topic gets in the press. It might be better in the long run if the enemies of prosperity remain ignorant in this regard. The Boom booms regardless.

. . . and something to be proud of: American workers continue to be the most productive in the world.

I'll feel even better if I see pay and benefits for American workers go up by an amount that approaches the productivity increase.

Or am I not supposed to say that?

this was a front page headline on nytimes.com on tuesday, not sure about the actual paper though.

"Productivity Rise Is Fastest in Two Years"

maybe i misunderstood what you meant by "hardly getting told."

take my comment as response to the other commenters taking it the same way.

Yet if my salary does not go up, I really don't care how much productivity increases, since my primary income -- as with 95% of Americans -- is my salary.

So if I'm to be impressed by this, someone has to give me some of the money.  Otherwise, I don't care.

I want my salary to go up too, but if my company is struggling in a global competitive environment, and without these productivity gains my company would fold, then keeping my existing salary while my company stays in business paying me more than int'l competitors pay their employees, is still a "win" for me.

So depending on how your company is doing, you still may care a lot even if your salary isn't going up.

It would be interesting to see what median real wage growth was like during this period (though you'd have to include fringe benefits to make it fair).

But some of these productivity gains are being achieved through lay-offs, so I guess it's just a roll of the dice.  More productivity might mean I have better job security, or it might mean that I've just been laid off.  I'd rather just get a raise.

Because productivity growth means all the goods and services you consume are cheaper on a real basis. One of the ways that shows up is in increased quality. Have you ever noticed that the average house nowadays is a whole lot bigger than it used to be? And cars are vastly more reliable? But houses and cars are not any less affordable for most people than they were forty years ago. If anything they are more affordable.

Productivity growth is the economic measure that correlates most closely with improvements in prosperity and well-being.

another way that you are better off from productivity, even if your salary doesn't go up, is that because of productivity increases, companies can afford to cut prices on their products, and your flat salary can buy more things than you otherwise would have, even possibly with an increasing salarly, compared with an economic that didn't have these kinds of productivity gains.

But I'll reiterate, getting the wage increases would be the best result of productivity increases. But since that doesn't always happen, just trying to think of other ways to look at it.

In the productivity growth data presented above, it's interesting to note the two worst four-year periods.

Worst 4-year term: ending 1980, 3.8%--the Carter years. What did he say about "malaise"?

Second worst 4-year term: ending 1996, 4.9%--the first Clinton term, after both his and Bush I's tax hikes.

The two worst terms were under Dem Presidents. The Kennedy/Johnson terms were good, but JFK cut taxes and started the space race, which probably helped productivity.

As the Gipper would have said, it's morning in America. Only better than when he said it.

Those are some shocking numbers (the per 4 years ones)).  This is incredible news that our productivity is increasing so greatly.

suggest companies are making the correct decisions. Long term, that's good. Even if short term it's a lay off, that means that there are resources that would be put to better use elsewhere.

there are lots of things companies can potentially do with that money, like pay a dividend or give a giant bonus to the CEO, neither of which does much good for normal people.

they can also invest in R&D or capital expenses, which won't have much impact in the short term, but can have a very large impact long term.

increased productivity certainly does tend to raise all ships, but you can't use it as an indicator of economic wellbeing without looking at other indicators, like compensation and inflation.  just to say that productivity is up, without looking at where the money from that increased productivity is going, is meaningless.

I'm looking forward to my 3% raise in January.  Everyone in my entire company is getting one.  That'll be nice...

With all due respect, what on earth are you babbling about?

a)That a company can make a widget with less workers does not in itself mean that

the company will lower the price.  They will continue to charge as much as they

can to maximize their profit.  There are also other factors affecting inflation

(your 'real' basis).

b)Productivity has nothing to do with quality.  You are making a false assumption

that because it takes less time to make the item or service that the company will

use some portion of its savings to improve the quality of same.  IMHO many

people would say a lot of items they buy now are of lesser quality than

years gone by.  Planned obsolesence?

c)Have you ever noticed that the average yard is a lot smaller than it used to

be? Have you noticed the significant increase in mortgage leverage?

Between 1973 and 2004, homeowners' equity fell from an average of 68.3 percent to 55 percent, the Demos study says. That means Americans own less of their homes than they did in the 1970s and 1980s. Worse, the percentage of monthly income that households must spend to manage monthly debt payments - a key measure of financial stress - is 18.56 percent. That's the highest since data started being collected 25 years ago.

