Productivity up, employment down: Is squeezing workers good for America?
Productivity, the amount that each worker produces per hour, rose 6.6 percent in the second quarter. quarter. That huge increase (analysts expected a 6.4 percent rise) came as the amount they produced fell 1.5 percent. But the reason for this increase in productivity is fairly straightforward: nearly seven million people are unemployed and hundreds of thousands lose their jobs each week. While higher productivity sounds great, you have to wonder, is this good for America?
It depends on what the meaning of America is. If by America, you mean American workers, the answer is ambiguous. That's because the high productivity means that the workers who remain employed are probably the best ones and they are likely to benefit as demand revives. Moreover, any worker whose 401(k) is invested in stocks will benefit as increased corporate productivity yields higher profits and stock prices.
But there's bad news too. First, unit labor costs -- which is how much those workers get paid -- are down 5.9 percent, the most in nine years. Second, all those unemployed workers who are helping boost those productivity numbers are not going to go on a spending spree. In fact, with 70 percent of GDP growth coming from consumer spending, we are still in the midst of a deflationary spiral.
That spiral starts with workers who get fired so that companies can meet their profit projections. Those unemployed workers spend less money which means that demand for consumer products and services declines. The factories that make those products adjust their production down to match the lower demand. And that means firing more workers.
As long as the U.S. is so dependent on consumer spending for economic growth, it looks to me like squeezing workers is bad for America.
Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter.
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Reader Comments (Page 1 of 4)
9-02-2009 @ 11:14AM
ettucat said...
It has been the Obama plan all along to make it tough for the private sector in order to get the citizens to scream for government assistance. Hold tight folks. Obama has said it will be a rough road, but what he didn't bring into the equation was the resilience and smarts of the American people. We do not want government calling the shots for every move we make in our daily lives, and this calculated squeeze of the private sector will not work for him.
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9-02-2009 @ 10:25PM
a-bus said...
Right on stay on course pay down personal debt tell your state to refuse Federal money and go to heck.
9-03-2009 @ 11:25AM
vaughnvdg said...
Will you OPEN YOUR EYES and REALIZE that DUMBYA BUSH put us in this position with his 8 YEARS OF FAILURE??!!! PLEASE!!!!!
9-02-2009 @ 5:33PM
Chuck said...
The plan started a long time before Obama. The baby boomers were getting set for retire and some had saved for that day. Wall Street and others thought they should have all they could get. About $8.5 trillion was taken from the economy. The only problem is that not enough have been investigated for cooking the books and selling investments that were nothing more that betting we couldn't pay our bills. I think it is long passed due to go get those that got millions is the process.
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9-03-2009 @ 3:51PM
skipperrc said...
think obama is for the working man? who is getting the stimulus money? this housing loan crap started with barney frank and chris dodd in the middle 90's
9-02-2009 @ 6:05PM
Andy said...
I think those in the know,new way before the baby boomers got to this stage in our country that they would cheat us.You can't tell me they didn't see this coming and plan way ahead too put the screws to the working class.The working class needs to band together and see that we are not taken advantage of again by the wealthy.
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9-03-2009 @ 10:52AM
jack said...
Your right! The Teaparty is marching on Washington, to protest this, and other Washington debacales.
Our government is trying to make us dependent on them. It's the first step in Socialism.
9-02-2009 @ 6:41PM
Hank said...
What about the little guy at the pump?
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9-02-2009 @ 6:43PM
sixkillerforhire said...
the american worker is a whore and the government is our pimp
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9-02-2009 @ 7:07PM
Jim said...
So this is how it begins. Somehow, we became a consuming nation. If we have no job or money we cannot consume. And this leads to more job loss. I think we are at the beginning stage of an economic shift in our country. We can move in one of two directions from here. One, the gov't becomes the major employer in all sectors, banks, auto, houses, manufacturing, etc. Or two, new businesses develop and begin producing goods at a low cost. So low, that China, Japan and others cannot help but buy the goods. To get this done, these new businesses need some form of incentive to accomplish this. Our current tax code and issues with labor unions will prevent this from happening. If we are depending on Americans to continue buying goods then we will slowly fall.
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9-03-2009 @ 3:05PM
Linda said...
