Wednesday, February 25, 2009

The curse of productivity 

Chad posts on manufacturing:

No one will deny that the transformation of manufacturing in American has been and continues to be painful. We do need to do a better job of recognizing and managing the changing world of manufacturing to ameliorate that pain.�

But when people start talking about how we need the government to "fix it" or "protect it," you have to ask yourself whether the cure will be worse than the disease.�

My father turned the key to lock the plastics plant he worked at for more than 25 years before it was turned over to a bank back in the 1980s. I keep pictures of the old Amoskeag Mills and their tenement blocks where workers had lived in the early 20th Century. My dad's plant, a mile further south down the Merrimack, lasted a couple decades more than the plant that founded my hometown.

But while the job lost is easy to see, what happens later is harder. �The graph Chad shows notes that the same share of our GDP is in manufacturing as was 50 years ago, but the number of workers in the field is barely a third. �But wages of manufacturing workers have, as economic theory would predict,�

What one wonders, certainly, is what happens to the ones who don't stay in manufacturing? In my father's case, it was to another career. Already in his fifties, working up through another plant was not likely, so he went on to work with waste plastic, regrinding it into useful material for blow molding some products at a fraction of the cost of new plastic. He was, in short, an early recycler. �Who makes that cheaper plastic if he doesn't go to work in a new field, if someone "saves" his job? � In many other cases, though, the person who goes on produces a good we might not otherwise have had. Who among us would think it a curse to have this much productivity? That was, in fact, what all the complaints about "jobless expansion" a few years ago really were. What was the sense, they seemed to say, of having all this extra GDP if nobody is getting a job?

What the graph shows is what Henry Hazlitt many years ago referred to as "the curse of machinery". Nowadays there is so much we owe to machines that even the most foolish among us feels sheepish about criticizing that which brings them so much pleasure. Still, we see calls to stop this. One guy:
The result has been the emergence of what some call a �winner-take-all� economy, in which a rising tide doesn�t necessarily lift all boats. Over the past decade, we�ve seen strong economic growth but anemic job growth; big leaps in productivity but flatlining wages; hefty corporate profits, but a shrinking share of those profits going to workers� (p. 146)
He says that like it's a bad thing. It's not. �And the line about shrinking share of profits? �Not so.