Source: 1/19/05 St.Petersburg Times

d)I have no source (and I doubt you do) on the overall reliability of cars now

compared to 20 years ago.  It may be true.  But it is also likely true that when

things do go wrong they cost significantly more to repair given the complexity

of cars nowadays.  How many guys do you know who are still able to do anything

more complicated than an oil change on their car today?

e) Cars are not more affordable.  One example: 1986 Mustang GT bought for 12,000

per CPI indexing would be $21,800.  The latest Edmunds lists same for ~24,000.

I'll grant that it does have some improvements to justify a 10% increase.

f) As others have pointed out, productivity increases can also result in

layoffs (same # of goods with less workers, not more goods with same # workers).

Likewise the positives do not necessarily benefit all, nor benefit equally. At

the low end of pay scales, real wages have been at best stagnant while benefits are

being curtailed.  In the middle, many workers (ie managers/office types) are

spending more hours working than in the past (later hours, work at home, work

on weekends, work on vacation).  Owners of privately held firms are in the

best position to benefit.  While increased profits will benefit public firms (and

hence stock holders/pensions/etc), a missed quarterly number can wipe out years

worth of gains.

his post made a lot more sense then yours did. Do you know anything about economics, or the reality of price v. quality over the last 20 years? It doesn't appear so.

You really don't understand what it takes to make a business successful, do you? The past always looks better than the present because you're filtering out the bad stuff.

Let me give you one really big example of how much productivity growth has made us all better off: We now live in the first society in history where the "poor" people are fatter than the rich people! Just let that sink in before you snark back, it's a really remarkable thing.

...and an F in Reality

Because productivity growth means all the goods and services you consume are cheaper on a real basis.

The report specifically shows productivity growth with real wages declining.

First off, your link doesn't go a report, it just goes to some summary of the BLS' monthly numbers. I don't know anyone who pays attention to these numbers. Wages respond to supply and demand and are all over the map across different geographies, industries, times of year, and points in the business cycle. Productivity growth always means you're getting more economic output per unit of input. The incremental value from increased productivity is getting consumed by someone, it's not just floating off to the moon. That translates directly into increased prosperity across the economy, often in ways that are hard to measure. Improved automobile quality is a great example.

There's too many cheaper sources of labor out there for income to be going up.  And here in the US, employers get the added burden of healthcare.  GM closes plants in the US but not Canada.  Healthcare costs must factor into those decisions.

Here's the trend according to US census stats:

 Table H-6. Regions--All Races by Median and Mean Income:

 1975 to 2004

 (Households as of March of the following year.  Income in current

 and 2004 CPI-U-RS adjusted dollars28/)

 ______________________________________________________________________

                                   Median income        Mean income

 Region                         ___________________ ___________________

 and                   Number   Current      2004   Current      2004

 year                 (thous.)  dollars   dollars   dollars   dollars

 ______________________________________________________________________

 UNITED STATES

 2004                   113,146   $44,389   $44,389   $60,528   $60,528

 2003                   112,000    43,318    44,482    59,067    60,654

 2002                   111,278    42,409    44,546    57,852    60,768

 2001                   109,297    42,228    45,062    58,208    62,114

 2000 30/               108,209    41,990    46,058    57,135    62,671

 1999 29/               106,434    40,696    46,129    54,737    62,044

 1998                   103,874    38,885    45,003    51,855    60,014

 1997                   102,528    37,005    43,430    49,692    58,320

 1996                   101,018    35,492    42,544    47,123    56,486

 1995 25/                99,627    34,076    41,943    44,938    55,313

 1994 24/                98,990    32,264    40,677    43,133    54,381

 1993 23/                97,107    31,241    40,217    41,428    53,331

 1992 22/                96,426    30,636    40,422    38,840    51,246

 1991                    95,669    30,126    40,746    37,922    51,290

 1990                    94,312    29,943    41,963    37,403    52,418

 1989                    93,347    28,906    42,524    36,520    53,725

 1988                    92,830    27,225    41,771    34,017    52,192

http://www.census.gov/hhes/www/income/histinc/p01ar.html

Forgot to mention, the far right column is 2004 adjusted dollars.

Looking a bit longer at those numbers, I'm noticing that the gap between median and mean income has grown from $10,421 in 1988 to $16,139 in 2004. Hopefully that trickle down will start soon!

and the $10,421 vs $16,139, my initial thought was that it indicates that the pace of growth at the high end of the income spectrum has outpaced the middle of the income spectrum, and that seems like a "bad" thing.