I agree with what you are saying but if you notice through all the debates and everything that has been said all the help has gone to big business that the federal government can end up controlling. There is very little help out there for the small business and when Clinton was president he had a republican congress and had to work with them but I believe relized that it was important to help and get the small businesses growing so that there will be more jobs. That is what has always been the backbone of this country not governemtn and of course not taxing people especially during times like this. It looks like they want more socialism where the government is responsible for everything and that just is and never has been the american way.
9-02-2009 @ 7:17PM
Andy said...
WOW we need economic data to show that people are feeling the squeeze. Geezzzzzzzz no wonder the gov is always years behind. The squeeze was felt back in late 2006 -2007. SNAFU!
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9-02-2009 @ 9:07PM
Steve said...
Andy -
I don't know about you, but for me the squeeze happened a long time before 2006-2007! Over my working career, I've seen an ongoing decline in the purchasing power of my wages - and I'm educated and in an 'in demand' field. Perhaps the difference between myself and others is that I never relied on debt - and so wasn't impacted by the credit crunch ..... however, I've just kept on cutting, cutting, and cutting - trying to stretch my paycheck more. The difference as I see it was that America used to be an exporter of goods and services - rather than today - where we import (and enrich) China and India. From my standpoint - trickle down globalism has made a few individuals wealthy - and people like myself less affluent - and more and more concerned about the future.
9-02-2009 @ 7:18PM
ellen said...
10 for 10 at the supermarket. no vacations no new cloths one pair of new school shoes. Retail in america is dead. :"(
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9-02-2009 @ 7:19PM
pete said...
It's cheaper to by 100 employees as much as 20% OT for a year than it is to hire and train 10 new employees, and pay all the government crap that goes with it. For every dollar I paid my employees in wages, I paid a dollar in government required benefits, unemployment insurance, social security tax, wage taxes, in addition to my own corporate expenses and taxes. The lowest paid man I employed made more than I did. When minimum wage went to $7.50 per hour I had to shut down. I could no longer afford to stay in business. Now I work out of my garage with only my four kids helping. I can't keep up with the demand, but I also cannot afford to expand. My wife keeps working more for the insurance coverage than the pay check. She put in for Michelle Obama's old job, but the hospital board said it was going to be eliminated. That $350,000 per year would sure have helped us.
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9-02-2009 @ 7:30PM
dan said...
I can guarantee you that if single payer or medicare doesn't get in this health care bill, those on medicare or medicaid will see their bill increase for insurance or will be denied care because hospitals aren't making enough money off them and doctors are refusing medicare patients now. And all health insurance premiums will continue to rise along with deductibles. Also small businesses will continue to drop health care for their employees.
Health insurance, as it is, is a monopoly/ponzi scheme because the working class are supporting the upper class workers. The workers in the better jobs are getting reduced costs because they are in a larger pools and so get lower costs. The people at the bottom get the increased costs in premiums and deductibles, and if they don't like it they have to find something else, and that something else will be nothing if the have a preexisting condition.
Most people, like I was, are stuck where they are and can't leave their jobs out of fear of losing their health care. If we as citizens can't force single payer into the system health care will be for the rich and you will be going to the emergency care hospital, if it's still open.
Go to thomhartman.com, Bill Moyers PBS.org, Cspan for more enlightened view point of what happening to our failing system of Wall Street health care.
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9-03-2009 @ 7:57PM
RICHIE said...
I feel/have the same circumstanses as you. What did you do ?
9-02-2009 @ 7:46PM
dan said...
Health care is in a supply and demand system, and the health care system is in a bubble. The insurance companies are holding it back, supply, increasing demand, driving costs up. These people are morally corrupt when they deny health care for people and children who are suffering. It's time to take these economic royalists down with single payer or Medicare for all.
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9-03-2009 @ 3:08AM
James said...
The price of Health Care has gone up by 50% over the last year. Heatlh Care providers are reporting obsence profits. They not only price out the individual, but employers who provide insurance for their employees are also getting hit hard by increased costs. This means many employees are not seeing the raises and cost of living increases that they used to see. It also means employers are having to lay off workers due to the high cost of insuring them.
If something isn't done, all the taxes we are paying each month out of our paychecks toward our Social Security and Medicare will be gone. All the wasted money and we'll have no health care when we retire.
9-03-2009 @ 5:35PM
prinsovd said...
just think how much savings we would have if we didnt support illegal aliens needs. of course with OUR TAX DOLLARS.