But taking a step back and thinking about it further, I actually can't think of a reason why in fact it would be either a good or bad thing one way or the other if Bill Gates's income growth, for example, over the last 10 years has outpaced my own.

Was your point similar to my initial take that the mean vs. median differential changes are an indication of some negative aspect of the US economy? And if so, why? Median income went up over the time period you cite, so isn't everybody better off? Why is it a bad thing if some people's success outpaces other people's?

I was going the other way and thinking that a rising "median" and a faling "mean" indicates a dwindling middle. But you're absolutely right that the Bill Gates types could be the real impact on these numbers and I have no problem with that at all. Do you have any thoughts/links on capital gains taxation? I'm suddenly thinking more about this.

Thanks for the reply.

in economics and finance?  Before disparaging others you should at least make

your credentials known. For the record I have BS Business and MS Financial

Engineering. I think there is a reasonable chance I may have a better handle on

this than you.  I attempted to respond specifically point by point to a rambling

off the mark post by Blackhedd. You on the other hand contriubted nothing.

The one thing you didn't do was disagree with my main point. Do you agree that productivity growth correlates with prosperity and economic well-being? Or is your answer going to be another long yes-but?

Your degrees don't impress me. How many businesses have you actually built? I've been lucky over the years to have a few really good CFO's working for me. But I haven't met many whom I would hire to run a company, which is not a knock on their knowledge or their financial skills, it's just to say that a broader perspective is required. And your analysis concentrates on just the kind of points that I would expect from a finance person.

I can tell you from direct experience that, as a CEO, when you find realizable productivity gains, you put as much of them into creating additional value for your customers as you can. That's what keeps you on top, especially since your competitors probably have access to exactly the same gains. As far as public companies whose stock prices get killed if they miss a quarter, well, that's a problem that comes from a different place, namely the needs of their most important owners (10,000 or so institutional fund managers and hedgies) to make their quarters.

Took Laffer's napkin and told Volker to do what he had to do and voila! Malaise cured.

BTW, please dont hold it against me, as I regularly disparage "my people" ie lawyers, but I was a summa cum laude phi beta kappa never made less than 100 on a test curve breaker geek hated by the hungover frat boy legacies econ BA grad

and I agree with you

as do Milton and Gilder.

You live it man!!!

Email me if you get up to NYC next month.

Count me in for a RedState NYC meetup, if you hold one.

..."the wind makes it feel like 2 degrees" weather and show gamecock some "cold" Northern hospitality.

I won't give you any money but here is my 2 cents.

I would guess you think because you sit in a cubical pushing paper or at the widget machine grinding out widgets you automatically deserve more money.  When you took the job you agreed to a certain amount of money.  I would bet that in your interview there was no guarantee of how much money you would make in the future.  If the job you have is capped no matter what you do that's all you get.  You will then have three choices.  One: live with it and be happy for the successful people. Two: become more valuable to the company earning a promotion.  Three: go look for something that pays more.  

Making money doesn't just happen you have to do something.  If you want someone to give you money call your mom.

That's all I have for you now.

...Kevs007's correct reply and some of the non-correct stuff that's been said here got me to thinking.

Productivity growth means that it takes less unit cost to produce a each unit of output. When the input that is being made more productive is labor, that means that you and every other worker have to produce more output in the same amount of time. If you feel like you're working harder than ever for the same amount of money, well, that's pretty much the way you're supposed to feel. It didn't occur to me until this moment that this is not self-evident to a lot of people.

The flip side to this is that you're producing more output from the same amount of input, and that means there's more value for you to consume with the same paycheck. That's why productivity growth makes your life more prosperous even though you're only looking at the small size of your raises.

At the end of the day, the absolute level of prosperity matters a great deal, even though most people react to the relative level ("I'm not doing any better than I used to be, and my workload used to be carried by two people!") But if you look at absolute (not relative) measures of poverty, you'll see that we indeed have made a lot of progress in the postwar period. I always trot this example out because it always shocks me to think about it, but in America today, the poor people are fat. Since poverty has always and everywhere else been associated with malnutrition because people couldn't afford enough calories, this is a huge qualitative change.

This is also why the labor movement is such a destroyer of prosperity. Their whole point is to reduce productivity through onerous work rules. Business people have to look for productivity gains among the salaried, which is why you're being called on to do so much more. It's also why manufacturing jobs have left America: because union labor is too expensive and unproductive to compete with the rest of our economy.